ASIC’s successful dismissal of the judicial review of its first use of the Product Intervention Power, in Cigno Pty Limited v ASIC  FCA 479, opens the door to its wider application.
It must have caused some disappointment, with ASIC at least, when the target of ASIC’s first use of the new Product Intervention Power filed an application for judicial review with the Federal Court back in September 2019. The Federal Court’s decision on 14 April 2020, however, has confirmed ASIC’s approach and that the Power’s scope of use should be subject to a broad interpretation.
The Product Intervention Power commenced on 6 April 2019, as part of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019. It was introduced, following recommendations by the Financial System Inquiry in 2014, to enable ASIC to take a proactive approach to reducing the risk of customer detriment, rather than being restricted to only pursuing actions after the event.
An important prerequisite to ASIC’s use of the Product Intervention Power is that it must be satisfied that a financial product or a class of financial products “has resulted in, or will or is likely to result in, significant detriment to retail clients” 1. Once that hurdle is cleared, ASIC may use the power in a variety of ways, from prohibiting sales of the product through to making sales subject to a variety of conditions. Whether that hurdle had been met was the subject of the Federal Court’s consideration.
Cigno Pty Ltd (Cigno) and Gold-Silver Standard Finance Pty Ltd (GSSF) operated a “short-term lending model” that had been on ASIC’s radar since early 2014. Under the model, GSSF provided short term credit to retail customers under a facility which met the requirements of the short-term credit exemption in the National Credit Code. One of the terms of that exemption is that the provider must receive fees and charges of no more than 5% of the credit provided. GSSM met that requirement.
Cigno, however, provided collateral services to GSSM’s customers under a separate service agreement, to facilitate the credit and to “fast-track applications”, and charged additional fees for those services. In that way, the companies together received income in excess of the short-term credit exemption cap.
After issuing a consultation paper, as it is required to do, ASIC issued a Product Intervention Order which imposed a condition on the provision of short-term credit to retail clients that the total amount of credit fees and charges, both for the credit and under any “collateral contract”, must not exceed the National Credit Code cap. The Order had the effect of preventing Cigno for charging for its collateral services; and would likewise apply to any other short-term lenders using a similar model.
Cigno disputed the decision and applied for judicial review.
Cigno contended that ASIC had failed to reach the requisite state of “satisfaction” required to issue the Product Intervention Order, because it had wrongly focused on the detriment of the short-term lending model as a whole, rather than any detriment in relation to the specific financial product; in this case, the short-term credit facility. As Justice Stewart stated:
“The question is really as to the narrowness or breadth of what it is that must “result in” the “significant detriment”; is it:
(1) narrowly, the class of financial products, or a financial product within that class, “itself”; or
(2) more broadly, the class of financial product, or a financial product within that class, in combination with something else that is not a financial product (in this case, the collateral contract with its fees and charges)?
Put differently, must the financial product or the class of financial products directly cause the significant consumer detriment, or is indirect causation sufficient?
The question is an important one, in relation to insurance as well as for other financial products. If a narrow interpretation were to apply, ASIC’s use of the Product Intervention Power would be quite limited in scope. It would be restricted to a consideration of whether significant detriment had, would or was likely to result from the financial product or class of products itself. The fact that there is another extraneous factor involved, for instance through an administrative arrangement which is not, of itself, a financial service, would need to be put aside.
Justice Stewart found that the broader interpretation should apply. He noted that there are a number of indications in the legislation that it need not be the financial product or class of products that “itself” directly causes the detriment and that detriment caused indirectly, for instance as to how the product is made available to retail customers, could also be considered. He held that the test that should, as a result, be applied is as follows:
The causal requirement is satisfied if the detriment would not have occurred but for the financial product or the class of financial products being made available in those circumstances.
The decision is a sensible one, even if it does not arise as clearly from the terms of the legislation as it might have. Subject to Cigno lodging an appeal, it will allow ASIC to conclude the draft Regulatory Guide ASIC released in June 2019 setting out its approach to applying the Product Intervention Power2 and to move forward with its proposed uses of the power.
For the insurance industry, the only such proposal put forward to date is to make the sale of Add-on insurance and warranty products through motor dealers subject to requirements to apply a form of suitability test and deferred sales model3 . While the conditions proposed by ASIC in that case raise some questions that still need to be resolved, the Cigno decision will give the regulator comfort that its use of the power in cases such as that will not founder for a lack of jurisdiction.
For more information on the operation of the Product Intervention Power, please contact insurance advisory principal, Mathew Kaley, or on matters of judicial review and civil procedure, litigation and dispute resolution principal Chiara Rawlins.
1 ss.1023D(1)(b) and 1023D(3)(b) of the Corporations Act 2001
2 ASIC Consultation Paper 313 Product Intervention Power, 26 June 2019
3 ASIC Consultation Paper 324 Product intervention: The sale of add-on financial products through caryard intermediaries, 1 October 2019
In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph , Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph , Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph : "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.
The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane  NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.