Nature of the contravening conduct
35 ASIC submitted that the contravening conduct occurred in the context of a pre-existing trustee and beneficiary relationship between Westpac and BT fund members, the conduct was deliberate in nature, as opposed to merely careless or negligent, and the conduct occurred in relation to a product of particular importance to Westpac's members, being their superannuation.
36 Westpac submitted that its contravention of s 961K was not deliberate. It argued that ASIC's characterisation of the conduct as deliberate pays insufficient regard to the complexity of the underlying questions relating to the interpretation and application of the law and whether Westpac's conduct, properly characterised, constituted the giving of personal advice. In that respect, Westpac referred to the fact that different conclusions were reached at first instance and on appeal; that three separate judgments were written in the Full Federal Court; and that the High Court considered it appropriate to grant special leave to appeal. Westpac further submitted that to characterise its conduct as "deliberate" does not give due regard to Westpac's extensive (albeit ultimately inadequate) attempts to train its consultants with respect to the difference between "general" and "personal" advice, and to review their calls to ensure that they were not providing the latter.
37 In the course of the hearing, ASIC made clear that it did not contend that Westpac deliberately contravened the law in the sense of knowing that the conduct involved a contravention (or being recklessly indifferent to whether it involved a contravention). ASIC's submission was that the conduct engaged in by Westpac was deliberate conduct, not the result of inadvertence or unauthorised behaviour.
38 I accept ASIC's characterisation of the contravening conduct. The following matters should be highlighted.
39 First, the contravening conduct was in relation to a product of particular importance to Westpac's members, being their superannuation. The "superannuation context" is a relevant matter for the Court to consider in assessing an appropriate penalty: Australian Securities and Investments Commission v MLC Nominees Pty Ltd [2020] FCA 1306; 147 ACSR 266 at [199] (Yates J). The potential significance of the rollover decision to a member should not be understated even if the particular amounts do not appear to be large. As Gordon J observed, the consolidation of multiple superannuation accounts is "a significant financial decision" (at [73] of the High Court Judgment). A decision by a member as to the entity to entrust with their superannuation can have a significant impact on their quality of life in retirement. Further, the inherent nature of superannuation as a complex investment for the long term is such that, what may seem a reasonably minor matter at the time of a decision, may have a very significant effect on a person's financial welfare in the long term. As Gordon J identified (at [34] and [82] of the High Court Judgment), superannuation products are given a distinct and special treatment under Chapter 7 of the Act, which provides that where the relevant financial product is a superannuation product, a person will always be a retail client. The reason for this is as described in the Revised Explanatory Memorandum for the Financial Services Reform Bill 2001 (Cth) at 9 [2.27]:
This will ensure that disclosure is given to all persons in relation to superannuation … products. This is consistent with the long term nature and complexity of such products and will ensure the integrity of the regime in a choice of superannuation fund environment.
40 Second, the superannuation consolidation campaign was a deliberate and carefully planned campaign. Westpac submitted that the QM Framework, being the compliance framework that governed the campaign, showed that Westpac sought to ensure that its representatives only gave general advice and not personal advice. It can be accepted that the QM Framework defined both general advice and personal advice and instructed Westpac's representatives not to give personal advice. However, the QM Framework then outlined an approach to the campaign (a marketing and sales technique referred to as "social proofing") which, in my view, was inherently likely to result in representatives giving personal advice and which the Court has found did result in giving personal advice to 14 of the 15 fund members who were the subject of the proceeding. In engaging in the contravening conduct in respect of those 14 fund members, the Westpac representatives were doing precisely as they had been instructed in the QM Framework. The primary judge described the marketing and sales approach under the QM Framework in the following terms (at [65] of the Primary Judgment):
The calls to the 15 customers reflected the terms of the QM Framework to varying extents, including through opening by saying that they were calling about the relevant customer's superannuation, as a "courtesy call" or to "help them potentially save on fees", uncovering the personal motivations of the customer and then linking those motivations to influence the customer to roll over their external superannuation accounts into the customer's BT account. The callers were encouraged to, and typically did, seek information about the customer's personal circumstances.
41 In the Full Court, Allsop CJ observed of these findings (at [38]-[39] of the Full Court Judgment) that:
There can be no doubt that Westpac's intention was to influence the customers in making a decision in relation to a particular financial product.
Further, there can be no doubt that the process and techniques involved in the QM Framework and the calls involved techniques of psychology in bringing the customer to a decision favourable to the interests of Westpac. …
42 Justice Jagot observed (at [289] of the Full Court Judgment):
It is apparent from the evidence of Mr Cannons in particular that through the campaign by its callers, Westpac was trying to do indirectly what it (rightly) thought it could not do directly without risking giving personal advice when Westpac held no licence to do so. …
43 I place little weight on Westpac's submission that the question whether its campaign constituted the giving of personal advice involved complexity relating to the interpretation and application of the law. It can be accepted that the primary judge formed the view that Westpac's conduct did not involve the giving of personal advice. However, the Full Court and the High Court were unanimously of the view that the conduct did involve the giving of personal advice. Neither the law nor its application are as complex as Westpac suggests. Westpac's failure was to consider properly the meaning and effect of the law in the context of its "social proofing" marketing and sales technique. The definition of "personal advice" in s 766B(3) of the Act has two limbs. The second limb is important. It refers to financial product advice that is given or directed to a person in circumstances where a reasonable person (the recipient) might expect the provider of the advice to have considered one or more of the recipient's objectives, financial situation and needs. Effectively, Westpac's "social proofing" marketing and sales technique activated that limb of the definition. The technique, when applied in telephone calls made by Westpac representatives to persons with whom Westpac had an existing relationship (as trustee of a superannuation fund of which the person was a member), created the circumstances in which a reasonable member might expect Westpac to have considered one or more of the member's objectives, financial situation and needs. As the High Court plurality found (at [12]-[13] of the High Court Judgment):
The social proofing technique deployed by Westpac served to confirm, by reference to the common experience of like-placed others, that consolidation of each particular member's external superannuation accounts was appropriate to achieve that member's personal objectives of reducing fees and improving manageability. Those very objectives had been identified by the discussion which the Westpac caller elicited in the phone call itself as matters of concern pertaining to that particular member. By segueing into an offer to effect the roll-over, Westpac's callers implicitly recommended that each member accept the offer there and then on the evident footing that his or her interests were being served without any need for further consideration of his or her other objectives, financial situation or needs. It is well recognised that "many persons will only absorb the general thrust" of such marketing ploys. Westpac knew its business and had reason to be confident that its marketing techniques were likely to be effective.
Each member might reasonably have expected that, given the nature of Westpac's business and its experience and expertise in relation to financial matters like superannuation, Westpac had taken the objectives it had elicited from the member into account in recommending the roll-over service. That is consistent with the recommendation of the service being presented to each member as a "no brainer" having regard to the manifest benefits to each member to be expected from rolling over into a single Westpac account. Given that Westpac's marketing was apt to create precisely that impression, it can hardly complain that it succeeded. Nor can it sensibly be suggested that the impression so created did not reasonably include an expectation on the part of the member that the recommendation was appropriate for him or her as an individual.
44 Similar, Gordon J concluded (at [81] of the High Court Judgment):
Section 766B(3)(b) is concerned with the circumstances of the retail client. Here, those circumstances included the form, content and context of the financial product advice given to the members that they should roll over their external superannuation accounts into their BT account. As O'Bryan J observed, where a provider of advice urges the recipient to follow a particular course of action, there is a greater likelihood that a reasonable person might expect the adviser to have considered the recipient's personal circumstances. This observation applies with particular force in the present case, where: the course of action concerns a subject matter of significance to most members (being the consolidation of multiple superannuation accounts); there is a pre-existing relationship of dependence between the adviser and the member (that of trustee and beneficiary); the adviser elicited the member's objectives; and once having been told them, the adviser confirmed those personal objectives through the use of social proofing as being common and relevant objectives. As has been said, those circumstances would have conveyed to a reasonable person not only that those personal objectives were considered, but that no other matters needed to be taken into account and no other advice was required before the member made a decision to accept the recommendation and roll over their external superannuation accounts.
45 The third matter to highlight is that Westpac's conduct favoured its own interests over the interests of the members of the superannuation funds in respect of which Westpac was trustee. That makes the conduct particularly egregious. In the Full Court, Allsop CJ observed (at [174]-[175] of the Full Court Judgment in the context of considering s 912A(1)(a) of the Act, but which observations apply to the overall effect of Westpac's contravening conduct):
… There was a degree of calculated sharpness about the practice adopted in the QM Framework. At best, the aim was to get a customer to make a decision after only general advice, being a decision that could only prudently be made by a consideration of the personal circumstances of the customer and his or her funds and their characteristics.
… The customers were, through the carefully structured QM Framework, made to feel that this straightforward and obvious decision should be taken when, subject to their personal circumstances and the features of their other funds, it may well not have been in their interests. In the context, the calls and the callers gave the impression (as it was intended by Westpac from the QM Framework) that BT (through the callers) was there to help, when in fact it was there only to help itself.
46 Similarly, Jagot J observed (at [218] of the Full Court Judgment):
…The rub in the present case is that while Westpac may have perceived what it was doing as a marketing campaign in the interests of Westpac, its campaign consisted of making calls to existing Westpac customers on the basis that the purpose of the call was to help the customer in respect of the customer's superannuation. The reasonable customer would not expect that in such a serious context, the customer's superannuation, and given the existing relationship between them, Westpac would present itself as helping the customer if, in reality, it was doing nothing more than helping itself.
and (at [301] of the Full Court Judgment):
… it is apparent that Westpac was not acting in the best interests of the customers. It was acting in its own interests in circumstances where it would be merely fortuitous if the rollover would also be in the customer's best interests.
47 My own conclusion as a member of the Full Court was the same. Again in the context of considering s 912A(1)(a) of the Act, but in observations that were generally applicable to describe the nature and character of Westpac's contravening conduct, I said (at [427] of the Full Court Judgment):
…There was an asymmetry in the knowledge held by Westpac and that held by the customer in relation to the subject of the advice, and Westpac took unfair advantage of that asymmetry. The asymmetry of knowledge arose from the facts that: Westpac knew that the decision by a customer whether to consolidate the customer's other superannuation funds into a Westpac fund was an important decision for the customer, with potentially significant implications for the customer's future financial position; Westpac also knew that the decision involved a range of considerations, including particularly the relative performance of the superannuation funds and the relative structure of the fees charged in the funds; and Westpac knew that a prudent customer would weigh up those matters. Westpac took unfair advantage of that asymmetry by implementing a carefully crafted telephone campaign, reinforcing in the minds of its customers an erroneous assumption that the decision to consolidate their superannuation into a Westpac fund was straightforward and was likely to generate benefits for the customer by saving fees and by reducing the burden of managing superannuation. The telephone campaign was directed to persons with whom Westpac had an existing relationship and in a real sense occupied a position of trust with respect to the customer's superannuation fund. Despite knowing that the decision was not straightforward, Westpac did not advise its customers about the matters that they should consider before deciding to consolidate their superannuation. Nor did Westpac even suggest to its customers that they reflect on the decision or seek advice about the decision. Through the campaign, Westpac pursued its own self-interest and disregarded the best interests of its customers…
48 The fourth matter is that it is apparent from what has been said above that Westpac's conduct was not isolated or unauthorised misconduct by employees or representatives, but rather the conduct of employees implementing a marketing and sales system designed by Westpac and that was in place over an extended period of time.