Australian Securities and Investments Commission v Darranda Pty Ltd (Penalty)

This Federal Court decision is a penalty judgment, not the first ruling in the case. The Court had already decided liability in an earlier judgment, Australian Securities and Investments Commission v Darranda Pty Ltd (Liability) [2024] FCA 1015. The penalty judgment says those earlier reasons should be read together with the penalty reasons.

The earlier liability ruling found that Darranda entered into 516 customer agreements between 1 April 2019 and 30 June 2019 titled "Tax Invoice and Rental Agreement". Even though those documents were presented as rental agreements, the Court found they were actually credit contracts under the National Credit Code. That finding mattered because it brought the contracts within the Code's disclosure and pricing rules and also engaged Darranda's obligations as a credit licensee.

ASIC then asked the Court to make declarations and impose pecuniary penalties. The penalty judgment records the contraventions already established and explains how the Court framed the declarations and penalties. It also records that Rent4Keeps was involved in key contraventions by Darranda and therefore faced its own penalty exposure.

The penalty judgment is easier to understand if you separate two stages of the case. First, the liability decision established what went wrong. Second, the penalty decision determined what declarations should be made and what penalties should follow.

According to the penalty reasons, the earlier liability decision found that Darranda had engaged in seven categories of contravention in relation to the 516 contracts. Four were disclosure failures under s 17 of the Code. The contracts failed to disclose the cash price of the goods, the annual percentage rate, the method of calculation of interest charges and the frequency with which interest charges were to be debited, and the total amount of interest charges payable.

The earlier decision also found that the contracts imposed a monetary liability exceeding what could be charged consistently with the Code and that the annual cost rate exceeded 48%. On top of those key requirement contraventions, Darranda was found to have contravened s 24(1)(a) of the Code by entering into credit contracts on prohibited terms. The Court had also found that Darranda engaged in conduct contravening ss 47(1)(a), (c) and (d) of the Credit Act, although only s 47(1)(a) was a civil penalty provision relevant to the penalty orders discussed here.

Rent4Keeps was found to have been involved in Darranda's contraventions of s 24(1)(a) of the Code and s 47(1)(a) of the Credit Act. That involvement finding was important because the Credit Act treats a person involved in a contravention of a civil penalty provision as having contravened it.

The Court said the penalty reasons addressed two things: the form of the declarations to be made and the penalties to be imposed. That sounds procedural, but it matters in practice because the way contraventions are grouped can affect the declarations and the penalty analysis.

For the key requirement contraventions under the Code, the Court considered how s 113(5) operates. The judgment explains that some contraventions must be treated as being of the same kind if one occurred merely because of another. The Court drew a distinction between the disclosure failures and the pricing-related contraventions.

On the disclosure side, the Court held there were four separate contraventions relating to the absence of required information under s 17. The omission of one disclosure did not occur merely because another disclosure was missing. The Court referred to authority explaining that the method of calculating interest is a broader concept than just the annual rate, and that the total amount of interest charges requires more than simply stating a rate or method. The judgment says that because Darranda misunderstood the nature of its contracts, there was a complete absence of disclosure of all such matters. One omission did not simply flow from another.

By contrast, the Court treated the contravention concerning monetary liability under s 23(1) and the annual cost rate contravention under s 32A(1) as contraventions of the same kind for these purposes, because one occurred merely because of the other.

The Court also had to decide how to frame the declaration for the general obligation in s 47(1)(a) of the Credit Act. It said declarations should be self-contained and intelligible, and should identify in reasonably concise terms the substantive conduct constituting the contravention. The Court declined to make additional declarations for ss 47(1)(c) and (d), partly because those matters formed part of the same conduct already captured by the s 47(1)(a) declaration and no injunctions were being sought.

The most practical part of the judgment for business owners is the declaration under s 47(1)(a) of the Credit Act. The Court did not describe the problem in vague terms. It identified six concrete deficiencies in Darranda's business systems that meant it failed to do all things necessary to ensure its licensed credit activities were engaged in efficiently, honestly and fairly.

Those deficiencies were: no effective system to monitor whether the contractual terms and conditions being used reflected the legal advice Darranda had received, no compliance officer with appropriate training, no proper monitoring of field representatives, marketing communications that were inconsistent with the customer contracts, no process for exercising a discretion provided for in the contracts, and failure to have a person acting as a required key person and to notify ASIC when the key person ceased to be an officer.

Read together, those findings show that the Court was looking at the whole operating system, not just the wording of one document. Contract control, staff capability, representative oversight, customer-facing communications, decision-making processes and licence governance were all part of the same compliance picture.

The Court made declarations that between 1 April 2019 and 30 June 2019 Darranda entered into 516 contracts titled "Tax Invoice and Rental Agreement" that were credit contracts. In relation to each contract, the Court declared that Darranda entered into credit contracts with an annual cost rate exceeding the maximum 48% and that the contracts imposed a monetary liability exceeding what could be charged consistently with the Code.

The Court also declared that Darranda contravened s 24(1)(a) of the Code by entering into those contracts on prohibited terms, and that Rent4Keeps contravened s 24(1)(a) because it was involved in Darranda's contraventions. Separate declarations were made for the four disclosure failures under s 17 of the Code. The Court further declared that Darranda contravened s 47(1)(a) of the Credit Act because of the six business-system deficiencies identified in the judgment, and that Rent4Keeps contravened s 47(1)(a) because it was involved in that contravention.

This is the key link between the earlier liability decision and the penalty judgment. The earlier decision established that the contracts were credit contracts and that the relevant contraventions had occurred. The penalty judgment then translated those findings into formal declarations and monetary penalties.

On penalties, the Court ordered Darranda to pay $2,000,000 for the s 24(1)(a) contraventions, $400,000 for the disclosure contraventions under ss 17(3), 17(4)(a), 17(5) and 17(6), and $1,000,000 for the s 47(1)(a) contravention. Rent4Keeps was ordered to pay $1,000,000 for involvement in the s 24(1)(a) contraventions and $3,000,000 for involvement in the s 47(1)(a) contravention.

The penalties were payable within 30 days. The respondents were also ordered to pay ASIC's costs, except in relation to two specified ASIC applications made on 16 October 2024 and 13 December 2024. The judgment also notes that ASIC did not seek injunctive relief.

Business owners should read this case as a warning about legal character, not just drafting style. A contract called a rental agreement may still be a credit contract. If that happens, the business may need to comply with disclosure rules, pricing limits and licensing obligations whether or not it intended to operate as a credit provider.

The case also shows that compliance failures often travel together. Here, the Court's declarations connected the contract terms, pricing, disclosures, marketing, representative oversight and licence governance. That means a business cannot safely treat compliance as a one-off template update. If the sales process, customer communications and internal controls do not match the legal position, the risk remains.

Another practical point is involvement liability. Rent4Keeps was not just a bystander. The Court found it was involved in Darranda's contraventions of the civil penalty provisions and imposed separate penalties on it. Businesses that design, support, franchise or centrally manage a consumer offering should not assume that only the contracting entity is exposed.

The judgment also notes that by 30 June 2023 both businesses had stopped entering new arrangements of the relevant kind and were dealing with legacy operations only. Even so, the Court still imposed substantial penalties. Stopping a model does not erase past contraventions.

For many businesses, the practical response is to review both documents and operations. Check what the product is in substance, whether the contract includes all required information, whether pricing is lawful, whether marketing says the same thing as the contract, who is responsible for compliance, how representatives are supervised, and whether licence conditions are being actively managed.

These questions matter most where a business uses standard-form consumer paperwork at scale. A single mistaken assumption about the legal character of the product can flow through hundreds of contracts. The Court's treatment of the 516 contracts in this case shows how quickly that can become a major enforcement problem.

Is this only relevant to large finance businesses? No. The judgment is especially useful for any business using standard-form consumer contracts where customers receive goods now and pay over time.

Does changing the contract title fix the issue? No. The Court's approach shows that legal substance matters more than the label on the document.

Can old contracts still create risk after a business stops offering them? Yes. The judgment records that the businesses had moved to legacy-only operations by 30 June 2023, but penalties were still imposed for earlier conduct.

Can a support or franchise entity be exposed too? Yes. Rent4Keeps was penalised because it was involved in Darranda's contraventions of civil penalty provisions.

Is this just about contract drafting? No. The Court's findings covered contract terms, disclosures, pricing, marketing, representative supervision, compliance staffing and licence governance.

The penalty judgment was delivered on 12 August 2025 in the Federal Court of Australia. It followed the earlier liability judgment delivered on 4 September 2024. The relevant contracting period identified in the declarations was 1 April 2019 to 30 June 2019. The judgment also records that from 30 June 2023 Darranda had ceased offering contracts to consumers and was servicing legacy contracts only, and that from the same date Rent4Keeps had ceased entering franchise agreements and was maintaining systems to support legacy franchisees and their ongoing customer contracts.

This page is based on Australian Securities and Investments Commission v Darranda Pty Ltd (Penalty) [2025] FCA 938 in the Federal Court of Australia. The penalty judgment expressly states that the reasons on liability in Australian Securities and Investments Commission v Darranda Pty Ltd (Liability) [2024] FCA 1015 should be read with the penalty reasons.

Because this page focuses on the penalty judgment, it gives a practical account of the contraventions, declarations and penalties recorded there. The fuller reasoning on why the "Tax Invoice and Rental Agreement" documents were credit contracts sits in the earlier liability decision.