The knowledge case
318 In my view, ASIC has not made out its case that Diversa failed to adhere to obligations under s 912A(1)(a) on the basis that, by virtue of what it knew or ought to have known about the operations of the Bhandari Entities, Diversa should have cut them off by the start of the Relevant Period (13 March 2019) or, if not, at some time before it ultimately did so on 17 March 2020. I have already explained why I consider the case beyond 17 March 2020, when Diversa did give instructions to cut off the Bhandari Entities, to lack any conceivable foundation. What follows is confined to the period between 13 March 2019 and 17 March 2020.
319 I accept that Diversa knew or ought to have known that the Bhandari Entities' business model involved consolidation of superannuation accounts principally by assisting customers to find their lost super and then establishing a YourChoice Super account into which the lost superannuation accounts would be consolidated. Although much of the evidence concerning levels of hardship claims coming through pre-dated the start of the Relevant Period, and, so far as it involved Mr Blood, also pre-dated the commencement of his role with Diversa in March 2018, the topic of hardship claims was a sufficiently widespread and recurring topic that Diversa knew or ought to have known that the level of hardship claims being made was regarded as relatively high and productive of additional work in handling those claims.
320 However, for the reasons already set out, I am not persuaded that the level of hardship claims was disproportionate when held up against the proportion of YourChoice Super members overall who were customers of the Bhandari Entities. Nor, for reasons already set out, do I accept that the mere making of hardship claims necessarily revealed vulnerability of the clients of the Bhandari Entities as a group, or anything about the operations of the Bhandari Entities that should have been of such concern to Diversa that it should have stepped in and cut off the Bhandari Entities.
321 Of course, the hardship claims were not the only issue on which ASIC relied. Its case was broad enough that the accumulation of issues must also be considered. I have already referred to the fees charges and Diversa's knowledge of the Bhandari Entities' fees.
322 There were also a number of complaints, which included complaints that the customer had not in fact authorised ASF to proceed, or fees had not been properly notified and understood. In any business setting, there will be complaints. Here, complaints of that kind are, of course, concerning, but they went to the commercial and contractual relationship between the Bhandari Entities and their clients, and fundamentally to the content of the interactions between them (whether steps had been duly authorised, whether certain information had been provided to the client). Although ASIC relied on transcripts of various calls between the Bhandari Entities and their customers, its case was not premised on any suggestion that Diversa had, or should have been, privy to or monitoring those interactions. Nor were the complaints accompanied by any evidence of the actual interactions between the Bhandari Entities and their customers, or the outcome of investigation into those complaints. In those circumstances, I do not consider that the existence, number or quality of the complaints really ought to have told Diversa that there were such serious problems in the operations of the Bhandari Entities that it should not accept members who were their clients.
323 The use of dummy email addresses and the issues concerning signatures also do not persuade me that Diversa failed to meet its duties under s 912A(1)(a) by continuing to issue interests in YourChoice Super to customers of the Bhandari Entities. Both issues were serious, but they were identified, investigated and acted upon. That demonstrates systems working, not failing. Moreover, the evidence did not reveal any suggestion that the Bhandari Entities were pushing back or resisting correcting issues identified by OneVue. On the contrary, taken as a whole, the evidence tends to suggest that Mr Bhandari was receptive to making corrections and alterations in response to matters brought to his attention. That was particularly the case in relation to the broader matters raised by ASIC concerning the Bhandari Entities' business model.
324 ASIC's underlying concern (or at least one distinct concern that emerged more clearly during the trial) was that consolidation into YourChoice Super was simply not in the best interests of the customers of the Bhandari Entities, or at least there was a risk that that was the case. ASIC put this concern a number of ways, including that YourChoice Super might not be an appropriate product for a particular customer. I do not accept that a risk that Diversa's product might not be the best product for some customers of an adviser means that Diversa should not have issued interests to any customers of the Bhandari Entities. It is of the nature of a general advice model that the personal circumstances of an individual are not considered. I do not consider that being aware that members to whom Diversa was issuing interests in YourChoice Super had come to the product under a general advice model means that Diversa should not have been willing to issue interests to them. It should also be recalled that, as Beach J said in Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) (No 3) (2020) 275 FCR 57 at [522], s 912A(1)(a) is "not a back door into an 'act in the [best] interests of' obligation".
325 Mention was also made of insurance being lost, but that was not established on the evidence (at least one internal email suggested the Bhandari Entities were mindful of the risk of lost insurance and did not take steps resulting in the loss of insurance). To the extent that ASIC's contention that YourChoice Super may not have been an appropriate product for customers related to the fees (other than consolidation fees) involved, the fees associated with being a member of YourChoice Super (whether on a temporary or ongoing basis) were detailed in the PDSs provided to prospective members. It was not suggested that the PDS was inadequate in any way. It was also not suggested or established that the fees charged by YourChoice Super were higher than those charged on other superannuation accounts.
326 That remains my view even accepting that, where general advice is provided via direct interactions with a customer, there is a risk that personal advice will be given. That risk exists in a wide variety of circumstances, and is a function of the existence of a hard legislative borderline between general and personal advice, coupled with application of the borderline being a matter of qualitative assessment in many cases. Here, the Bhandari Entities had retained a law firm, The Fold, to advise them on this (and other) issues. Prior to the start of the Relevant Period, Mr Blood had received the package of advice and documents earlier obtained which showed that the risk of personal advice being given was on the radar and that legal advice had been obtained and acted upon by the Bhandari Entities. In those circumstances, I do not accept that Diversa knowing that there was a risk that personal advice was being given went beyond the usual risk that general advice will stray into personal advice such that Diversa should have cut the Bhandari Entities off and declined to issue interests in YourChoice Super to any customers of the Bhandari Entities.
327 ASIC relied on the Westpac general advice litigation that went to the High Court as confirming the risk of personal advice being given. During the trial, reference was made by counsel for Diversa to the High Court's decision in Westpac HC having "to some extent destroyed the [general advice] model". Diversa also submitted that "it was certainly a legitimate model in the way in which it was operated prior to that time". The judgment of the primary judge was handed down on 21 December 2018 (Australian Securities and Investments Commission v Westpac Securities Administration Ltd (2018) 133 ASCR 1; [2018] FCA 2078) and determined that Westpac had not given personal advice. That conclusion was overturned by the Full Court in Australian Securities and Investments Commission v Westpac Securities Administration Ltd (2019) 272 FCR 170 (Westpac FC), handed down on 28 October 2019. The Full Court's decision was upheld by the High Court in Westpac HC, handed down on 3 February 2021.
328 The Relevant Period in this case commenced when the primary judgment in the Westpac litigation had been given, and concluded after the Full Court's decision. Even so, I do not consider the chronology of the Westpac litigation to be of significance in this case. That is because perusal of the reasons of the Full Court, and the High Court, shows that the facts specific to the giving of advice in that case drove the conclusion that personal advice was given. Two features stand out. First, it was close consideration of the actual interactions with consumers that was required to determine that personal advice was in fact given. In this case, while ASIC relied on transcripts of phone calls with customers in seeking to establish the "vices" for which it contended, there was no suggestion by ASIC that Diversa should have monitored the calls. Nor did ASIC suggest personal advice had been given by the Bhandari Entities, just that there was a risk of personal advice being given.
329 Secondly, the fact that those receiving calls from Westpac were its existing customers was a significant factor in the High Court and the Full Court's conclusions that personal advice was given: see, eg, Westpac FC at [146] (Allsop CJ), [219] (Jagot J), [389] (O'Bryan J); Westpac HC at [9] (Kiefel CJ, Bell, Gageler and Keane JJ), [71] and [79] (Gordon J). By contrast, contact was made between the Bhandari Entities and a customer when the customer completed an online form to be contacted about lost super; there was no existing customer relationship.
330 Further, it should also be noted that there was no general finding in Westpac FC (or Westpac HC, decided after the end of the Relevant Period) that direct consumer interactions by telephone necessarily carry an unacceptable risk of personal advice being given. As I have already addressed, here, advice was obtained from The Fold addressing the specific circumstances of the operations of the Bhandari Entities. There was a risk, but, from Diversa's viewpoint, it was being managed.
331 I will address other matters that ASIC pleaded (FASOC [42]) that Diversa knew, or ought to have known, which have not already been addressed in the course of the foregoing.
332 ASIC alleged that, "prior to their relationship with the OneVue Entities, Bhandari, ADG and/or ASF had been asked to leave another financial services licensee, MLC, because of the way in which they conducted their superannuation aggregation business": FASOC [42(f)]. An email of Mr Mills dated 30 April 2018, forwarded to Mr Blood on 26 November 2019, was relied on in support of that contention. The email in question referred to consolidation having resulted in "our adviser services, super admin and trustee" having been "hit with many financial hardship claims", and noted that Mr Bhandari had been asked to leave his previous platform provider, MLC, for "precisely this reason". The link drawn by the email was with the administrative burdens associated with processing hardship claims, to which I have already referred. There is nothing in the email that referred to MLC having cut ties due to "the way in which they [the Bhandari Entities] conducted their superannuation aggregation business".
333 Another matter raised by ASIC was the fact that "Bhandari, ASF and ADG were being asked questions by ASIC about their superannuation consolidation business": FASOC [42(h)]. A communication from Mr Mills to Mr Blood on 12 February 2019 concerning ASIC's investigation was relied upon in support of that contention. The email set out a list of the categories of documents that ASIC had requested. It said nothing about what concerns ASIC may have had about the operations of the Bhandari Entities. I do not see that being aware that ASIC was engaging in some sort of unspecified review of the operations of an adviser and had requested various, quite general, categories of documents advances ASIC's case.
334 I also do not accept ASIC's contention (pleaded in FASOC [42(i)]) that Diversa was, or ought to have been, aware that there was a material risk that the Bhandari Entities were engaging in misleading or deceptive conduct, or unconscionable conduct, or that ADG was itself in breach of its own obligations under s 912A(1)(a) or s 912A(1)(ca).
335 Taken as a whole, I am not satisfied that the matters known to Diversa are of such a character that it breached its obligations under s 912A(1)(a) by issuing interests in YourChoice Super to those who came to it via the Bhandari Entities.
336 I should also note that ASIC pleaded that Diversa knew or ought to have known, from at least 17 March 2020, that the use of SuperMatch by the Bhandari Entities resulted in the ATO's revocation of the OneVue Platform's access to that service. The exchanges between OneVue and the ATO show that there were a range of general matters of concern to the ATO that were not specific to the Bhandari Entities. The exchanges also revealed that the ATO adopted a policy of cutting off access to SuperMatch in order to conduct its enquiries (cf a decision to cut off access reflecting a concluded view by the ATO as to wrongdoing or misuse). It appears that specific discussion with the ATO concerning ASF arose due to that entity accessing SuperMatch via a different process which did not involve a "direct technology link" to conduct SuperMatch searches, and which involved the public providing details via ASF's website.
337 For these reasons, interactions with the ATO concerning SuperMatch do not assist ASIC's case. For completeness, I note that I do not accept that the Bhandari Entities' use of SuperMatch constituted misuse of the service, per se (as parts of ASIC's oral submissions appeared to suggest). Access to SuperMatch was an integral part of the Bhandari Entities' consolidation business model, but ASIC did not plead or establish any misuse of that service by the Bhandari Entities beyond its general case as to the vices of the Bhandari Entities' business model. As such, contentions that Diversa was somehow responsible for the Bhandari Entities' use of the SuperMatch service based on the terms and conditions on which the ATO made that service available to trustees and administrators, do not assist ASIC (as well as not having been pleaded). In addition, and as already noted, the evidence did not establish whether the Bhandari Entities were using SuperMatch pursuant to an authorisation from Diversa, as trustee, or Super, as administrator.