Australian Finance Direct Limited v Director of Consumer Affairs Victoria [2007] HCATrans 161 (24 April 2007)

Last Updated: 2 May 2007

[2007] HCATrans 161

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M163 of 2006

B e t w e e n -

AUSTRALIAN FINANCE DIRECT LIMITED

Applicant

and

DIRECTOR OF CONSUMER AFFAIRS VICTORIA

Respondent

Application for special leave to appeal

HAYNE J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON TUESDAY, 24 APRIL 2007, AT 2.02 PM

Copyright in the High Court of Australia

MR A.C. ARCHIBALD, QC: May it please the Court, in this matter I appear on behalf of the applicant with my learned friend, MR D.G. ROBERTSON. (instructed by Dibbs Abbott Stillman)

MR D. O’CALLAGHAN, SC: If the Court pleases, I appear for the respondent with my learned friend, MR J.A. REDWOOD. (instructed by General Counsel, Consumer Affairs Victoria)

HAYNE J: Yes, Mr Archibald.

MR ARCHIBALD: If the Court pleases, section 15(B) - - -

HAYNE J: Before we come to that, we have the affidavit of Mr Carter, do we not?

MR ARCHIBALD: Yes, we seek to rely upon that.

HAYNE J: Is there any objection to that, Mr O’Callaghan?

MR O’CALLAGHAN: No, there is not.

HAYNE J: Yes, Mr Archibald.

MR ARCHIBALD: Section 15(B) is concerned with a statement as to the amount of credit. The amount of credit and the concept of credit itself are, of course, matters that are central to, pivotal to, the whole operation of the Credit Code. Section 15(B) therefore addresses itself to a matter of vital importance as between the credit provider on the one hand and the borrower upon the other. Its object, as we contend, is to ensure that there is a faithful reflection on the face of the contract instrument of the substantive obligations undertaken by the credit provider as part of that credit contract.

Here, as the learned President observed, the whole point of the credit contract was that the borrower would borrow the amount of the seminar fee and the whole of the seminar fee would be paid to the supplier to discharge the borrower’s obligation. It follows, in our submission, that the function of section 15(B) is to ensure that on the face of the instrument there is a faithful reflection of that component of the arrangements between the borrower and the credit provider.

HAYNE J: Now, the point made against you, as I understand it, is or includes that made at 173, paragraph 6, to the effect that Ms Maxwell’s view depends upon an understanding of some words in the section that are not there, namely, “under the contract.”

MR ARCHIBALD: That is not a sound answer to our contention. As the learned President in his dissenting reasons articulated, the first point is that the concept of “credit”, as defined in section 4(1) of the Code, itself embodies the expression “under the contract” so that that phrase is part of the defined concept and to add those words in section 15(B) would be to add a superfluity. It would be otiose in section 15(B) to have those words.

The words do appear on occasion elsewhere later in section 15(B) but, as an examination of those sections shows and as the learned President observed, there the presence of that phrase is largely explained because the expressions the subject of those subsections are not themselves defined. Hence the need to include those words in order to make clear what the statutory purpose is. It is also - - -

HAYNE J: Then does it come to the propositions that we have a national scheme, we have an arrangement of a kind which is not unknown; this is a point of general application to provisions of the kind sometimes described as “interest-free schemes?”

MR ARCHIBALD: Yes, your Honour. The point is novel at all levels in the hierarchy of courts. This Court, as we would understand it, has never had occasion to consider the Credit Code at all. This provision is pivotal. The affidavit shows that these schemes are - I think “common” is the adjective used in the affidavit and there is the material from the peak industry body showing significant concerns about the ramifications of this point for the industry at large and of course borrowing consumers generally.

HAYNE J: We might be assisted by hearing from Mr O’Callaghan.

MR O’CALLAGHAN: Your Honour, in our respectful submission, section 15(B) does not prescribe the use of these holdbacks, as they are called, assuming the arrangements are otherwise in compliance with other laws. The requirement of the Code is that they be disclosed, not proscribed. So any suggestion, valid though it might be, made by the AFC and the applicant that this decision might in some way require the abandonment of the common form of financing is unsustainable because the requirement only requires disclosure.

The AFC letter, your Honours, at application book 158 is, with respect, somewhat coy about what impact the decision is likely to have other than the self-evident assertion in Mr Hardaker’s letter that the question of what section 15(B) requires “is of vital importance to all such financiers” – well, one would have hoped so – and the statement that the decision below will “have a potential impact on all providers of finance in Australia”. The basis of the AFC’s concern and precisely how the various contractual relationships that are anticipated in the advertisements exhibited to the affidavit, precisely how they relate to holdbacks is not made at all clear in circumstances where one would have thought if anybody could have made them clear, it would have been the AFC.

In any event, your Honours, it may well be that these interest-free products are not similar. Mr Carter says that the burden of these interest-free products is always borne by the supplier. Inn this case, of course, we know that the greater burden here is borne by the consumer who absorbs the burden of the holdback by paying a hugely inflated price for the services provided. That is what we would say on the question of importance, your Honour, that the material is very thin indeed. But, on the other hand - - -

HAYNE J: But the point I think you may have to meet is national scheme generality of application. You say the consequences of the particular application are not to be characterised as deleterious or hard or some other pejorative expression, but you have national scheme, general application, a division of opinion in the Court of Appeal. What is the answer you would make to those propositions?

MR O’CALLAGHAN: On an application such as this, your Honour, there is not a sensible one. Your Honour is quite right. It is a national Code. It is very important legislation and there is a division of opinion in the Court of Appeal. The Director does not seek to gainsay those propositions. As to the question of construction, in our respectful submission, it does in the first instance turn on reading into of section 15(B) words that are not there. In our submission, they are not there for very good reason.

The applicant, your Honours, at paragraph 8 of its reply, seeks to make quite a lot of the inclusion or exclusion of the words “under the contract” and points in particular to the important expressions “annual percentage rate” and “interest charge” as not being defined. That proposition, your Honour, which we read as being central to their interpretation of the Code, is inaccurate. “Annual percentage rate” is defined in section 25(1). Not only is it defined, but it is defined to mean:

“annual percentage rate” under a credit contract means a rate specified –

so the very point that the applicant is seeking to make about a lack of a definition is not only inaccurate, but when one turns to the definition the expression “under a contract” appears, so that the inclusion of that phrase in 15(C) which deals with that annual percentage rates is – I withdraw that, your Honour. I got lost in the sentence, I am sorry. The point that the applicant is seeking to make is simply inaccurate. The term is defined, your Honours. If there was any doubt about it, if one goes to Schedule 1 of the Act, which I believe is in the package that the applicant provided, under the heading “PRINCIPAL DEFINITIONS”:

“annual percentage rate” see section 25.

So the point of distinction sought to be drawn in fact works the other way.

We do make a number of other points on construction too, your Honours. Not only does the view of the minority below seek to rely on words that are not there, but the expression “under the contract” was included in the equivalent provisions in the Credit Act. It is excluded in section 15(B) which, in our respectful submission, strengthens the presumption that it was deliberately excluded, a view that Justice Neave expressed at application book 128.

The expression “under the contract” was also the subject of decisions in the Victorian Court of Appeal before the Consumer Credit Code was introduced. It may reasonably be inferred therefore that the legislature attributed significance to those words and that the exclusion in section 15(B) was deliberate.

The second reason, in our submission, that the applicant’s argument is wrong is that it on all occasions treats section 15 as if the sole purpose of that part of the Act were to record or memorialise an agreed contract, but one only has to read section 14 and the heading to that division of the Act to see that the provision is about pre-contractual disclosure. The applicant’s attempt, in our submission, to reduce section 15(B) to no more than what it calls a manner and form provision is mistaken.

The function of section 15, in our respectful submission, is what the Victorian Attorney-General said it was in her second reading speech. That is, it is to enable a borrower to see the prime financial information in a simple form so that he or she can, among other things, make meaningful comparisons of competing products. If the fact of the matter is that the amount of the loan disclosed on the face of the contract is never destined to the supplier at all, but up to 50 per cent of it can be retained by the credit provider, that fundamental purpose is not adhered to. Clause 7(1) of Schedule 2 of the Code is also important, your Honours, because it requires a court upon two competing interpretations to prefer that which will best achieve the purpose of the Code. The applicant’s view, in our submission, does not address the purpose of enabling a borrower to make meaningful comparisons, let alone provide any way of best achieving it.

On the contrary, the applicant’s view of section 15 would make the Code amenable to all sorts of convenient side arrangements of which
borrowers would remain forever in ignorance. Those are the submissions we would make on the question of construction, if the Court pleases.

HAYNE J: Yes. Thank you, Mr O’Callaghan. We need not hear you in reply, Mr Archibald. I am just looking at the draft notice of appeal. I do not want to engage in a drafting session with you now. Some at least of it seems to be cast at a level of abstraction which might repay some further consideration.

MR ARCHIBALD: We would accept that observation and we will give attention to it before we file the notice in Court.

HAYNE J: Yes. There will be grant of leave in this matter. Mr Archibald, how long do you think the case would take?

MR ARCHIBALD: The duration of the hearing, one might fairly optimistically say half a day, but certainly not more than one day.

HAYNE J: Yes. Do you dispute those estimates, Mr O’Callaghan?

MR O’CALLAGHAN: No, your Honour.

HAYNE J: I cannot of course say when the case will be fixed for hearing but the parties should order their affairs on the assumption that they may find that they are fixed sooner rather than later, in particular in the June sittings. Now, that may or may not happen, but do not later say you were not warned. We will adjourn to reconstitute.

AT 2.18 PM THE MATTER WAS CONCLUDED