Westpac Securities Administration Ltd & Anor v Australian Securities and Investments Commission

[2020] HCATrans 57

[2020] HCATrans 057

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S326 of 2019

B e t w e e n -

WESTPAC SECURITIES ADMINISTRATION LTD ACN 000 049 472

First Applicant

BT FUNDS MANAGEMENT LTD ACN 002 916 458

Second Applicant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

Application for special leave to appeal

KIEFEL CJ
KEANE J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO SYDNEY

ON FRIDAY, 24 APRIL 2020, AT 11.30 AM

Copyright in the High Court of Australia

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR J.R. WILLIAMS and MS E.R. DOYLE‑MARKWICK for the applicants.  (instructed by Allens)

MR J.G. RENWICK, SC:   May it please the Court, I appear with MR T.J. KANE and MR M.S. KALYK for the respondent.  (instructed by Australian Securities and Investments Commission)

KIEFEL CJ:   Yes, Mr Gleeson.

MR GLEESON:   Could I ask your Honours to go directly to page 335 of the book which contains in section 776B(3) of the Corporations Act the key definition of “personal advice” which is engaged by this application.  Your Honours, the binary division between “personal advice” as defined and “general advice” has been in the Act since 2001.  Its importance, if anything, has been increased by the 2012 reforms which introduced section 961B, which you will also find on that page and over and that is the quasi‑fiduciary duty which attaches where the advice is personal but not otherwise. 

Your Honours, this case is the first which has had to give detailed consideration to the construction of the definition of “personal advice” and in particular to the distinction between what is termed the subjective limb, paragraph (a), and the objective limb, paragraph (b), and to ask the question what would be the circumstances in which the reasonable person might expect the provider to have considered one or more of the personal circumstances when in fact the provider has not done so. 

We contend that the essential reason for the grant of leave is that the decisions below have resulted in a lack of clarity in these construction questions, not just because of differences between the primary judge and the Full Court, but importantly because of the differences between the three judgments in the Full Court. 

Your Honours, before addressing each of the leave questions which are at page 321, could I invite the Court to go to the facts of customer number 1 which commence at page 51, to provide some focus for the three questions.  What you will see from paragraph 143 is that Westpac commenced the exchange with an existing customer by promoting a general message that consolidating super could or might lead to a saving on fees and administrative convenience and they invited the customer to provide their TFN so that Westpac could do a search.  You will see in paragraph 153 that the customer consented to the search and it duly found there was other super available for consolidation. 

Your Honours, the entirety of the case for customer 1 hinges on paragraphs 158 and 159.  They are the calls which the primary judge says do not trigger personal advice, whereas the Full Court says they do.  If your Honours look at those fairly transparent calls, the first commences by saying:

We’ve got [your] results here and we’d like to help you bring them over . . . to potentially save you on fees.

So that repeats the general message about potentialities.  Then the general advice warning is given and the customer agrees that the phone call will continue on that basis.  Then the caller asks the main reason the customer had to look for the super and the main benefits and from that the customer indicates the general matters:  the prospect of saving on fees and manageability, and the caller at the top of page 55 validates that these are general reasons that many customers think of to bring their super together and the second call proceeds to complete the transaction.

Now, against that background, when we consider the subjective limb, which is whether Westpac in fact considered personal circumstances of the customer in formulating the advice, you have concurrent findings that if that limb is not satisfied it is important to dwell upon why that limb is not satisfied because it will inform the second limb.

It was not satisfied for three main reasons.  The first was that Westpac gave the general advice warning indicating it was not considering the particular circumstances of the customer.  The second was that the only personal objectives of the customer that were elicited were of the most general kind and the only messages which Westpac repeated in the call were the general messages from the original correspondence about the possibility of saving on fees.  The third matter is – and perhaps the most important – Westpac never sought from the customer and never obtained the minimum irreducible information about the customer’s objectives that would have been necessary to provide personal advice, namely, what fees are you currently paying and what are your current management issues?

When one then turns to the objective limb can I contrast the finding of the primary judge with the disparate findings of the Full Court?  For the primary judge, if your Honours go please to page 117, in paragraph 394 her Honour reasons as to why the reasonable person in the customer’s position would not have expected Westpac to be considering the customer’s personal objectives, and those reasons essentially mirror the matters that I have already referred to, namely, the general advice warning, the generality of the messages and the fact that the specific information about fee profile was never provided.

Your Honours will note at the end of paragraph 394(3), the primary judge contrasts the statutory question with a different question which does not arise which is whether the callers might reasonably be expected that they should have considered objectives and she pursues that theme further in paragraph 395 to indicate that the normative or the should question is not the one that arises under the objective limb.

Can I then show, in relation to the first special leave question, that at least two and arguably three of the disparate judgments have introduced a normative limb, a normative aspect into the objective limb that we say is not there.  If your Honours could go, please, to page 265, I will commence with Justice Jagot.  At paragraphs 267 onwards, her Honour lists eight reasons why the objective limb is satisfied and if your Honours focus for a moment on the third, fourth, and fifth reasons, they are, essentially, that because there was a pre‑existing banker/customer relationship or superannuation fund customer relationship:

a reasonable person . . . would not expect that Westpac might act contrary to the customer’s interest ‑

That is paragraph 269.  Paragraph 270, the calls are about an important product, superannuation, and the reasonable person again would not expect that Westpac would be making recommendations if it was contrary to the customer’s interest, and in 271 you see another reflection of the concept of Westpac being expected not to act contrary to the customer’s interest.

Pausing there, we wish to submit that the normative element has been introduced into what is, in truth, an objective factual inquiry.  Her Honour has built in, with respect, an assumption that the reasonable person expects that Westpac is acting only in the customer’s interest, and built upon that a further normative assumption, which you see in the following three paragraphs, that if Westpac is acting in the customer’s best interests, Westpac would necessarily be considering the customer’s personal circumstances before making the recommendation.

Now, through that double‑normative assumption we say this, with respect, the approach risks circularity because the “best interests” obligation under section 961B that I started with has been imposed substantially because of a judgment that it would be in the customer’s best interest to receive personal advice rather than general advice. 

Your Honours, in relation to Justice O’Bryan, I can be more brief, but at page 301 through to 302, commencing at paragraph 388, his Honour lists five factors which he says point in favour of the objective limb being satisfied, and the first three of those, although differently expressed, contain within them a similar notion to Justice Jagot that because of the existing customer/provider relationship and because of the importance of the product, as it is expressed in paragraph 390, the individual would reasonably expect that the institution is acting for their benefit and in their interests.

Now, we submit that the five factors of Justice O’Bryan taken together do not address the statutory question which is whether the reasonable person might expect Westpac had in fact considered the customer’s personal objectives, and the reasonable person could never expect that knowing that the particular position of the customer about fees had never been revealed and that Westpac’s messages never went beyond the general advice warning plus the general statement about potentialities.

KIEFEL CJ:   Mr Gleeson, how would you frame the question of construction?

MR GLEESON:   The question of construction, if I could return to page 335, would be this, that in addressing the second paragraph (b) limb or the objective limb, is the focus of the court upon the expectations of the reasonable person based upon what actually passed during the communication, or is it based upon a normative assumption as to whether a provider, acting in the best interests of the customer, would have given the appropriate consideration.  That is the question under special leave question 1.

KIEFEL CJ:   To what extent do the words “to have considered” ‑ ‑ ‑

MR GLEESON:   That is – I am sorry, your Honour.

KIEFEL CJ:   I am just saying to what extent is that a focus in relation to the resolution of the question of construction.

MR GLEESON:   Thank you, your Honour.  It is critical because the second construction question which concerns the words “has considered” under the first limb and the words “to have considered” under the second limb, is whether in each case there is a common conception that the provider either in fact or in reasonable perception has evaluated the personal circumstances of the customer in the formulation of the advice, as opposed to merely noted them or listened to them attentively, which the Full Court reasoned on that second question. 

Your Honours, the importance of that – I have now moved to the second question – is that there is in fact an inconsistency in the Full Court’s approach because they were perfectly happy that under the first limb Westpac did not in fact consider the relevant personal objectives and that can only be for the reasons I have mentioned, and yet on the second limb they have applied what we would call an undemanding approach to consideration that it is enough that the provider has heard, listened to attentively those matters, even though it could not have taken them into account in evaluating the advice. 

Your Honours, on that second question could I invite you to observe that this concept of consideration is not only a part of the threshold or the gateway, but it is a critical part of the substantive obligation under section 961B.  You will see a similar concept of consideration or its analogues in 961B(2)(b)(ii) and very importantly over the page in paragraph (e) you will see that the concept of consideration emerges three times in the substantive obligation. 

So one of themes in the Full Court’s judgment is that consideration can be given an undemanding approach because this is a protective statute.  In fact, consideration is central to the operation of the substantive provision itself, and so it is critical to understand whether its meaning is that which we contend and which the primary judge adopted.

Your Honours, the third question is really the reflection of the consideration point which is that the consideration under the subjective or objective limb must be about one or more of the person’s objectives, financial situation and needs.  As we indicate in our submissions at paragraphs 24 and 25 on page 344, the Full Court has offered three different conceptions of the relevant touchstone ‑ ‑ ‑

KIEFEL CJ:   Which reminds me, Mr Gleeson, I interrupted you perhaps before, you have not dealt with Chief Justice Allsop’s approach.

MR GLEESON:   Yes, thank you, your Honour.  With Chief Justice Allsop the normative element comes in in a slightly different way.  If your Honours go to paragraph 5 of the judgment, page 166, which recognising it is a summary of what follows, his Honour has said between about lines 17 and 25:

The difficulty is that the decision to consolidate superannuation funds into one chosen fund is not a decision suitable for marketing or general advice.  It is a decision that requires attention to the personal circumstances of a customer and the features of the multiple funds held by the customer.

That is the normative premise that, with respect, we say the Chief Justice has adopted, that this is the type of decision which simply cannot be the subject of personal advice – general advice, and that, we submit, is contrary to one of the premises of the Act which is that customers are entitled to

choose whether to make decisions large or small based on general advice, personal advice or no advice at all. 

The other aspect of his Honour’s paragraph which is developed later is this concept of the closing which his Honour places great weight on and apparently the vice that tipped this over the line into personal advice was that Westpac invited the customer to make a decision on the call as opposed to sending the customer away. 

Now, that concept of the closing was not focused on by the other two justices.  It was not focused on by the primary judge and in principle it is difficult to see how the nature of the closing answers the question posed by the statute. 

Your Honours would perceive from what we have put that this case is not simply about a particular form of marketing technique.  It raises the more general question when a provider has some information, even if generalised, about the personal circumstances of the customer, and wishes to use that information to tailor or to reinforce general messages, always giving the general advice warning, has the provider nevertheless tripped the wire and undertaken the onerous obligations of personal advice?  May it please the Court.

KIEFEL CJ:   Yes, thank you, Mr Gleeson.  Yes, Mr Renwick. 

MR RENWICK:   Your Honours, in summary it is true your Honours have not had occasion yet to consider section 766B(3)(b), but this we say is not a suitable vehicle.  There is no reason to doubt the correctness of the decisions of the Full Court and any differences between three judges, and, after all, we are not construing a statute ‑ we are looking at three different expressions of judicial opinion ‑ are not such as to warrant the grant of special leave. 

May I deal directly with customer 1 in the way Chief Justice Allsop dealt with it and then go to the particular special leave questions.  If your Honours go to page 194 of the application book.  So the first thing is that in both the statutory construction and in the viewing of the facts, Westpac below encouraged the court to atomise or decontextualize both the statute and the exchanges and both those invitations were rightly rejected.  Thus, on page 194, line 30, the Chief Justice says:

It is important not to break up or decontextualize the whole communication or exchange.

Then at lines 38 to 42 he says - in particular at 40:

A reasonable person might (indeed, would) expect the caller to have considered the customer’s objectives about fees and manageability –

Then over the page at paragraph 80:

by making the implied recommendation in the whole exchange –

viewed as a whole:

and taking the customer to the point of decision, a reasonable person might expect the person’s previously expressed concerns and objectives to have been taken into account and paid regard to –

So we say that is an important answer to it all. 

KEANE J:   So, Dr Renwick, is the contention that the Full Court’s decision, at least insofar as the Chief Justice was concerned, the decision proceeds on the basis that Westpac somehow misled customers as to the extent of the consideration they had given to their personal circumstances?

MR RENWICK:   No, your Honour.  In relation to 766B, which is all we are concerned about – we are not concerned about 912A, when they might have considered that – they simply construe the statute properly, they look carefully at what had done - your Honours will recall they had already passed through the gateway of 766B(1) so their Honours concluded that there was an implied recommendation and the question then became was it subsection (a) subjective, no; subsection (b), yes, and they looked at all the relevant facts, in particular the objectives elucidated from the customers and encouraged by the Bank with statements like “We are here to help you”, or the social‑proofing technique which is “You are interested in that, many other customers say the same thing”.

KEANE J:   So it is this idea of manipulation that supports the view that the reasonable person might conclude that the caller ought to have considered these things before taking the position that the caller was taking with the customer?

MR RENWICK:   Not really, your Honour.  If in that question there is this idea of a normative assumption – we say there was not a normative assumption by the Full Court at all, rather they looked at what was said, what was known, and what was known is by a reasonable person standing in the shoes of the customer, and they knew that the Bank knew that they had more than one account and so on.

Your Honours, just to continue then, we say, firstly, as Justice O’Bryan rightly said, neither the statutory provisions in issue in this proceeding nor the commercial matters with which they are concerned are complex.  The essence of the scheme can be stated very shortly.  You pass through the subsection (1) gateway in 766B(1), and that has been established, and then if it is not personal advice it is general advice, what is the consequence?  If, like Westpac, you are licensed to only give general advice and you confine yourself to that, your obligations are limited principally to give the general advice warning, although that is not a panacea, and comply with the “efficiently, honestly and fairly” requirement.

If, on the other hand, you step over into personal advice, not only need you be licensed but you must give advice appropriate to the client and strict obligations of disclosure and disinterestedness come in.  Perhaps I can answer Justice Keane’s question a bit better.  Essentially, what was happening here is Westpac was deliberately eliciting from its customers their objectives and then using those objectives to recommend rollover, and that is the vice of this.

Can I just make a couple of other preparatory points?  In relation to the law, Justice O’Bryan at paragraph 314, application book 280, rightly rejected an:

excessive focus on the meaning of individual words . . . separated from the sentence of which the words form part –

to which we would add focusing on words not there at all:  fully personalised advice, marketing, sales and advertising, and I have already taken you to the point about the minute examination of the facts, you need to look at this as a whole.

One of Westpac’s big points seems to be that because there was a general advice warning given at the beginning of the conversation that somehow that was a protection against what could be found.  But, in fact, when you go back to Westpac’s own training to the callers who spoke on Westpac’s behalf - can I invite your Honours to go to page 177, paragraph 34, and if you look at the last three dot points on that page, 177, all of this is really a road map as to how Westpac could have avoided crossing the line:

If you provide/suggest or imply an opinion/recommendation . . . then you are providing advice –

That is what they did:

The client needs to receive a general advice warning at the outset and at any time where you need to reinforce –

it.  Now, there were no reinforcing warnings given:

be aware that providing a warning does not cover instances where you have provided personal advice (Implied or actual) –

Exactly.  Finally:

General advice should NEVER be provided in such a way as to drive a particular outcome.

Your Honours, can I then turn to our response document and deal with the three questions which are raised by Westpac.  If I can take your Honours to our response which begins at 337, your Honours, at paragraph 4 on pages 338 and 339, we emphasise the findings about what was done here, and we particularly emphasise:

e.the purpose of the call was to influence the customer to roll over –

f. . . . the impression to customers that they were there to help or assist the customer -

g.         . . . was an obvious and uncontroversial course of action ‑

The consideration point can be dealt with pretty quickly, your Honours.  Your Honours, this was the point of difference on principle between the primary judge and the Full Court, and essentially what her Honour had done, as the primary judge, is introduce a gloss on the word “consideration” from administrative law principles, referring to an active process of evaluation and intellectual engagement.  As we say there, the Full Court, in contrast, at 8:

a.        gave the word “consideration” its ordinary meaning . . . 

b.         adopted an orthodox approach to statutory construction ‑

and d., without regard to administrative law principles.  If I can very briefly take you to what Justice Jagot said at page 259, paragraph 248, your Honours see there the telling criticism of the primary judge at paragraph 248:

the primary judge’s construction is apt to lead to ambiguity because it will be difficult to know what level of intellectual engagement is required . . . If “considered” means nothing more than “taken into account”, as is my view, a factual question remains to be answered but without the overlay of administrative law concepts -

So that is what we wanted to say about the “consideration” point.  Can I then take you to the “one or more” point, which is at our submissions at page 343.  This was a point at which Westpac was unsuccessful at both trial and on appeal and we say if you look at our submissions, the first point is, in paragraph 24, that there is no difference of significance between the three judges at all. 

We set out in paragraph 24 what they articulated, and you could put it in a number of ways, but in substance it is, consideration must be “sufficient” in the sense it must be given to at least an aspect of one of the three categories, or to say the same thing another way, to one of the three categories, to some extent.

Two other points here, your Honours, at paragraph 26 we point to the irrelevance of 961D introduced in 2012 to the construction of 766B introduced in 2001.  That is unsurprising because 766B is a broad gateway, 961B creates a statutory norm and then provides a safe harbour.

But the fundamental final point is at paragraph 22 which is that the parliamentary intention is all too clear, and if your Honours go to AB 175 your Honours will see – at the bottom of 174 you see the reference to the Senate supplementary explanatory memorandum which indicates that “As currently drafted” – this is before the amendments – it defines personal advice that is given or directed where you have considered the “objectives, financial situation and needs”, not one or more than. 

The vice of that is set out at the top of page 175 as currently drafted a financial services provider could recommend it is appropriate to needs or objectives, but not financial situations, and avoid it.  In other words, they could drive a truck through the relevant provisions.  We say that is why their Honours have rightly come to the conclusion that they have.

Can I then turn to Westpac’s first ground.  We do say that this is a point where this is not a suitable vehicle to determine this question.  So, to consider what the judges did below, if I can take you again to page 175, what the Chief Justice said from line 38:

The provision is not framed by reference to what a provider should consider if the advice is to be given reasonably or responsibly.  Rather, [it] calls for an enquiry as to whether, in the circumstances of the giving of the advice by the provider, a reasonable person might expect one or more of the subject matters to have been considered in the given of that advice.

So we say that is entirely correct.  What all of the judges below did and found important was that Westpac elicited the objectives from the customers, used them to found an implied recommendation with an opinion that doing so would meet their objectives, while presenting itself as helping the customer, and that was an important point for all of the judges. 

There were of course many other facts that the judges took into account.  The awareness by Westpac that the customer had other superannuation accounts is a critical point of conveying the impression of assistance, the social‑proofing technique, and so on, and they came back to the conclusion if your bank rings, it says they are helping you with your superannuation, asks you why you want to consolidate and then impliedly recommends a rollover would suit your stated objectives, a reasonable person would clearly expect those objectives would have been considered in making the recommendation.

Really I cannot improve, with respect, on what the Chief Justice said at paragraph 80 at AB 195 to 196 where he characterises what actually happened in this case, from the third line of paragraph 80:

a reasonable person might expect the person’s previously expressed concerns and objectives to have been taken into account and paid regard to, that is, to have been considered, in the making of the recommendation.  It is not a question of an absence of a warning transforming general advice into personal advice.  Rather, all the circumstances – what was said, what was not said, the tone in, and charter of, the call – one of assistance –

and so on, those are the vital factors.

KEANE J:   So does that mean that any conversation that proceeds by way of the offering of assistance cannot be general advice?

MR RENWICK:   Not at all, your Honour, not at all.  The vice here was when Westpac’s caller used the information about objectives, financial situations or needs, elicited from the customer, reinforced them by the social‑proofing technique as something other people would follow and then making the implied recommendation to do so.  Can I give your Honours this example ‑ ‑ ‑ 

KEANE J:   But why would not the information about the needs and objectives of the customer that the customer reasonably thinks have been taken into account be anything more than what the customer was actually offered by way of objectives and needs?

MR RENWICK:   I am not sure I quite ‑ ‑ ‑ 

KEANE J:   To the extent that what is elicited from the customer is general, why would the customer reasonably expect that something more is being considered by Westpac? 

MR RENWICK:   Well, the answer is what is elicited from the customers is particular.  Can I try and answer it this way, your Honour?  Assume Westpac goes to a retirement village and stands up and says we have this terrific product, you should roll over – sorry, we have this terrific product, it is a good idea to have fewer rather more superannuation funds and there is to be a lot to be said for rolling over. 

By itself that is fine.  The problem then comes if, at the end of that speech, someone comes up and says my situation is this.  What is important to me is this, that and the other, even if they are held by other people and then using the social‑proofing technique saying other people have that concern as well, implicitly recommending that it would be in the customers’ interests to transfer. 

That is what has really happened here, your Honours, and I can do no more, particularly given the time, than really go back to what we said in our response at pages 338 and 339, but particularly it is points 4c, d, e, f and g.  So that is what happened in this particular case.  Of course, your Honours, it goes without saying these cases will all be heavily fact specific, but in this case the Full Court, we say, faithfully looked at the provisions and carefully made findings of fact.  Unless I can assist your Honours further. 

KIEFEL CJ:   Yes, thank you.  Do you have anything in reply, Mr Gleeson? 

MR GLEESON:   Your Honours, could I address Justice Keane’s question to Mr Renwick and Mr Renwick’s answer as to what is the fundamental basis of the Full Court’s decision.  Your Honour first asked whether the decision is based on a finding of deception, that something occurred in the conversation to falsify the general advice warning and Mr Renwick disavowed that as a justification for the decision.  If that is what the decision is based on the building blocks for it simply cannot be found in the decision and Mr Renwick has disavowed that.

Your Honour second asked Mr Renwick whether it was based on what we call the normative assumption that the reasonable person might expect that the provider should have considered the personal circumstances and Mr Renwick’s answer to that was no, that is not what the judgment is based on.  On that point we fundamentally differ.

I have taken you to the very clear statements in Justices Jagot and O’Bryan, which clearly do build in a normative assumption about the best interests.  I have taken you to the Chief Justice at paragraph 5.  It is also relevant to note, in the Chief Justice, where the same normative approach emerges on page 206, paragraph 150, in the final sentence.

What then was Mr Renwick left with?  He said to your Honours that if you go to page 339 of the book, and he went to it twice, that this case is based on facts in paragraph 4d, e, f, and g.  What he said, in effect, is that in any circumstance where objectives, even if very generalised, are elicited from the customer, and if the provider conveys that it wishes to help the customer and ultimately recommends the product, you will always have personal advice under the second limb.  That, with respect, your Honours, exposes the construction question that lies at the heart of this application. 

If your Honours could, finally, go to page 195 again, Mr Renwick said he could not improve upon the Chief Justice at paragraph 80.  Paragraph 80 really has within it the essence of that construction question.  His Honour must be using “consideration” in the undemanding sense we have indicated because, one begs to ask, how has the provider taken into account and paid regard to the objectives when they have been expressed in such generalised terms.  May it please the Court.

KIEFEL CJ:   Thank you.  Yes, there will be a grant of special leave in this matter.  What is your estimate of time, Mr Gleeson - a day?

MR GLEESON:   One day, your Honour.

KIEFEL CJ:   Would you agree, Mr Renwick?

MR RENWICK:   I think it could go to a day and a half, it is quite heavily fact‑specific, to understand what happened.

KIEFEL CJ:   Yes, thank you.  The Court will now adjourn until 12.30.

AT 12.13 PM THE MATTER WAS CONCLUDED