Ruling confirms principle of finality prevents re-litigating certain findings
The High Court unanimously handed ASIC a landmark win on 18 March 2026, clarifying when judges must step aside in two-stage civil penalty proceedings.
In SunshineLoans Pty Ltd v Australian Securities and Investments Commission [2026] HCA 8, a seven-judge bench dismissed SunshineLoans' appeal, confirming that a judge who makes adverse credibility findings at the liability stage of bifurcated civil penalty proceedings does not automatically face disqualification from presiding over the penalty stage.
ASIC commenced proceedings against SunshineLoans in 2022, alleging the online lender charged an unlawful "Amendment Fee" under its small amount credit contracts (SACCs). Between July 2016 and November 2020, SunshineLoans entered into over 670,000 contracts containing the prohibited fee, required payment of the fee over 12,000 times, received payment over 8,000 times, and collected around $300,000 from consumers.
Justice Derrington found SunshineLoans liable in April 2024, making credibility findings against the company's witnesses, including director Mr Powe. The judge described Powe's evidence as "preposterous" and found that "he was also not a witness who tried to give his evidence in an honest manner." When SunshineLoans indicated Powe would give further evidence at the penalty hearing, Justice Derrington, having already rejected the broader argument that his liability judgment revealed animosity toward the company, recused himself on the narrower ground that a reasonable apprehension of bias arose specifically from his adverse findings about Powe's credibility and the prospect of having to assess that credibility again at the penalty stage.
A majority of the Full Federal Court (Bromwich J and Colvin J, Perram J dissenting) allowed ASIC's appeal against that recusal in March 2025. SunshineLoans then escalated the matter to the High Court.
The Court rejected SunshineLoans' two arguments: that the liability judgment revealed animosity toward the company (the "broad argument"), and that it prejudged Powe's credibility for the penalty stage (the "narrow argument").
Chief Justice Gageler and Justice Gleeson held there was no logical connection between the judge's findings and any apprehended deviation from deciding the penalty on its merits. The adverse credibility findings fell squarely within the issues presented at the liability stage and remained available to inform the penalty assessment.
The Court confirmed that findings from the liability stage, including credibility findings, carry forward as a binding foundation for the penalty stage, regardless of which judge presides. Justice Jagot, among others, emphasised that the principle of finality meant SunshineLoans could not re-agitate those findings at the penalty hearing.
Justice Gordon rejected the "extreme language" argument, finding that "strident" remarks fell within acceptable judicial expression.
In its news release, ASIC welcomed the decision, saying it provided greater certainty for the efficient resolution of civil penalty proceedings.
"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," Deputy Chair Sarah Court said.
The matter returns to Justice Derrington for the penalty hearing, with a case management listing scheduled for 7 April 2026.
