Recusal in civil penalty proceedings: High Court hands down decision in SunshineLoans Pty Ltd v ASIC [2026] HCA 8

The High Court’s decision in SunshineLoans Pty Ltd v ASIC [2026] HCA 8 provides authoritative guidance on apprehended bias in bifurcated civil penalty proceedings, confirming that firm findings at the liability stage do not, without more, disqualify a trial judge from determining penalty. While the judgment (SunshineLoans’ appeal dismissed with costs, 7-0) brings finality to the appeal process concerning Derrington J’s recusal, it does not conclude the underlying enforcement action. The matter now returns to the Federal Court, where the penalty hearing has been remitted to Justice Roger Derrington for determination.  From the initial liability proceedings through successive appeals in the Full Federal Court and the High Court, ASIC has been represented by Gadens partner, Scott Couper and team. The ongoing significance of the matter will be followed with interest as we move to the penalty phase.

Significance of the High Court decision for bifurcated civil penalty proceedings

The High Court’s decision is of considerable importance for the conduct of bifurcated civil penalty proceedings, confirming that the liability and penalty stages form part of a single, continuous judicial process, rather than discrete exercises requiring a judge to reset their evaluative reasoning. Gageler CJ and Gleeson J explained that a trial judge is not required to quarantine or disregard findings made at the liability stage when determining penalty. Their Honours stated that the primary judge “is not required to put aside the views he has already expressed concerning the credibility of [a witness]” and that taking such findings into account at the penalty stage “is not a departure from, but rather part of, determining the case on its legal and factual merits”.  This clarification protects the efficiency and coherence of civil penalty proceedings and prevents tactical recusal applications arising simply from adverse findings.

More broadly, the Court reinforced that robust judicial reasoning at the liability stage is not only permissible but expected, and that apprehended bias principles must not be applied in a way that undermines ordinary judicial practice. As Gageler CJ and Gleeson J observed, while the primary judge’s findings were “robust in their language”, they were “all relevant and open to be made, and revealed neither animosity towards nor prejudgment of the appellant”. Beech‑Jones J similarly emphasised that the assessment of penalty and any related evidence is “a continuation of the final hearing of which the liability hearing and judgment form part”. The decision therefore provides authoritative guidance that bifurcation does not fragment the judicial task, ensuring that civil penalty regimes remain workable, efficient and resistant to procedural manipulation.

ASIC has noted that the High Court’s unanimous dismissal of SunshineLoans’ appeal is an important decision for the conduct of civil penalty proceedings. ASIC has endorsed the view that adverse findings made at the liability stage do not, of themselves, give rise to apprehended bias and that enforcement proceedings should not be disrupted by tactical recusal arguments. ASIC Deputy Chair Sarah Court said the ruling “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.”

A recap – ASIC secured liability judgment against SunshineLoans for prohibited fees

In April 2024, the Federal Court of Australia delivered a liability judgment in proceedings commenced by the Australian Securities and Investments Commission (ASIC) against SunshineLoans Pty Ltd, a major provider of small amount credit contracts (SACCs). The proceeding concerned SunshineLoans’ practice of charging a $35 ‘Amendment Fee’ or ‘rescheduled payment fee’ to consumers, which ASIC alleged was prohibited under the National Credit Code and the National Consumer Credit Protection Act 2009 (Cth).

ASIC was represented throughout the proceeding by Gadens, with Scott Couper, Partner, leading the matter for the regulator. The case formed part of ASIC’s strategic enforcement response to systemic non‑compliance identified in the SACC market at the time, particularly involving vulnerable consumers.

The contraventions occurred between 1 July 2016 and 2 November 2020, during which SunshineLoans entered into hundreds of thousands of SACCs that provided for the Amendment Fee. ASIC alleged, and the Court accepted, that the fee constituted a prohibited monetary liability.

SunshineLoans sought to resist liability by advancing broad jurisdictional and standing challenges, contending that ASIC lacked power to bring the proceedings and that the Federal Court lacked jurisdiction to grant the relief sought. These arguments were comprehensively rejected by Derrington J. His Honour held that the relevant Credit Code provisions were civil penalty provisions and that ASIC plainly had standing to seek the declaratory and pecuniary relief it sought.

On liability, the Court found SunshineLoans had contravened s 24(1A) of the National Credit Code and s 47(1)(d) of the Credit Act by imposing and requiring payment of fees not permitted by law. The Court accepted ASIC’s construction of the statutory scheme and rejected SunshineLoans’ attempts to characterise the Amendment Fee as falling within an allowable category of charges.

The judgment represented a decisive enforcement outcome for ASIC and underscored the effectiveness of ASIC’s litigation strategy supported by Gadens.

SunshineLoans’ liability appeal — SunshineLoans Pty Ltd v ASIC [2025] FCAFC 34

SunshineLoans appealed Derrington J’s liability findings to the Full Court of the Federal Court. That appeal challenged the construction of the National Credit Code, ASIC’s standing, the characterisation of the Amendment Fee, and aspects of the primary judge’s factual and credibility findings.

The Full Court unanimously dismissed the appeal in its entirety, upholding Derrington J’s reasoning on all substantive issues. The Court reinforced that the statutory scheme strictly limits the fees chargeable under SACCs and that the Amendment Fee was not a fee payable “in the event of default”. The Court was critical of the manner in which the appeal was advanced and confirmed the breadth of the contraventions established. SunshineLoans did not seek special leave to appeal the liability decision to the High Court.

ASIC’s recusal appeal — ASIC v SunshineLoans Pty Ltd (Full Federal Court)

Following the liability judgment, SunshineLoans applied for Derrington J to recuse himself from determining penalty, alleging apprehended bias arising from his adverse credit findings against a number of SunshineLoans witnesses. Derrington J acceded to the application on limited grounds and not the grounds sought by SunshineLoans. ASIC appealed that decision.

The Full Court allowed ASIC’s appeal, holding (by a majority of 2 to 1) that the primary judge erred by treating the penalty phase as requiring a fresh, unencumbered assessment divorced from views necessarily formed at the liability stage. The Court confirmed that bifurcated civil penalty hearings are orthodox and that robust liability findings do not give rise to apprehended bias. The matter was remitted to Derrington J for determination of penalty.

High Court recusal appeal dismissed

SunshineLoans sought and obtained special leave to appeal the Full Federal Court’s recusal decision to the High Court of Australia. The appeal was heard on 16 October 2025 before the full bench of the High Court.  On 18 March 2026, the High Court unanimously dismissed the appeal in six separate concurring judgments.

The High Court held that no reasonable apprehension of bias arose from the primary judge’s liability findings. The Court confirmed that strong credibility findings reached in the discharge of the judicial function do not evidence animus or prejudgment, and that penalty proceedings are a continuation of the same final hearing. The decision preserved the efficiency of civil penalty enforcement and definitively resolved the procedural challenge raised by SunshineLoans.

The following is a summary of the main judgment delivered by Gageler CJ and Gleeson J.

1. Introduction and issue
   Gageler CJ and Gleeson J identified the sole question on the appeal as whether the primary judge was disqualified, on the ground of apprehended bias, from hearing the penalty stage of bifurcated civil penalty proceedings after having made adverse credit findings at the liability stage. Their Honours emphasised that the applicable test is whether a fair‑minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the later determination.
2. Applicable legal principles
   Their Honours reaffirmed the orthodox “double might” test from Ebner v Official Trustee in Bankruptcy, requiring identification of the factor said to give rise to bias, articulation of a logical connection between that factor and a feared deviation from deciding the case on its merits, and assessment of the reasonableness of that apprehension.
3. Context of bifurcated proceedings
   The joint judgment stressed that bifurcating civil penalty proceedings into liability and penalty stages is a common and accepted judicial practice. A fair‑minded observer is taken to understand that judges routinely make firm findings at one stage of proceedings and are nonetheless obliged to decide later issues according to law and evidence.
4. The ‘broad’ apprehended bias argument
   As to the argument raised by SunshineLoans that the language and tone of Derrington J’s liability judgment revealed animus towards SunshineLoans, their Honours rejected the contention. Robust and critical findings, even in strong language, do not of themselves demonstrate hostility or prejudgment. The findings were directed to issues the judge was required to decide and were open on the evidence.
5. The ‘narrow’ argument concerning Mr Powe
   Gageler CJ and Gleeson J also rejected the argument that previous adverse credibility findings concerning SunshineLoans director Mr Powe created a reasonable apprehension of bias in assessing his further evidence at the penalty stage. Their Honours held that judges frequently assess the credibility of the same witness on more than one occasion and are expected to bring an impartial mind to each assessment.
6. Absence of a logical connection
   Central to the joint judgment was the absence of any logical connection between the primary judge’s prior findings and the feared inability to decide penalty issues on their merits. The fact that prior findings might be relevant, or even influential, does not equate to prejudgment.
7. Error in the primary judge’s recusal
   Their Honours concluded that the primary judge erred in recusing himself on the basis that reassessing credibility would involve a “lack of propriety”. That approach misconceived both the nature of apprehended bias and the ordinary judicial task in staged proceedings.
8. Disposition
   Gageler CJ and Gleeson J upheld the Full Court’s decision, dismissed the appeal, and confirmed that no reasonable apprehension of bias arose. Their Honours’ reasoning reinforced the finality and integrity of judicial findings and the efficiency of having the same judge determine liability and penalty in civil penalty cases.

The High Court expressly noted and accepted the primary judge’s strong characterisation of the evidence given by SunshineLoans’ director, Mr Powe, when explaining why those findings did not amount to bias. The joint reasons referred to the trial judge having described aspects of the evidence as “preposterous” and “disingenuous”, and having found that Mr Powe was “not a witness who tried to give his evidence in an honest manner” (summarised and endorsed in joint reasons). These descriptions were treated as legitimate evaluative findings arising from SunshineLoans’ forensic choice to advance that evidence.

Edelman J likewise referred to the fact that these adverse findings were “the product of deciding issues the appellant chose to contest” and arose directly from “the forensic course taken at the liability hearing”. His Honour rejected any suggestion that consequences flowing from those choices could be re‑characterised as unfairness.

Beech‑Jones J rejected the notion that reassessing credibility necessarily gives rise to bias, observing that courts frequently revisit credibility where further evidence is led. The fair‑minded observer would recognise that judges are trained to reassess evidence in light of new material and that doing so is part of ordinary judicial work, not a cause of disqualification.

Gordon J noted that apprehended bias must be assessed in light of how courts actually function, including the routine practice of splitting liability and penalty. The observer is taken to understand that findings made at one stage do not exhaust the judicial task at another. Her Honour also stressed that adverse findings are not only permissible but often unavoidable where contraventions are established.

Jagot J’s reasons concentrated on correcting the primary judge’s concern about “propriety”. Her Honour held that there is nothing improper about a judge hearing a later stage of proceedings after making credit findings earlier, even where the same witness is involved. The law does not require a judge to approach later issues as if earlier findings had never been made.

Steward J adopted a practical and cautionary approach, warning against an expansion of apprehended bias principles that would disrupt efficient case management. His Honour observed that if SunshineLoans’ arguments were accepted, bifurcated proceedings would become unworkable, as judges would routinely be required to recuse themselves after making liability findings.

Across the judgments, several Justices expressly endorsed the quality, propriety and orthodox nature of Derrington J’s liability reasons. Gageler CJ and Gleeson J stated that Derrington J’s findings, although robust in their language, were all relevant to the issues he was required to decide and were open on the evidence and revealed neither animosity towards the appellant nor prejudgment of issues not yet to be determined. Gordon J similarly observed that the primary judge did no more than discharge his judicial duty to give clear and reasoned findings on contested issues of fact and credit, adding that such reasoning is not only permissible but essential to the integrity of judicial decision‑making.

Summary and practical take-away

In summary, as Edelman J observed, the resolution of the appeal involved the application of well-established principles to the facts of the case. The liability and penalty stages form part of a single, continuous judicial process. A trial judge is not required to quarantine or disregard findings made at the liability stage when determining penalty. A primary judge is not required to put aside the views she or he has already expressed concerning the credibility of a witness and that taking such findings into account at the penalty stage is not a departure from, but rather part of, determining the case on its legal and factual merits.

This case provides important guidance to regulators and protects the efficiency and coherence of civil penalty proceedings. Any attempts to raise tactical recusal applications arising simply from adverse findings should be resisted.

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Authored by:

Scott Couper, Partner
Tegan Harris, Special Counsel