ASIC v. Sunshine Loans - High Court Ruling on Recusal

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Print Share ASIC has been successful in the High Court on an appeal by Sunshine Loans from a decision of the Full Federal Court concerning the decision made by the liability judge to recuse himself from determining the question of penalty, with the High Court finding 7-0 in ASIC’s favour.

On 12 April 2024 Justice Derrington in the Federal Court found Sunshine Loans liable for contraventions of the National Credit Act by charging unlawful fees (24-074MR). Following that decision, Sunshine Loans applied for his Honour to recuse himself from further hearing the matter to determine appropriate penalties on the basis of apprehended bias, based on credibility findings and the language used by his Honour in making findings about Sunshine Loans and its witnesses in his judgment on liability. In July 2024, his Honour determined to recuse himself.

In August 2024, ASIC appealed Justice Derrington’s recusal decision to the Full Federal Court and was successful in March 2025 (25-046MR). Sunshine Loans appealed that decision to the High Court, and the matter was heard on 16 October 2025.

Today, in six separate judgments, the High Court unanimously rejected Sunshine Loans’ appeal.

ASIC Deputy Chair Sarah Court said, ‘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.

‘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’.’

In rejecting Sunshine Loans’ argument that the language of Justice Derrington indicated an apprehension of bias, Chief Justice Gageler and Justice Gleeson said, ‘the primary judge is not required to put aside the views he has already expressed concerning the credibility of [Sunshine Loans’ director] as a witness. … To take such findings into account in the determination of penalty … is not a departure from, but rather part of, determining the case on its legal and factual merits.’

Justice Beech-Jones rejected the argument that Justice Derrington ought to ‘return to … [an] impartial state of suspended judgment’, saying ‘the assessment of the appropriate civil penalty following a finding of contravention … and the consideration of any evidence given by a witness in relation to penalty are simply a continuation of the final hearing of which the liability hearing and judgment forms part’.

Justice Gordon further observed that, ‘There was nothing "extreme" about any of the primary judge's remarks. To the extent the language might be described as "strident", it was acceptable for the primary judge to use that language in making his finding’.

The matter will now come back before Justice Derrington for a hearing on the question of the appropriate penalty to be paid by Sunshine Loans.

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Judgment

Background

Sunshine Loans operates online and since 2023 has offered loans of between $2,050 and $2,500. Prior to that date it offered SACC loans of up to $2,000.

ASIC commenced the proceeding against Sunshine Loans on 6 June 2022 (22-132MR). A trial took place before Justice Derrington between 17 and 20 July 2023.

The Federal Court found in April 2024 that Sunshine Loans had contravened the National Credit Code by charging unlawful fees.  The Court found that between July 2016 and November 2020, Sunshine Loans entered into over 670,000 contracts which included an amendment fee that was not permitted by the Code. The Court found Sunshine Loans required payment of these fees over 12,000 times and accepted payment over 8,000 times, receiving around $300,000 from consumers for those fees.

The action was brought by ASIC after a targeted review of the SACC market during the COVID-19 pandemic identified the misconduct. At the time of the misconduct, Sunshine Loans was one of the largest credit providers in the SACC market.

Under national consumer credit laws, SACC providers must not impose fees and charges apart from: an establishment fee, a monthly fee, a fee payable in the event of a default, or a government fee, charge or duty.  The amendment fee charged by Sunshine Loans was not one of those fees.

A borrower is also entitled to pay out their small amount credit contract at any time and can only be charged an amount that is calculated in accordance with the National Credit Code.

If consumers have taken out a loan with Sunshine Loans and are concerned that they may have been affected by this conduct, they can make a complaint to the Australian Financial Complaints Authority (www.afca.org.au) on 1800 931 678.

Moneysmart has information about loans and alternatives and where to find help with managing debt concerning small amount lender Sunshine Loans.