notice of filing · pursuant to part iva of the federal court of australia act (cth) being natural...

NOTICE OF FILING

This document was lodged electronically in the FEDERAL COURT OF AUSTRALIA (FCA) on

31/08/2018 2:08:15 PM AEST and has been accepted for filing under the Court’s Rules. Details of

filing follow and important additional information about these are set out below.

Details of Filing

Document Lodged: Statement of Claim - Form 17 - Rule 8.06(1)(a)

File Number: NSD601/2016

File Title: Kim McKenzie v Cash Converters International Ltd ACN 069 141 546 &

Ors

Registry: NEW SOUTH WALES REGISTRY - FEDERAL COURT OF

AUSTRALIA

Dated: 4/09/2018 12:12:49 PM AEST Registrar

Important Information

As required by the Court’s Rules, this Notice has been inserted as the first page of the document which

has been accepted for electronic filing. It is now taken to be part of that document for the purposes of

the proceeding in the Court and contains important information for all parties to that proceeding. It

must be included in the document served on each of those parties.

The date and time of lodgment also shown above are the date and time that the document was received

by the Court. Under the Court’s Rules the date of filing of the document is the day it was lodged (if

that is a business day for the Registry which accepts it and the document was received by 4.30 pm local

time at that Registry) or otherwise the next working day for that Registry.

Filed on behalf of Kim McKenzie (Applicant) Prepared by Miranda Nagy Law firm Maurice Blackburn Tel (02) 9261 1488 Fax (02) 9261 3318 Email [email protected] Address for service c/- Maurice Blackburn Pty Ltd, Level 32, 201 Elizabeth Street, Sydney NSW 2000

[Form approved 01/08/2011]

Form 17 Rule 8.05(1)(a)

Second Further Amended Statement of claim No. NSD 601 of 2016

(filed pursuant to leave granted by Gleeson J on 24 August 2018)

Federal Court of Australia

District Registry: New South Wales

Division: General

Kim McKenzie

Applicant

Cash Converters International Ltd (ACN 069 141 546) and others named in the schedule

First Respondent

A. THE GROUP MEMBERS

1. The applicant brings this proceeding on her own behalf and on behalf of represented persons

pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth) being natural persons

(Group Members) who entered into one or more credit contracts in Queensland styled as ‘cash

advances’ between 28 April 2010 and 30 June 2013:

(a) where one of:

(i) the second respondent (CC Cash Advance); or

(ii) the third respondent (CC Stores); or

(iii) for the period from 31 August 2010, the fourth respondent (Bak);

was the lender;

(b) in respect of which the Consumer Credit (Queensland) Code (Qld Code) or National

Credit Code (National Code) applied; and

(c) in relation to which, a fee styled as a ‘broker’s’ fee or a ‘brokerage’ fee was paid by or on

behalf of the Group Member to a company or entity that was wholly owned by the first

respondent (CC International);

(‘Qld CA Loan Contracts’).

2

B. THE PARTIES

2. The applicant (Ms McKenzie):

(a) at all material times was resident in Queensland

(b) is a ‘consumer’ within the meaning of section 5 of the National Consumer Credit

Protection Act 2009 (Cth) (Credit Act); and

(c) at all material times when she obtained credit from any of CC Cash Advance, CC Stores

or Bak, obtained that credit for personal, domestic or household purposes.

3. CC International:

(a) is a public company duly incorporated under the laws of Australia;

(b) held, at all material times since at least November 2006, 100% of the shares in:

(i) Cash Converters Personal Finance Pty Ltd (ACN 110 275 762) (CC Personal

Finance);

(ii) Safrock Finance Corporation (QLD) Pty Ltd (ACN 098 566 520) (Safrock);

(iii) Mon-E Pty Ltd (ACN 087 343 299) (Mon-E);

(iv) CC Stores;

(v) CC Cash Advance which held, from 31 August 2010, 100% of the shares in Bak.

4. CC Cash Advance:

(a) is a company duly incorporated under the laws of Australia;

(b) is a wholly owned subsidiary of CC International;

(c) from 31 August 2010, wholly owned Bak;

(d) provided credit in the course of its business within the meaning of section 6(1) of the Qld

Code and/or section 5(1) of the National Code;

(e) is a credit provider within the meaning of section 5 of the Credit Act;

(f) from a date no later than 13 September 2010 operated the ‘Personal Finance Centre’

within the Cash Converters branded store at Shop 6, 76-84 Robina Town Centre Drive,

Robina QLD 4226;

(g) at all material times from a date no later than 13 September 2010 used the business name

‘Cash Converters Robina’;

3

(h) in the premises of paragraph 4(d) and/or 4(e), at all material times provided a financial

service within the meaning of section 12BAB(1)(b) of the Australian Securities and

Investments Commission Act 2001 (Cth) (ASIC Act); and

(i) in its dealings with Ms McKenzie and the Group Members, engaged in trade and

commerce within the meaning of section 12BA(1) of the ASIC Act.

5. CC Stores:


(b) is a wholly owned subsidiary of CC International;

(c) provided credit in the course of its business within the meaning of section 6(1) of the Qld


(d) is a credit provider within the meaning of section 5 of the Credit Act;

(e) in the premises of paragraph 5(c) and/or 5(d), at all material times provided a financial

service within the meaning of section 12BAB(1)(b) of the ASIC Act; and

(f) in its dealings with Ms McKenzie and the Group Members, engaged in trade and


6. Bak:


(b) from 31 August 2010 was a wholly owned subsidiary of CC Cash Advance;

(c) provided credit in the course of its business within the meaning of section 6(1) of the Qld


(d) is a credit provider within the meaning of section 5 of the Credit Act;

(e) in the premises of paragraph 6(c) and/or 6(d), at all material times provided a financial

service within the meaning of section 12BAB(1)(b) of the ASIC Act; and

(f) in its dealings with Ms McKenzie and the Group Members, engaged in trade and


C. CASH CONVERTERS BUSINESS STRUCTURE & SYSTEM

7. CC International:

(a) at all material times was, or has styled itself as, the international master franchisor of the

Cash Converters franchise;

4

(b) presently operates a global network of over 700 Cash Converters branded stores across

21 countries, including:

(i) approximately 71 stores in Australia which are owned either by CC International

or by an entity that is wholly owned by CC International; and

(ii) approximately 82 franchised stores in Australia which provide consumer credit

services and second hand goods retailing.

8. CC International, Mon-e, CC Cash Advance and CC Stores have had:

(a) since at least October 2007, the following directors in common:

(i) Peter Cumins; and

(ii) Reginald Webb in the period from October 2007 to 14 February 2017 (except CC

Cash Advance and CC Stores);

(b) the following directors previously in common:

(i) John Yeudall for the period 10 April 2012 until 20 November 2013;

(ii) Andrew Moffat for the period from at least October 2006 to 27 October 2008

(except CC Cash Advance and CC Stores); and

(c) in the period from at least 5 October 2007 until 30 June 2017, the same company

secretary, being Derek Ralph Groom.

9. Bak has had in common with CC International, Mon-e, CC Cash Advance and CC Stores:

(a) Peter Cumins as a director, for the period since 31 August 2010;

(b) John Yeudall as a previous director for the period from 25 September 2012 until 20

November 2013; and

(c) The same company secretary, being Derek Ralph Groom, for the period from 31 August

2010 until 30 June 2017.

10. At all material times prior to 1 July 2010, CC Cash Advance and/or CC Stores and/or Bak were

required to comply with clause 3 of the Consumer Credit (Queensland) Special Provision

Regulation 2008 (Qld) (Qld Regs) which provided that the maximum rate of interest for all

credit contracts regulated by the Qld Code was 48% and that calculating the annual percentage

rate for the purpose of compliance with the Qld Regs was to be undertaken in accordance with

clauses 3 and 4.

5

11. At all material times from 1 July 2010, CC Cash Advance and/or CC Stores and/or Bak were

required to comply with the Credit (Commonwealth Powers) Act 2010 (Qld) (Qld Act) which

operated in Queensland to:

(a) impose a maximum interest rate for all credit contracts (within the meaning of the Qld

Code) of 48% (section 32(1));

(b) require calculation of the annual percentage rate for the purpose of compliance with

section 32(1) to be undertaken in accordance with sections 32 and 34; and

(c) continue the application of certain provisions of the Qld Code, despite its repeal, for the

purpose of enforcing compliance with the maximum annual percentage rate (section 33).

Particulars

The provisions of the Qld Code that were continued included, relevant to this case (cf section 33(2)(b) of the Qld Act): section 21 (prohibited monetary obligations), Part 6 to the extent it relates to section 21(Civil Penalties for Defaults of Credit Providers), and Part 11, Division 4 (tolerances and assumptions).

12. At all times since at least 1 July 2009, there has been loan administration software and an

internet platform provided by Mon-e (Mon-e System) which:

(a) generated a recommendation as to the amount of credit that can be lent to a consumer, on

the basis of information provided by the consumer;

(b) generated uniform documents relating to a credit contract or proposed credit contract,

which for Qld CA Loan Contracts at all material times included the documents entitled:

(i) ‘Appointment of Broker’ and/or ‘Quote for Credit Assistance’; and

(ii) ‘Contract – Part 1 Schedule’ or ‘Loan Contract’ (including pages headed ‘The

Schedule’); and

(c) formulated, or was used to formulate, the amounts and schedules for repayment of

principal, fees and charges, and the payment of interest by consumers with respect to

each credit contract;

(d) in conjunction with Safrock and/or CC Personal Finance caused direct debits to occur

directly to a consumer’s bank account;

(e) arranged fees and/or commissions payable by CC Cash Advance and/or CC Stores and/or

Bak with respect to unsecured loans to be set and effected; and

6

(f) enabled reporting as to each individual credit contract accessible by entities including CC

Cash Advance and/or CC Stores and/or Bak.

13. At all material times, CC Cash Advance and/or CC Stores and/or Bak have used the Mon-e

System for unsecured loan products offered or provided by them to Ms McKenzie and Group

Members.

D. LOANS TO THE APPLICANT

D1. Contravening Conduct of CC Cash Advance

14. In the period from 17 December 2010 until on or about 10 June 2011, Ms McKenzie entered

into six credit contracts with CC Cash Advance styled as ‘cash advances’ pursuant to which Ms

McKenzie was advanced sums of approximately $150.00 (excluding brokerage fees) on each

credit contract (First Tranche Loans).

Particulars

(a) The dates on which the First Tranche Loans were entered into were:

(i) 17 December 2010, an advance of approximately $150.00 (excluding brokerage fees);

(ii) 8 January 2011, an advance of $150.00 (excluding brokerage fees); (iii) 7 February 2011, an advance of $150.00 (excluding brokerage fees); (iv) 4 March 2011, an advance of $150.00 (excluding brokerage fees); (v) 28 April 2011, an advance of $150.00 (excluding brokerage fees); (vi) 10 June 2011, an advance of $150.00 (excluding brokerage fees).

(b) The First Tranche Loans were entered into by Ms McKenzie at the Cash Converters branded store at Shop 6, 76-84 Robina Town Centre Drive, Robina QLD 4226.

15. Ms McKenzie signed a document entitled ‘Appointment of Broker’ (First Tranche

Appointment of Broker/s) with CC Cash Advance in respect of each of the First Tranche

Loans.

16. Each of the First Tranche Appointment of Brokers signed by Ms McKenzie had terms which

included:

(a) that she had requested CC Cash Advance to recommend to CC Cash Advance to lend her

the amount specified in the First Tranche Loans;

(b) that CC Cash Advance acted exclusively for CC Cash Advance and did not seek to

obtain credit from any other credit providers;

7

(c) that she would pay CC Cash Advance a ‘Broker’s Fee’ in a specified amount which was

approximately 35% of the proceeds of the loan (excluding, for the purposes of that

calculation, the brokerage fee) (First Tranche Brokerage Fee/s).

17. On the same day that Ms McKenzie signed each of the First Tranche Appointment of Brokers,

she also signed another document entitled ‘Contract – Part 1 Schedule’ in which CC Cash

Advance was described as ‘the Lender’ (First Tranche Contract Form/s) and which had

terms that included:

(a) an annual percentage rate of 24% payable upon the ‘Amount of credit’ defined in the

First Tranche Contract Form; and

(b) the payment of the First Tranche Brokerage Fees to CC Cash Advance from the monies

advanced.

18. On or about 17 December 2010, 8 January 2011, 7 February 2011, 4 March 2011, 28 April 2011

and 10 June 2011:

(a) CC Cash Advance gave Ms McKenzie cash in an amount representing the ‘Amount of

credit’ defined in the First Tranche Contract Forms (less the amount referred to in (b)

below); and

(b) the amount of the First Tranche Brokerage Fees was retained by CC Cash Advance from

the loan monies otherwise directly advanced to Ms McKenzie.

D2. Contravening Conduct of CC Stores

19. In the period from 3 August 2011 until on or about 27 November 2011, Ms McKenzie entered

into four credit contracts with CC Stores styled as ‘cash advances’ pursuant to which Ms

McKenzie was advanced sums of between $100.00 and $150.00 (excluding brokerage fees) on

each credit contract (Second Tranche Loans).

Particulars

(a) The dates on which the Second Tranche Loans were entered into were:

(i) [deleted] (ii) 3 August 2011, an advance of $100.00 (excluding brokerage fees); (iii) 16 September 2011, an advance of $150.00 (excluding brokerage fees); (iv) 14 October 2011, an advance of $150.00 (excluding brokerage fees); (v) 27 November 2011, an advance of $150.00 (excluding brokerage fees).

(b) The Second Tranche Loans were entered into by Ms McKenzie at the Cash Converters branded store at Shop 6, 76-84 Robina Town Centre Drive, Robina QLD 4226.

8

20. Ms McKenzie signed a document entitled ‘Appointment of Broker’ (Second Tranche

Appointment of Broker/s) with CC Cash Advance in respect of each of the Second Tranche

Loans.

21. Each of the Second Tranche Appointment of Brokers signed by Ms McKenzie had terms which

included:

(a) that she had requested CC Cash Advance to recommend to CC Stores to lend her the

amount specified in the Second Tranche Loans;

(b) that CC Cash Advance acted exclusively for CC Stores and did not seek to obtain credit

from any other credit providers;

(c) that she would pay CC Cash Advance a ‘Broker’s Fee’ in a specified amount, which was


calculation, the brokerage fee) (Second Tranche Brokerage Fee/s).

22. On the same day that Ms McKenzie signed each of the Second Tranche Appointment of

Brokers, she also signed another document entitled ‘Contract – Part 1 Schedule’ in which CC

Stores was described as ‘the Lender’ (Second Tranche Contract Form/s) and which had terms

that included:


Second Tranche Contract Form; and

(b) the payment of the Second Tranche Brokerage Fees to CC Cash Advance from the

monies advanced.

23. On or about 3 August 2011, 16 September 2011, 14 October 2011 and 27 November 2011:


credit’ defined in the Second Tranche Contract Forms (less the amount referred to in (b)

below); and

(b) the amount of the Second Tranche Brokerage Fees was remitted directly by CC Stores to

CC Cash Advance from the loan monies otherwise directly advanced to Ms McKenzie.

Particulars

(a) The applicant does not know how the brokerage fees were remitted by CC Stores to CC Cash Advance.

(b) Further particulars will be provided following discovery and the issue of subpoenas and notices to produce.

9

D3. Contravening Conduct of Bak

24. In the period from 7 April 2012 until on or about 2 January 2013, Ms McKenzie entered into 5

credit contracts with Bak styled as ‘cash advances’ pursuant to which Ms McKenzie was

advanced sums of between $100.00 and $150.00 (excluding brokerage fees) on each credit

contract (Third Tranche Loans).

Particulars

(a) The dates on which the Third Tranche Loans were entered into were:

(i) [deleted] (ii) [deleted] (iii) [deleted] (iv) 7 April 2012, an advance of $130.00 (excluding brokerage fees); (v) 19 May 2012, an advance of $100.00 (excluding brokerage fees); (vi) 12 June 2012, an advance of $100.00 (excluding brokerage fees); (vii) 22 September 2012, an advance of $100.00 (excluding brokerage fees); (viii) 2 January 2013, an advance of $100.00 (excluding brokerage fees).

(b) The Third Tranche Loans were entered into by Ms McKenzie at the Cash Converters branded

store at Shop 6, 76-84 Robina Town Centre Drive, Robina QLD 4226.

25. Ms McKenzie signed a document entitled ‘Appointment of Broker’ (Third Tranche

Appointment of Broker/s) with CC Cash Advance in respect of each of the Third Tranche

Loans.

26. Each of the Third Tranche Appointment of Brokers signed by Ms McKenzie had terms which

included:

(a) that she had requested CC Cash Advance to recommend to Bak to lend her the amount

specified in the Third Tranche Loans;

(b) that CC Cash Advance acted exclusively for Bak and did not seek to obtain credit from

any other credit providers;

(c) that she would pay CC Cash Advance a ‘Broker’s Fee’ in a specified amount, which was


calculation, the brokerage fee) (Third Tranche Brokerage Fee/s).

27. On the same day that Ms McKenzie signed each of the Third Tranche Appointment of Brokers,

she also signed another document entitled ‘Contract – Part 1 Schedule’ in which Bak was

described as ‘the Lender’ (Third Tranche Contract Form/s) and which had terms that

included:


Third Tranche Contract Form; and

10

(b) the payment of the Third Tranche Brokerage Fees to CC Cash Advance from the monies

advanced.

28. On or about 7 April 2012, 19 May 2012, 12 June 2012, 22 September 2012 and 2 January 2013:


credit’ defined in the Third Tranche Contract Forms (less the amount referred to in (b)

below); and

(b) the amount of the Third Tranche Brokerage Fees was remitted directly by Bak to CC

Cash Advance from the loan monies otherwise directly advanced to Ms McKenzie.

Particulars

(a) The applicant does not know how this amount was remitted by Bak to CC Cash Advance.


E. BREACH OF THE QLD CODE BY CC CASH ADVANCE WITH REGARD TO THE APPLICANT

29. By reason of the matters pleaded in paragraphs 4 and 7 to 18 and/or 35(a)(iv) and/or 35(b)

(commencing from the words “its requirement…”), each First Tranche Appointment of Broker

and each respective First Tranche Contract Form:

(a) were, within the meaning of ‘contract’ set out in Schedule 1 of the Qld Code, either:

(i) a contract; or

(ii) a series or combination of contracts or contracts and arrangements;

and

(b) formed part of each ‘credit contract’ between Ms McKenzie and CC Cash Advance

within the meaning of section 5 of the Qld Code (First Tranche Credit Contract/s).

30. The provision in each of the First Tranche Credit Contracts for the payment of the First Tranche

Brokerage Fees is void as:

(a) each such First Tranche Brokerage Fee is to be included in calculating the annual

percentage rate under each respective First Tranche Credit Contract pursuant to section

32(4) of the Qld Act; and

11

(b) by its inclusion in each of the First Tranche Credit Contracts, each First Tranche

Brokerage Fee caused the annual percentage rate under that contract to exceed 48% per

annum in contravention of section 32(1) of the Qld Act.

31. Further, the provision in each of the First Tranche Credit Contracts for the payment of each

respective First Tranche Brokerage Fee and interest on that fee imposed a monetary liability on

Ms McKenzie in respect of a fee or charge and interest charge exceeding the amount that may

be charged consistently with the Qld Code in contravention of section 21(1) of the Qld Code.

32. Further, as each First Tranche Brokerage Fee and interest charge on that fee was imposed at the

time each of the First Tranche Credit Contracts was entered into, each of the First Tranche

Credit Contracts contravened a key requirement of the Qld Code pursuant to section 100(1)(i)

of the Qld Code.

33. In the circumstances, Ms McKenzie seeks:

(a) the recovery of each of the First Tranche Brokerage Fees and interest charged or paid on

those fees pursuant to section 21(2) of the Qld Code and/or section 32(3) of the Qld Act;

(b) a declaration that CC Cash Advance has contravened a key requirement of the Qld Code

in relation to each of the First Tranche Credit Contracts pursuant to section 102(1) of the

Qld Code;

(c) an order requiring CC Cash Advance to pay her an amount as a civil penalty pursuant to

section 102(2) of the Qld Code.

F. CONTRAVENTION OF THE ASIC ACT BY CC CASH ADVANCE WITH REGARD TO THE APPLICANT – UNCONSCIONABLE CONDUCT

34. Further and in the alternative to the claim of Ms McKenzie pleaded in section E, each of the

First Tranche Loans was a financial service within the meaning of section 12BAB of the ASIC

Act.

Particulars

Each of the First Tranche Loans was a credit facility as defined in section 12BAA(7)(k) of the ASIC Act and Reg 2B(1)(a) of the ASIC Regulations 2001 (Cth) because they involved the provision of credit to Ms McKenzie. Accordingly, each of the First Tranche Loans was a financial product that the credit provider issued and dealt in, within the meaning of ss 12BAB(1)(b) and 12BAB(7) of the ASIC Act.

35. By entering into an arrangement or arrangements with Ms McKenzie which included the

payment of the First Tranche Brokerage Fees in respect of the First Tranche Loans, and interest

12

upon those fees, CC Cash Advance engaged in conduct that was, in all the circumstances,

unconscionable in contravention of section 12CB(1) of the ASIC Act in that:

(a) the bargaining position of Ms McKenzie and CC Cash Advance was grossly unequal in

that:

(i) Ms McKenzie had no bargaining power to bargain for any change to the terms and

conditions of the First Tranche Credit Contracts;

(ii) Ms McKenzie was in a vulnerable position in that she had been in receipt of the

Disability Support Pension since 24 November 2008, and was in need of the

service constituted by the First Tranche Loans;

(iii) CC Cash Advance was a wholly owned subsidiary of CC International which is a

publicly listed company with a market capitalisation of approximately:

A. $298M for the period 2010 to 2011;

B. $290.5M for the period 2011; and

C. $529.8M for the period 2012 - 2013;

(iv) CC Cash Advance was only willing to provide a loan styled as a ‘cash advance’ to

Ms McKenzie if she executed the First Tranche Appointment of Brokers and was

not willing to negotiate that requirement;

Particulars

(a) The documents provided by CC Cash Advance for execution by the applicant in relation to the First Tranche Loans included:

(i) the ‘Contract – Part 1 Schedule’ that included a statement that a brokerage fee would be paid to ‘Cash Converters Robina’ as advised by the borrower; and

(ii) the ‘Appointment of Broker’ forms.

(b) On or about 23 October 2008, after the Office of Fair Trading, Queensland (OFT), commenced regulatory action in relation to purported pawn broking arrangements styled as ‘Advantage Loan’ products offered within Cash Converters branded stores in Queensland, Ian Day (General Manager) and Peter Cumins (Managing Director) of CC International informed Joe Camilleri of OFT to the effect that Cash Converters in Queensland intended to ‘move to a finance broking model’.

(c) On or about 28 October 2008, Mr Cumins further informed Stephen L’Barrow of OFT to the effect that he would be telling franchisees that ‘they are in big trouble’ and Cash Converters would be converting to a finance broking model as soon as possible.

(d) The 16 September 2009 KPMG ‘Independent expert report & Financial services guide’ on CC International, commissioned by CC International and based upon

13

publicly available information, internal documents of CC International and discussions with CC International directors and management, at page 23 stated that:

(i) ‘In Queensland, New South Wales (NSW) and the Australian Capital Territory (ACT) the relevant State Governments have introduced a 48 percent per annum cap on all consumer credit loans, inclusive of fees and charges (refer to Appendix 4 for further details). In these territories, store franchisees have been licensed by Cash Converters to act as finance brokers for various lenders and MPL [Mon-e] provides a software support system to the lenders and the franchisees. The franchisees receive brokerage fees from borrowers.’

(ii) ‘Safrock derives income from the interest it charges on loans, which varies from State to State due to different legislative requirements, and an establishment fee for each new loan granted and each existing loan refinanced. In Queensland, NSW and the ACT a brokerage arrangement/system operates, which is similar to the one managed by MPL [Mon-e], except with Safrock the lender is Cash Converters (and not a related party set up by the franchisee/broker). Costs consist of commissions paid to franchisees for each successful or refinanced loan and commissions paid to an external entity responsible for promoting the loans and providing in-store staff training.’

(e) On 4 September 2011, Mr Cumins informed the Courier Mail to the effect that Cash Converters gets around the statutory cap in Qld by operating a brokerage lending model and stated ‘Our franchisee or store manager is the broker and charges a fee while another company, which does not legally have to be at ‘arms-length’ is the lender and also charges a fee.’

(f) CC International stated on or about 14 October 2011 in a submission to the Parliamentary Committee on Corporations and Financial Services at page 7 that ‘While it is argued that industry survives in these states [QLD and NSW], the reality is that all short term lenders in these states have in place mechanisms to ensure they receive a return greater than the (less than) 4% per month, which the 48% annualised cap imposes on them. They resort to these alternative mechanisms, most commonly a brokerage fee, in order to return a profit. The implication that consumers are better off in QLD and NSW, and are borrowing at much lower effective rates, is just not true. No-one pays less for a Cash Advance in QLD or NSW than in other states.’

(g) Sometimes the ‘broker’ and the lender were the same entity as evidenced by Ms McKenzie’s First Tranche Credit Contracts.

(h) The applicant repeats paragraph 55 below.

(i) Further particulars will be provided following discovery and the issue of subpoenas and notices to produce.

(b) CC Cash Advance used unfair tactics in its dealings with Ms McKenzie in that its

requirement that Ms McKenzie obtain the ‘brokerage’ services and pay the First Tranche

Brokerage Fees was a mechanism to ensure that Ms McKenzie paid and CC Cash

Advance received a return on each First Tranche Loan that was greater than the statutory

cap provided for under the Qld Act (and the earlier Qld Regs);

Particulars

(a) The applicant repeats particulars (b) to (g) of paragraph 35(a)(iv) above.


14

(c) CC Cash Advance also used unfair tactics in its dealings with Ms McKenzie in that CC

Cash Advance knew that the alleged ‘brokerage’ services the subject of the First Tranche

Appointment of Brokers were illusory in that CC Cash Advance was both the ‘broker’

and the lender in the First Tranche Credit Contracts;

(d) CC Cash Advance also used unfair tactics in its dealings with Ms McKenzie in that CC

Cash Advance disguised the fact that it was both the ‘broker’ and the lender by

describing the lender as ‘Cash Converters Cash Advance Pty Ltd’ and the ‘broker’ as

‘Cash Converters Robina’ in documents given to Ms McKenzie;

(e) by virtue of the matters pleaded in paragraphs 29 to 31 above, the provision in each of

the First Tranche Credit Contracts requiring Ms McKenzie to pay the First Tranche

Brokerage Fees is void under section 32(2) of the Qld Act;

(f) CC Cash Advance knew or ought to have known that the extended definition of

‘contract’ in Schedule 1 to the Qld Code and used in ‘credit contract’ applied to the First

Tranche Appointment of Brokers, with the consequence that the provision in each of the

First Tranche Credit Contracts requiring Ms McKenzie to pay the First Tranche

Brokerage Fees was void under section 32(2) of the Qld Act;

Particulars

(a) CC Cash Advance was a wholly owned subsidiary of CC International, which is a publicly listed company whose business was providing consumer finance;

(b) The activity of consumer finance was highly regulated at both national and state levels. In Queensland it was regulated, among other things, by the Qld Code, Qld Regs and later the Qld Act.

(c) The extended meaning of ‘contract’ in the Qld Code as used in ‘credit contract’ and its application to related arrangements had been considered in 2008 in a manner adverse to CC Cash Advance in this proceeding by the NSW Court of Appeal in Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150.

(d) Further particulars will be provided following discovery and the issue of subpoenas and notices to produce.

(g) alternatively, CC Cash Advance had no belief or no reasonable belief that the provision

for payment of the First Tranche Brokerage Fees complied with the statutory cap

provided for under the Qld Act (and the earlier Qld Regs);

Particulars

(a) CC Cash Advance knew that there was no ‘broker’ as it was both the ‘broker’ and the lender in each of the First Tranche Credit Contracts.

(b) Any alleged ‘brokerage’ service provided or function performed was completed virtually instantaneously, as the amount of the loan (less the brokerage fee) was advanced to Ms McKenzie in cash by CC Cash Advance almost immediately after Ms McKenzie had signed the First Tranche Appointment of Brokers and First Tranche Contract Forms.

15

(c) The applicant repeats particulars (b) to (f) of paragraph 35(a)(iv) above.

(d) The extended meaning of ‘contract’ in the Qld Code as used in ‘credit contract’ and its application to related arrangements had been considered in 2008 in a manner adverse to CC Cash Advance in this proceeding by the NSW Court of Appeal in Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150.

(e) Further particulars will be provided following discovery and the issue of subpoenas and notices to produce.

(h) in causing or permitting the First Tranche Credit Contracts to include provision for the

payment of the First Tranche Brokerage Fees CC Cash Advance did not act in good faith

as its only objective in requiring payment of a brokerage fee was to avoid the operation

of the statutory cap provided for under the Qld Act (and the earlier Qld Regs);

Particulars

The applicant repeats the particulars to paragraph 35(b) above.

36. Ms McKenzie suffered loss and damage by the contravening conduct of CC Cash Advance and

claims compensation pursuant to section 12GF(1) of the ASIC Act.

Particulars

Payment by Ms McKenzie of the First Tranche Brokerage Fees and interest charged or paid on those fees.

G. BREACH OF THE QLD CODE BY CC STORES WITH REGARD TO THE APPLICANT

37. By reason of the matters pleaded in paragraphs 5, 7 to 13 and 19 to 23 and/or 43(a)(iv) and/or

43(c) (commencing from the words “its requirement…”), each Second Tranche Appointment of

Broker and each respective Second Tranche Contract Form:


(i) a contract; or


and

(b) formed part of each ‘credit contract’ between Ms McKenzie and CC Stores within the

meaning of section 5 of the Qld Code (Second Tranche Credit Contract/s).

38. The provision in each of the Second Tranche Credit Contracts for the payment of the Second

Tranche Brokerage Fees is void as:

16

(a) each such Second Tranche Brokerage Fee is to be included in calculating the annual

percentage rate under each respective Second Tranche Credit Contract pursuant to

section 32(4) of the Qld Act; and

(b) by its inclusion in each of the Second Tranche Credit Contracts, each Second Tranche

Brokerage Fee caused the annual percentage rate under that contract to exceed 48% per


39. Further, the provision in each of the Second Tranche Credit Contracts for the payment of each

respective Second Tranche Brokerage Fee and interest on that fee imposed a monetary liability

on Ms McKenzie in respect of a fee or charge and interest charge exceeding the amount that

may be charged consistently with the Qld Code in contravention of section 21(1) of the Qld

Code.

40. Further, as each Second Tranche Brokerage Fee and interest charge on that fee were imposed at

the time each of the Second Tranche Credit Contracts was entered into, each of the Second

Tranche Credit Contracts contravened a key requirement of the Qld Code pursuant to section

100(1)(i) of the Qld Code.


(a) the recovery of each of the Second Tranche Brokerage Fees and interest charged or paid

on those fees pursuant to section 21(2) of the Qld Code and/or section 32(3) of the Qld

Act;

(b) a declaration that CC Stores has contravened a key requirement of the Qld Code in

relation to each of the Second Tranche Credit Contracts pursuant to section 102(1) of the

Qld Code;

(c) an order requiring CC Stores to pay her an amount as a civil penalty pursuant to section

102(2) of the Qld Code.

H. CONTRAVENTION OF THE ASIC ACT BY CC STORES WITH REGARD TO THE APPLICANT

42. Further and in the alternative to the claim of Ms McKenzie pleaded in section G, each of the

Second Tranche Loans was a financial service within the meaning of section 12BAB of the

ASIC Act.

17

Particulars

Each of the Second Tranche Loans was a credit facility as defined in section 12BAA(7)(k) of the ASIC Act and Reg 2B(1)(a) of the ASIC Regulations 2001 (Cth) because they involved the provision of credit to Ms McKenzie. Accordingly, each of the Second Tranche Loans was a financial product that the credit provider issued and dealt in, within the meaning of ss 12BAB(1)(b) and 12BAB(7) of the ASIC Act.

43. By entering into an arrangement or arrangements with Ms McKenzie which included the

payment of the Second Tranche Brokerage Fees in respect of the Second Tranche Loans, and

interest upon those fees, CC Stores engaged in conduct that was, in all the circumstances,

unconscionable in contravention of section 12CB(1) of the ASIC Act in that:

(a) the bargaining position of Ms McKenzie and CC Stores was grossly unequal in that:


conditions of the Second Tranche Credit Contracts;



service constituted by the Second Tranche Loans;

(iii) CC Stores was a wholly owned subsidiary of CC International which is a publicly

listed company with a market capitalisation of approximately:



C. $529.8M for the period 2012 - 2013;

(iv) CC Stores was only willing to provide a loan styled as a ‘cash advance’ to Ms

McKenzie if she executed the Second Tranche Appointment of Brokers and was

not willing to negotiate that requirement;

Particulars

(a) The documents provided for execution by the applicant in relation to the Second Tranche Loans included:



(b) The applicant repeats particulars (b) to (i) of paragraph 35(a)(iv) above.

(b) the requirement to use a ‘broker’ was not reasonably necessary for the protection of the

legitimate interests of CC Stores in that it was able itself to provide any necessary

assessment of the credit-worthiness of Ms McKenzie;

18

(c) CC Stores used unfair tactics in its dealings with Ms McKenzie in that its requirement

that Ms McKenzie obtain the ‘brokerage’ services and pay the Second Tranche

Brokerage Fees was a mechanism to ensure that Ms McKenzie paid and CC Cash

Advance and CC Stores received a return on each Second Tranche Loan that was greater

than the statutory cap provided for under the Qld Act (and the earlier Qld Regs);

Particulars

The applicant repeats particulars (b) to (i) of paragraph 35(a)(iv) above.

(d) CC Stores also used unfair tactics in its dealings with Ms McKenzie in that CC Stores

knew or ought to have known that the ‘brokerage’ services the subject of the Second

Tranche Appointment of Brokers were of no or negligible value to Ms McKenzie in that:

(i) the ‘broker’ acted exclusively for the lender;

(ii) any determination of Ms McKenzie’s credit worthiness was a largely automated

process undertaken by use of the Mon-e System;

(iii) there was no relevant ‘recommendation’ made by the ‘broker’ to CC Stores;

(iv) the ‘broker’ provided no service and performed no function that could not be

provided or performed by CC Stores itself;

(v) any alleged ‘brokerage’ service provided or function performed was completed

virtually instantaneously, as the amount of the loan (less the brokerage fee) was

advanced to Ms McKenzie in cash by CC Stores almost immediately after Ms

McKenzie had signed the Second Tranche Appointment of Brokers and Second

Tranche Contract Forms;

(vi) the brokerage services provided by the ‘broker’ in respect of the Second Tranche

Loans were provided to, and paid for by, CC Stores;

Particulars

(a) Email from Guy Noakes, Principal of Deloitte, to Ralph Groom, dated 14 October 2008 [CCPQ.001.075.3456] in which Mr Noakes stated in respect of Cash Advances that the fee charged by the broker would be subject to Goods and Services Tax (GST) on the basis that the broker will be making a taxable supply of brokerage services and would be liable to pay the applicable GST to the ATO but that if the lender company received the brokerage services there was the potential for the lender company to claim as a credit 75% of the GST included in the cost of the brokerage services.

(b) Document entitled “Broker/Lender Cash Advance - Proposed Structure” [CCPQ.001.041.2946] which stated that “The broker will invoice the lender for the brokerage fee which will include GST. The lender (because of being classified as a financial service) will be allowed to claim 75% of the GST on the brokers invoice”, which was attached to an email from Bob Hoffman dated 10

19

November 2008 to Queensland franchisees via [email protected] and copied to Michael Cooke [CCPQ.001.041.2942], and which Mr Hoffman stated was distributed at a Queensland franchise meeting on or about Friday 7 November 2008.

(c) “Summary of intercompany transactions.xlsx” provided by Janice Kwok (the then “Financial Controller” of CCPL) to Ralph Groom on 29 August 2011 [CCPQ.001.082.8458] which shows that Safrock recorded the payment to CC Cash Advance of the brokerage fees as an “expense”.

(d) Legal advice from Grant Donaldson SC to CCPL dated 14 May 2012 [CCPQ.001.052.4160] in which Mr Donaldson describes the transaction between Safrock and one its brokers as being one in which the broker “could recover [the brokerage fee] in an action against Safrock” (at paragraph 42).

(e) Further particulars will be provided after interrogatories or discovery.

(e) alternatively to (d), CC Stores used unfair tactics in its dealings with Ms McKenzie in

that CC Stores knew or ought to have known that the amount of Second Tranche

Brokerage Fees, being approximately 35% of the amount advanced, was not reasonably

related to the value of the service allegedly being provided by the ‘broker’ to Ms

McKenzie;

Particulars

The applicant repeats paragraph 43(d)(i) to (vi) above.

The applicant repeats the particulars (a) to (e) to paragraph 43(d)(vi) above.

(f) by virtue of the matters pleaded in paragraphs 37 to 39 above, the provision in each of

the Second Tranche Credit Contracts requiring Ms McKenzie to pay the Second Tranche


(g) CC Stores knew or ought to have known that the extended definition of ‘contract’ in

Schedule 1 to the Qld Code and used in ‘credit contract’ applied to the Second Tranche

Appointment of Brokers, with the consequence that the provision in each of the Second

Tranche Credit Contracts requiring Ms McKenzie to pay the Second Tranche Brokerage

Fees was void under section 32(2) of the Qld Act;

Particulars

(a) CC Stores was a wholly owned subsidiary of CC International, which is a publicly listed company whose business was providing consumer finance.


(c) The extended meaning of ‘contract’ in the Qld Code as used in ‘credit contract’ and its application to related arrangements had been considered in 2008 in a manner adverse to CC Stores in this proceeding by the NSW Court of Appeal in Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150.

(d) Further particulars will be provided following discovery and the issue of subpoenas and notices to produce

20

(h) alternatively, CC Stores had no belief or no reasonable belief that the provision for

payment of the Second Tranche Brokerage Fees complied with the statutory cap provided

for under the Qld Act (and the earlier Qld Regs);

Particulars

(a) Any alleged ‘brokerage’ service provided or function performed was completed virtually instantaneously, as the amount of the loan (less the brokerage fee) was advanced to Ms McKenzie in cash by CC Stores almost immediately after Ms McKenzie had signed the Second Tranche Appointment of Brokers and Second Tranche Contract Forms.

(c) The applicant repeats particulars (b) to (g) of paragraph 35(a)(iv) above.

(d) The extended meaning of ‘contract’ in the Qld Code as used in ‘credit contract’ and its application to related arrangements had been considered in 2008 in a manner adverse to CC Stores in this proceeding by the NSW Court of Appeal in Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150.


(i) in causing or permitting the Second Tranche Credit Contracts to include provision for the

payment of the Second Tranche Brokerage Fees, CC Stores did not act in good faith as

its only objective in requiring payment of a brokerage fee was to avoid the operation of

the statutory cap provided for under the Qld Act (and the earlier Qld Regs).

Particulars


44. Ms McKenzie suffered loss and damage by the contravening conduct of CC Stores and claims

compensation pursuant to section 12GF(1) of the ASIC Act.

Particulars

Payment by Ms McKenzie of the Second Tranche Brokerage Fees and interest charged or paid on those fees.

I. BREACH OF THE QLD CODE BY BAK WITH REGARD TO THE APPLICANT

45. By reason of the matters pleaded in paragraphs 6 to 13 and 24 to 28 and/or 51(a)(iv) and/or

51(c) (commencing from the words “its requirement…”), each Third Tranche Appointment of

Broker and each respective Third Tranche Contract Form:


(i) a contract; or


and

21

(b) formed part of each ‘credit contract’ between Ms McKenzie and Bak within the meaning

of section 5 of the Qld Code (Third Tranche Credit Contract/s).

46. The provision in each of the Third Tranche Credit Contracts for the payment of the Third

Tranche Brokerage Fees is void as:

(a) each such Third Tranche Brokerage Fee is to be included in calculating the annual

percentage rate under each respective Third Tranche Credit Contract pursuant to section

32(4) of the Qld Act; and

(b) by its inclusion in each of the Third Tranche Credit Contracts, each Third Tranche

Brokerage Free caused the annual percentage rate under that contract to exceed 48% per


47. Further, the provision in each of the Third Tranche Credit Contracts for the payment of each

respective Third Tranche Brokerage Fee and interest on that fee imposed a monetary liability

on Ms McKenzie in respect of a fee or charge and interest charge exceeding the amount that

may be charged consistently with the Qld Code in contravention of section 21(1) of the Qld

Code.

48. Further, as each Third Tranche Brokerage Fee and interest charge on that fee were imposed at

the time each of the Third Tranche Credit Contracts was entered into, each of the Third Tranche

Credit Contracts contravened a key requirement of the Qld Code pursuant to section 100(1)(i)

of the Qld Code.


(a) the recovery of each of the Third Tranche Brokerage Fees and interest charged or paid on

those fees pursuant to section 21(2) of the Qld Code and/or section 32(3) of the Qld Act;

(b) a declaration that Bak has contravened a key requirement of the Qld Code in relation to

each of the Third Tranche Credit Contracts pursuant to section 102(1) of the Qld Code;

(c) an order requiring Bak to pay her an amount as a civil penalty pursuant to section 102(2)

of the Qld Code.

22

J. CONTRAVENTION OF THE ASIC ACT BY BAK WITH REGARD TO THE APPLICANT

50. Further and in the alternative to the claim of Ms McKenzie pleaded in section I, each of the

Third Tranche Loans was a financial service within the meaning of section 12BAB of the ASIC

Act.

Particulars

The Third Tranche Loans were a credit facility as defined in section 12BAA(7)(k) of the ASIC Act and Reg 2B(1)(a) of the ASIC Regulations 2001 (Cth) because it involved the provision of credit to Ms McKenzie. Accordingly, the Third Tranche Loans were a financial product that the credit provider issued and dealt in, within the meaning of ss 12BAB(1)(b) and 12BAB(7) of the ASIC Act.

51. By entering into an arrangement or arrangements which included the payment of the Third

Tranche Brokerage Fees in respect of the Third Tranche Loans, and interest upon those fees,

Bak engaged in conduct that was, in all the circumstances, unconscionable in contravention of

section 12CB(1) of the ASIC Act in that:

(a) the bargaining position of Ms McKenzie and Bak was grossly unequal in that:


conditions of the Third Tranche Credit Contracts;



service constituted by the Third Tranche Loans;

(iii) Bak was a wholly owned subsidiary of CC International which is a publicly listed

company with a market capitalisation of approximately:



C. $529.8M for the period 2012 - 2013;

(iv) Bak was only willing to provide a loan styled as a ‘cash advance’ to Ms McKenzie

if she executed the Third Tranche Appointment of Brokers and was not willing to

negotiate that requirement;

Particulars

(a) The documents provided for execution by the applicant in relation to the Third Tranche Loans included:

23



(b) The applicant repeats particulars (b) to (i) of paragraph 35(a)(iv) above.

(b) the requirement or condition to use a ‘broker’ was not reasonably necessary for the

protection of the legitimate interests of Bak in that it was able itself to provide any

necessary assessment of the credit-worthiness of Ms McKenzie;

(c) Bak used unfair tactics in its dealings with Ms McKenzie in that its requirement that Ms

McKenzie obtain the ‘brokerage’ services and pay the Third Tranche Brokerage Fees

was a mechanism to ensure that Ms McKenzie paid and CC Cash Advance and Bak

received a return on each Third Tranche Loan that was greater than the statutory cap

provided for under the Qld Act (and the earlier Qld Regs);

Particulars


(d) Bak also used unfair tactics in its dealings with Ms McKenzie in that Bak knew or ought

to have known that the ‘brokerage’ services the subject of the Third Tranche

Appointment of Brokers and Third Tranche Contract Forms were of no or negligible

value to Ms McKenzie in that:


(ii) any determination of Ms McKenzie’s credit worthiness was a largely automated


(iii) there was no relevant ‘recommendation’ made by the ‘broker’ to Bak;


provided or performed by Bak itself;

(v) any alleged ‘brokerage’ service provided or function performed was completed

virtually instantaneously, as the amount of loan (less the brokerage fee) was

advanced to Ms McKenzie in cash by Bak almost immediately after Ms McKenzie

had signed the Third Tranche Appointment of Broker and Third Tranche Contract

Forms;

(vi) the brokerage services provided by the ‘broker’ in respect of the Third Tranche

Loans were provided to, and paid for by, Bak;

24

Particulars


(e) alternatively to (d), Bak used unfair tactics in its dealings with Ms McKenzie in that Bak

knew or ought to have known that the amount of Third Tranche Brokerage Fees, being

approximately 35% of the amount advanced, was not reasonably related to value or cost

of the service allegedly being provided by the ‘broker’ to Ms McKenzie;

Particulars

The applicant repeats paragraph 51(d)(i) to (v) above.


(f) by virtue of the matters pleaded in paragraphs 45 to 47 above, the provision in each of

the Third Tranche Credit Contracts requiring Ms McKenzie to pay the Third Tranche


(g) Bak knew or ought to have known that the extended definition of ‘contract’ in Schedule

1 to the Qld Code and used in ‘credit contract’ applied to the Third Tranche Appointment

of Brokers, with the consequence that the provision in each of the Third Tranche Credit

Contracts requiring Ms McKenzie to pay the Third Tranche Brokerage Fees was void

under section 32(2) of the Qld Act;

Particulars

(a) Bak was a wholly owned subsidiary of CC International, which is a publicly listed company whose business was providing consumer finance.


(c) The extended meaning of ‘contract’ in the Qld Code as used in ‘credit contract’ and its application to related arrangements had been considered in 2008 in a manner adverse to Bak in this proceeding by the NSW Court of Appeal in Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150.


(h) alternatively, Bak had no belief or no reasonable belief that the provision for payment of

the Third Tranche Brokerage Fees did not breach the statutory cap provided for under the

Qld Act (and the earlier Qld Regs);

Particulars

(a) Any alleged ‘brokerage’ service provided or function performed was completed virtually instantanteously, as the amount of loan (less the brokerage fee) was advanced

25

to Ms McKenzie in cash by Bak almost immediately after Ms McKenzie had signed the Third Tranche Appointment of Brokers and Third Tranche Contract Forms.

(c) The applicant repeats particulars (b) to (g) of paragraph 35(a)(iv) above.

(d) The extended meaning of ‘contract’ in the Qld Code as used in ‘credit contract’ and its application to related arrangements had been considered in 2008 in a manner adverse to Bak in this proceeding by the NSW Court of Appeal in Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150.


(i) in causing or permitting the Third Tranche Credit Contracts to include provision for the

payment of the Third Tranche Brokerage Fees, Bak did not act in good faith as its only

objective in requiring payment of a brokerage fee was to avoid the operation of the

statutory cap provided for under the Qld Act (and the earlier Qld Regs).

Particulars


52. Ms McKenzie suffered loss and damage by the contravening conduct of Bak and claims

compensation pursuant to section 12GF(1) of the ASIC Act.

Particulars

Payment by Ms McKenzie of the Third Tranche Brokerage Fees and interest charged or paid on those fees.

K. BUSINESS SYSTEM OF CC INTERNATIONAL AND INVOLVEMENT IN CONTRAVENTIONS BY CC CASH ADVANCE, CC STORES AND BAK

53. At all material times, CC International had effective control over the conduct of its wholly

owned subsidiaries, including CC Cash Advance, CC Stores and Bak, with respect to the

system by which they would offer and administer unsecured loans styled as ‘cash advances’.

Particulars

(a) Ms McKenzie repeats paragraphs 3 to 9 and 12 to 13.


54. At all times since at least October 2007, CC International encouraged or required all of its

wholly owned subsidiaries, including CC Cash Advance, CC Stores and Bak to deal with their

customers on terms which included the requirement to pay a fee or charge which amounted to

approximately 35% of the amount of the credit loaned on a loan styled as a ‘cash advance’.

Particulars

(a) The applicant repeats paragraph 13.

(b) Prior to the commencement of the Qld Regs, CC International required a fee of approximately 35% of the principal loaned in credit contracts in NSW, Queensland and

26

the ACT (including with respect to unsecured loans styled as ‘cash advances’ given by its wholly owned subsidiaries in those states and with respect to larger unsecured loans styled as ‘personal loans’ in which Safrock or CC Personal Finance was the lender) to be charged. CC International continued until 30 June 2013 to require a fee of approximately 35% of the principal loaned in credit contracts in Queensland and the ACT (including with respect to unsecured loans styled as ‘cash advances’ given by its wholly owned subsidiaries in those states and with respect to larger unsecured loans styled as ‘personal loans’ in which Safrock or CC Personal Finance was the lender) to be charged and stated to be for brokerage services.

(c) At all material times since at least April 2009, CC International required a fee or charge of approximately 35% of the principal loaned in credit contracts in Victoria to be charged and stated to be for the costs of the lender in connection with Loan Establishment, Documentation, Information Verification, Direct Debits, Loan Maintenance and Data Management.

(d) In CC International’s submission on the Commonwealth Green Paper on Consumer Lending dated 10 August 2010, it set out a table on page 6 showing that in Tasmania, Victoria and Western Australia a ‘loan establishment fee’ of 35% of principal would be charged while in Qld and the ACT a ‘brokerage fee’ of 35% of principal applied.


55. From a date not known to the applicant but which was no later than 16 September 2009, CC

International encouraged or required all of its wholly owned subsidiaries, including CC Cash

Advance, CC Stores and Bak, in dealing with their customers ordinarily resident in Queensland

to recover a charge of approximately 35% of the amount of credit loaned on an unsecured loan

styled as a ‘cash advance’ by requiring the payment of a charge styled as a ‘brokerage fee’.

Particulars

The best particulars the applicant can give prior to discovery are as follows:

(a) The loan documents in respect of unsecured loans styled as ‘cash advances’ given by CC Cash Advance, CC Stores and Bak were generated by the use of the Mon-E System. The applicant repeats paragraphs 12 and 13.

(b) CC International had effective control over Mon-E (and thereby over the generation of loan documents via the Mon-E System) because of the matters pleaded in paragraphs 3(b)(iii), 8 and 12 to 13.

(c) A KPMG report commissioned by CC International and dated 16 September 2009 also publicly stated that in Qld, NSW and the ACT stores were licenced to act as brokers and recover 35% through brokerage.

(d) On 22 September 2009 the Annual Report for 2009 also mentioned at page 41 ‘financial services commission and brokerage’ were part of the ‘profit from operations and revenue’;

(e) CC International stated in its 14 October 2011 submission to the Parliamentary Committee on Corporation and Financial Services that ‘While it is argued that industry survives in these states [QLD and NSW], the reality is that all short term lenders in these states have in place mechanisms to ensure they receive a return greater than the (less than) 4% per month, which the 48% annualised cap imposes on them. They resort to these alternative mechanisms, most commonly a brokerage fee, in order to return a profit. The implication that consumers are better off in QLD and NSW, and are borrowing at much lower effective rates, is just not true. No-one pays less for a Cash Advance in QLD or NSW than in other states.’

(f) Further particulars will be provided following discovery and the issue of subpoenas and notices to produce.

27

56. In the premises of paragraphs 53 to 55, after 1 January 2010, CC International knew that

compliance with its business system or practice in relation to unsecured loans styed as ‘cash

advances’ was achieved by having the entity purporting to act as the ‘broker’ print out from the

Mon-E System and have the consumer sign:

(a) a document entitled ‘Appointment of Broker’ or ‘Quote for Credit Assistance’ which

provided for the payment of a brokerage fee of approximately 35% of the monies

advanced; and

(b) a document entitled ‘Contract – Part 1 Schedule’ or ‘Loan Contract’ disclosing the

payment of the brokerage fee.

Particulars

(a) The knowledge of CC International is to be inferred from the matters pleaded at paragraphs 53 to 55.


57. Further, CC International knew:

(a) that the bargaining position of its customers, including Ms McKenzie, and the entity

acting as the lender were grossly unequal in that:

(i) the consumers had no bargaining power to bargain for any change to the terms and

conditions of the credit contracts;

(ii) many or most of the consumers were in a vulnerable financial position and in need

of the loans;

(iii) the entity acting as the lender was a wholly owned subsidiary of CC International

and that CC International had a market capitalisation of approximately:



C. $529.8M for the period 2012 - 2013;

(iv) the entity acting as the lender was not willing to negotiate the terms of the

arrangements that included the payment of the brokerage fees;

Particulars

(a) CC International knew Ms McKenzie’s income because it was recorded on the Mon-E system.

28

(b) CC International knew that many or most of the consumers who obtained loans

from its wholly owned subsidiaries were vulnerable in that it commissioned and obtained a report from ‘Policis’ entitled ‘The Impact of Interest Rate Ceilings’ dated 26 March 2008 which:

i. identified on page 12 that CC International’s ‘domestic market’ was ‘low income Australian credit users’;

ii. indicated on page 24 that the research was based on ‘low income households’ and the ‘Key source of credit for those on lowest incomes and the third of payday users for whom this kind of lending is their only source of credit’ and ‘There would appear to be an irreducible need for credit, particularly among low income borrowers, who have no savings safety nets.’; and

iii. indicated that ‘low income’ was considered to be less than $35,000 per year: pages 25, 26 and 64;

(c) CC International also provided a table on page 6 of its August 2010 response to the Commonwealth Government Green Paper on Consumer Credit Reform that demonstrated that the majority of its customers had net incomes of less than $35,999 per year after tax;

(d) CC International knew its approximate market capitalisation because it was recorded as follows:

i. for the period 2010 to 2011 in an ASX Value article dated 9 January 2011 at http://www.asxvalue.com/2011/01/09/cash-converters-ccv/;

ii. for the period 2011 - 2012 in an 12.09.18 Investor Presentation dated 18 September 2012 at p3; and

iii. for the period 2012 - 2013 in an 13.02.01 Investor presentation dated 1 February 2013 at p3.

(e) The applicant repeats paragraph 55 and the particulars (b) to (f) of paragraph 35(a)(iv) above;

(f) Further particulars will be provided following discovery and the issue of subpoenas and notices to produce.

(b) that the requirement to use a ‘broker’ was not reasonably necessary for the protection of

the legitimate interests of lender in that the lender was able itself to provide any

necessary assessment of the credit-worthiness of Ms McKenzie and the consumer;

Particulars

The applicant repeats paragraph 55 and the particulars (b) to (f) of paragraph 35(a)(iv) above.

(c) that the brokerage fees being charged by the entity purporting to act as the ‘broker’ were

a mechanism designed to ensure that the customer paid and the lender and ‘broker’

received a return greater than the statutory cap provided for under the Qld Act (and the

earlier Qld Regs);

Particulars

The applicant repeats the particulars (b) to (f) of paragraph 35(a)(iv) above.

Further particulars will be provided following discovery and the issue of subpoenas and notices to produce.

(d) of the extended definition of ‘contract’ in Schedule 1 to the Qld Code;

29

Particulars

(a) CC International is a public listed company whose business was providing consumer finance.


(c) The extended meaning of ‘contract’ in the Qld Code as used in ‘credit contract’ and its

application to related arrangements had been considered in by the NSW Court of Appeal in Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150.

(d) Further particulars will be provided following discovery and the issue of subpoenas and

notices to produce.

58. Further, in relation to loans styled as ‘cash advances’ where CC Cash Advance was both the

lender and the alleged ‘broker’, CC International knew:

(a) that the ‘brokerage’ being provided was illusory;

(b) that CC Cash Advance had disguised the fact that it was both the ‘broker’ and the

lender in the credit contracts provided to customers;

Particulars

(a) The applicant repeats paragraph 8.

(b) The loan documents in respect of unsecured loans styled as ‘cash advances’ were generated by the use of the Mon-E System. The applicant repeats paragraphs 12 and 13.

(c) CC International had effective control over Mon-E (and thereby over the generation of loan documents via the Mon-E System) because of the matters pleaded in paragraphs 3(b)(iii), 8 and 12 to 13.

59. Further, CC International knew that:

(a) the ‘brokerage’ services of the entity purporting to act as the ‘broker’ were of no or

negligible value to customers in that:


(ii) any determination of a customer’s credit worthiness was a largely automated


(iii) there was no relevant ‘recommendation’ made by the ‘broker’ to the lender;


provided or performed by lender itself;

30

(v) any alleged ‘brokerage’ service provided or function performed was took place

virtually instantaneously, as the amount of loan (less the brokerage fee) was

advanced to Ms McKenzie and the other customers in cash by the lender almost

immediately after Ms McKenzie and the customer had signed the Appointment of

Broker and the Contract Forms;

(vi) the brokerage services provided in respect of Ms McKenzie’s and other customers’

loans styled as ‘cash advances’ were provided to, and paid for by, the lender.

Particulars

(a) The loan documents in respect of unsecured loans styled as ‘cash advances’ were generated by the use of the Mon-E System. The applicant repeats paragraphs 12 and 13.

(b) CC International had effective control over Mon-E (and thereby over the generation of loan documents via the Mon-E System) because of the matters pleaded in paragraphs 3(b)(iii), 8 and 12 to 13.

(c) The applicant repeats particulars (b) to (f) of paragraph 35(a)(iv) above and (a) to (e) to paragraph 43(d)(vi).


(b) the amount of the brokerage fees being charged by the entity purporting to act as the

‘broker’, being approximately 35% of the amount advanced, was not reasonably

related to value or cost of the service being provided by the ‘broker’;

Particulars

The applicant repeats the paragraph 59(a) above.

The applicant repeats the particulars (a) to (c) to paragraph 43(d)(vi) above.

60. By reason of the matters pleaded in paragraphs 56 to 58, CC International:

(a) had knowledge of the essential elements of the contravention by CC Cash Advance

pleaded in paragraph 35; and

(b) by reason of sub paragraph (a), was directly or indirectly, knowingly concerned in or

party to the contraventions by CC Cash Advance pleaded in paragraph 35.

61. In the premises, CC International was a person involved in the contraventions by CC Cash

Advance pleaded in paragraph 35 within the meaning of section 12GF(1) of the ASIC Act.

62. Pursuant to section 12GF(1) of the ASIC Act, Ms McKenzie is entitled to recover from CC

International the amount of her loss and damage in respect of the contraventions by CC Cash

Advance pleaded in paragraph 35.

31

Particulars

Payment by Ms McKenzie of the First Tranche Brokerage Fees and interest on those fees.

63. By reason of the matters pleaded in paragraphs 56, 57 and 59, CC International:

(a) had knowledge of the essential elements of the contravention by CC Stores pleaded in

paragraph 43 and of Bak pleaded in paragraph 51; and

(b) by reason of sub paragraph (a), was directly or indirectly, knowingly concerned in or

party to the contraventions by CC Stores pleaded in paragraph 43 and of Bak pleaded in

paragraph 51.

64. In the premises, CC International was a person involved in the contraventions by CC Stores

pleaded in paragraph 43 and of Bak pleaded in paragraph 51 within the meaning of section

12GF(1) of the ASIC Act.

65. Pursuant to section 12GF(1) of the ASIC Act, Ms McKenzie is entitled to recover from CC

International the amount of her loss and damage in respect of the contraventions by CC Stores

pleaded in paragraph 43 and of Bak pleaded in paragraph 51.

Particulars

Payment by Ms McKenzie of the Second and Third Tranche Brokerage Fees and interest on those fees.

L. CLAIMS OF GROUP MEMBERS

66. Group Members signed documents listed in paragraph 12(b) being:

(a) ‘Appointment of Broker’ or ‘Quote for Credit Assistance’; and

(b) ‘Contract – Part 1 Schedule’ or ‘Loan Contract’ (including pages headed ‘The

Schedule’).

67. Group Members entered into the Qld CA Loan Contracts which provided for the payment of a

fee styled as ‘brokerage fee’ in circumstances where:

(a) that fee was void; and/or

Particulars

(a) The material facts and particulars of the claims of the Group Members in respect of the conduct of CC Cash Advance and/or CC Stores and/or Bak are similar to the material facts and particulars of the claims of Ms McKenzie against CC Cash Advance and/or CC Stores and/or Bak in that:

32

(i) prior to 30 June 2010, the maximum interest rate was set out in clause 3 of the Qld Regs and applied as if it had been prescribed by the Qld Code by reason of section 14(2) of the Consumer Credit (Queensland) Act 1994 (Qld) (1994 Act);

(ii) the provision for the payment of the brokerage fee in each of the Qld CA Loan Contracts reflected a system in place in respect of the offering and administration of unsecured loans through Cash Converters branded stores in Queensland in the period from at least 16 September 2009 until 30 June 2013 inclusive, in which persons who wished to obtain an unsecured loan would be required to sign a document entitled ‘Appointment of Broker’ and agree to pay a fee styled as a ‘broker’s’ or ‘brokerage’ fee prior to having their application for credit accepted by any of CC Cash Advance and/or CC Stores and/or Bak;


(b) the provision for the payment of the fee was unconscionable;

Particulars

(a) The material facts and particulars of the claims of the Group Members in respect of the conduct of CC Cash Advance and/or CC Stores and/or Bak and/or CC International are similar to the material facts and particulars of the claims of Ms McKenzie against CC Cash Advance and/or CC Stores and/or Bak and/or CC International.


68. The Group Members, pursuant to:

(a) section 21(2) of the Qld Code and/or section 32(3) of the Qld Act, are entitled to recover

payment of the brokerage fees and interest on those fees;

(b) section 102(1) of the Qld Code, seek a declaration that CC Cash Advance and/or CC

Stores and/or Bak contravened a key requirement of the Qld Code in relation to the Qld

CA Loan Contracts;

(c) section 102(2) of the Qld Code, seek an order requiring CC Cash Advance and/or CC

Stores and/or Bak to pay them an amount as a civil penalty.

Particulars

(a) As the brokerage fee and interest charge on that fee were imposed upon each of the Group Members at the time each of the Qld CA Loan Contracts were entered into by the Group Members, each of the Qld CA Loan Contracts contravened a key requirement of the Qld Code pursuant to section 100(1)(i) of the Qld Code, by reason of the operation of section 14(2) of the 1994 Act and/or section 33(2) of the Qld Act.

(b) Further particulars of the brokerage fee and interest charge on that fee imposed upon each of the Group Members will be provided after a trial of the common issues.

69. Further or in the alternative to the claim pleaded in paragraph 68, pursuant to section 12GF(1)

of the ASIC Act, each Group Member is entitled to recover the amount of his or her loss and

33

damage from CC Cash Advance and/or CC Stores and/or Bak and/or CC International in

respect of the contraventions pursuant to section 12GF(1) of the ASIC Act.

Particulars

The Group Members claim repayment of the brokerage fees and interest on those fees.

Further particulars of the Group Members’ loss and damage will be provided after a trial of the common issues.

Date: 31 August 2018

Signed by Miranda Nagy Lawyer for the applicant

This further amended pleading was prepared by John Sheahan QC and Rachel Francois of counsel.

34

Certificate of lawyer

I, Miranda Nagy certify to the Court that, in relation to the statement of claim filed on behalf of the

applicant, the factual and legal material available to me at present provides a proper basis for each

allegation in the further amended pleading.

Date: 31 August 2018

Signed by Miranda Nagy Lawyer for the applicant

35

Schedule

NSD 601 of 2016

Federal Court of Australia

District Registry: NSW

Division: General

Respondents

Second Respondent: Cash Converters (Cash Advance) Pty Ltd (ACN 127 866 308)

Third Respondent: Cash Converters (Stores) Pty Ltd (ACN 127 343 293)

Fourth Respondent: Bak Property Pty Ltd (ACN 103 054 824)

notice of filing · pursuant to part iva of the federal court of australia act (cth) being natural...

Documents