Treasury Laws Amendment (Putting Consumers First-Establishment of the Australian Financial Complaints Authority) Bill 2017 [2017] AUSStaCSBSD 351 (18 October 2017)

• Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017
• Delegated legislation not subject to disallowance 111
• Strict liability113
• Exclusion of judicial review116
• Privacy120
• Significant matters in delegated legislation121

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Treasury Laws Amendment (Putting Consumers First—Establishment of the Australian Financial Complaints Authority) Bill 2017

Purpose	This bill seeks to amend Corporations Act 2001 and other related legislation to introduce a new external dispute resolution framework and an internal dispute resolution framework for the financial system
Portfolio	Treasury
Introduced	Senate on 14 September 2017
Scrutiny principles	Standing Order 24(1)(a)(i), (iii) and (iv)

Delegated legislation not subject to disallowance ^[111]

1.154 Proposed subsection 1050(1) provides that the Minister may authorise an external dispute resolution (EDR) scheme, by notifiable instrument, if the Minister is satisfied that the scheme will meet certain mandatory requirements under proposed section 1051. Once an EDR scheme has been authorised, the operator of the authorised EDR scheme will be known as the Australian Financial Complaints Authority (AFCA) and the authorised EDR scheme will be known as the AFCA scheme. Proposed paragraph 1050(5)(b) provides that the Minister may specify, vary or revoke conditions relating to the authorisation. In addition, proposed subparagraph 1051(5)(a)(i) provides that the operator of the EDR scheme (i.e. AFCA) must ensure that any conditions specified under proposed paragraph 1050(5)(b) are complied with.

1.155 The committee notes that unlike legislative instruments, notifiable instruments are not subject to parliamentary disallowance or scrutiny by the Senate Standing Committee on Regulations and Ordinances, nor are they subject to sunsetting after 10 years.^[112] There is no detail in the explanatory memorandum as to why it is proposed that the authorisation of the scheme, and the specification of conditions relating to the authorisation, is to be done by notifiable instrument, rather than legislative instrument. There is also no detail as to the type of conditions it is envisaged may be specified under this provision.

1.156 The committee therefore requests the Minister's advice as to why it is proposed that the authorisation of the external dispute resolution scheme, and the specification of conditions relating to the authorisation, will not be subject to parliamentary disallowance. The committee also requests advice as to the type of conditions it is envisaged may be specified under this provision.

Strict liability^[113]

1.157 Proposed section 1054A provides the Australian Financial Complaints Authority (AFCA) with the ability to obtain certain information and documents that are relevant to a superannuation complaint. Proposed subsection 1054A(4) makes it an offence of strict liability if a person fails to comply with a requirement in the written notice given by AFCA. The offence is subject to a penalty of 30 penalty units.

1.158 As it is proposed that AFCA will have a number of statutory powers that can be used to compulsorily obtain information in the case of a superannuation complaint, secrecy provisions in proposed section 1058 make it an offence to disclose or make records of information, or produce or permit access to documents, acquired by an AFCA staff member under AFCA's statutory powers in connection with a superannuation complaint. Proposed subsection 1058(2) makes it an offence of strict liability if an AFCA staff member fails to comply with the secrecy provisions and is subject to a penalty of 30 penalty units.

1.159 In both instances, the explanatory memorandum provides no justification as to why the offences are subject to strict liability.

1.160 Under general principles of the criminal law, fault is required to be proved before a person can be found guilty of a criminal offence (ensuring that criminal liability is imposed only on persons who are sufficiently aware of what they are doing and the consequences it may have). When a bill states that an offence is one of strict liability, this removes the requirement for the prosecution to prove the defendant's fault. In such cases, an offence will be made out if it can be proven that the defendant engaged in certain conduct, without the prosecution having to prove that the defendant intended this, or was reckless or negligent. As the imposition of strict liability undermines fundamental criminal law principles, the committee expects the explanatory memorandum to provide a clear justification for any imposition of strict liability, including outlining whether the approach is consistent with the Guide to Framing Commonwealth Offences.^[114]

1.161 The committee requests a detailed justification from the Minister for each proposed strict liability offence with reference to the principles set out in the Guide to Framing Commonwealth Offences.^[115]

Exclusion of judicial review^[116]

1.162 Item 11 of the bill seeks to ensure that the Administrative Decisions (Judicial Review) Act 1977 (the ADJR Act) does not apply to decisions or determinations made by AFCA in relation to superannuation disputes.

1.163 The committee notes that the explanatory memorandum only provides a brief justification for the exclusion of the ADJR Act review and therefore a number of scrutiny issues arise in relation to this provision.

1.164 First, the explanatory memorandum states that the approach to review rights for superannuation disputes is consistent with the existing practice for disputes handled by the Superannuation Complaints Tribunal (the SCT).^[117] However, the committee notes it appears that at least some decisions of the SCT are subject to ADJR Act review.^[118]

1.165 Secondly, the explanatory memorandum suggests that ADJR Act review for superannuation disputes may be inappropriate because a statutory right to appeal on questions of law to the Federal Court is provided for. The committee notes that although a statutory appeal on a question of law is sometimes a functional equivalent of an ADJR Act review, this is not necessarily so. This is because the type of errors that can constitute questions of law (and thus whether the court has jurisdiction to hear an appeal) is a question of statutory interpretation. The courts interpret the meaning of 'question of law' in the context of the particular statute in which it appears. It is therefore not clear that an appeal on a question of law would enable an aggrieved consumer to raise all of the errors that would give them a ground of review in a judicial review application brought under the ADJR Act.

1.166 Finally, while parties may appeal to the Federal Court on questions of law in relation to superannuation disputes, the AFCA also has jurisdiction over non-superannuation financial disputes. The explanatory memorandum states that the ADJR Act will not apply to determinations by AFCA in relation to non-superannuation financial disputes because those determinations would not be made under an enactment.^[119] While the proposed AFCA will be a private industry body, it will play an important role in a mandatory scheme of public regulation which is set up in part through the exercise of statutory power. It is therefore unclear why it would not be appropriate for a court to have the jurisdiction to judicially review the legality of AFCA's non-superannuation decisions and determinations.

1.167 The committee therefore requests the Minister's advice:

• as to the decisions or conduct of the SCT that is currently reviewable under the ADJR Act and the rationale for proposing to exclude ADJR Act review of these types of decisions made by AFCA;

• in relation to superannuation disputes, whether the grounds for bringing an appeal on a 'question of law' will be narrower or more limited than those that would be available under the ADJR Act; and

• in relation to non-superannuation financial disputes:

• whether, in the absence of ADJR Act review and a statutory right to appeal, any court would have jurisdiction to judicially review the legality of AFCA's non-superannuation decisions and determinations; and

• the appropriateness of providing that a court of general jurisdiction have the jurisdiction, by way of appeal on a question of law or judicial review, to hear disputes about the legality of AFCA's non-superannuation decisions and determinations.

Privacy^[120]

1.168 The proposed amendments in items 13, 14 and 29 of the bill would allow officers and other staff members of APRA, ASIC and the ATO to disclose protected information to AFCA to assist it to perform its functions. The explanatory memorandum does not provide any information in relation to the type of information that may be disclosed to AFCA and whether this information is likely to include personal or confidential information. There are also no details about the safeguards that will be in place to ensure that AFCA will protect the confidentiality of any information disclosed to it under these provisions.

1.169 In the absence of this explanatory information, the committee considers that enabling protected information to be disclosed to a non-government body such as AFCA raises privacy scrutiny concerns.

1.170 The committee therefore requests the Minister's advice as to the type of information that it is envisaged may be disclosed to AFCA under these provisions, whether this information is likely to include personal or confidential information, and details as to the safeguards that will be in place to ensure that AFCA will protect the confidentiality of any information disclosed to it.

Significant matters in delegated legislation^[121]

1.171 Under current section 101 of the Superannuation Industry (Supervision) Act 1993 trustees of regulated superannuation funds and approved deposit funds are required to have an internal dispute resolution (IDR) system and to provide written reasons for decisions about complaints made by beneficiaries, former beneficiaries or other interested parties. Current section 47 of the Retirement Savings Accounts Act 1997 specifies similar requirements for an IDR system for complaints relating to the operation or management of a Retirement Savings Account (RSA). A person who intentionally or recklessly contravenes these requirements commits an offence punishable by a fine of up to 100 penalty units.^[122]

1.172 Items 7 and 9 of Schedule 2 seek to repeal the current requirements in the primary legislation and allow ASIC to set requirements about providing written reasons for IDR decisions in a legislative instrument.^[123] Contravening these requirements will remain an offence, subject to up to 100 penalty units (or $21,000). The committee's view is that significant matters, such as requirements the breach of which will constitute an offence, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this case, the explanatory memorandum states that the amendments will 'provide ASIC with the flexibility to align the requirements around giving reasons for IDR decisions made by these trustees to those that apply for other IDR firms'.^[124] While the committee notes this brief explanation, the committee does not consider that this adequately explains why the use of delegated legislation is appropriate in this instance.

1.173 The committee requests the Minister's more detailed justification as to the appropriateness of setting out requirements in delegated legislation where breach of those requirements will constitute an offence.

1.1

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[111] Schedule 1, item 2, proposed section 1050. The committee draws Senators’ attention to this provision pursuant to principle 1(a)(iv) of the committee’s terms of reference.

[112] See Legislation Act 2003.

[113] Schedule 1, item 2, proposed subsections 1054A(4) and 1058(2). The committee draws Senators’ attention to this provision pursuant to principle 1(a)(i) of the committee’s terms of reference.

[114] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 22–25.

[115] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp 22–25.

[116] Schedule 1, item 11, proposed paragraph (hba) of Schedule 1 to the Administrative Decisions (Judicial Review) Act 1977. The committee draws Senators’ attention to this provision pursuant to principle 1(a)(iii) of the committee’s terms of reference.

[117] Explanatory memorandum, p. 44.

[118] See Superannuation Complaints Tribunal, Submission in response to the Consultation Paper: Improving dispute resolution in the financial system, p. 10, available at https://static.treasury.gov.au/uploads/sites/1/2017/09/Superannuation-Complaints-Tribunal.pdf.

[119] Explanatory memorandum, p. 44.

[120] Items 13, 14 and 29 of Schedule 1. The committee draws Senators' attention to these provisions pursuant to principle 1(a)(i) of the committee's terms of reference.

[121] Schedule 2, items 7 and 9, proposed subsection 47(2A) of the Retirement Savings Accounts Act 1997 and proposed subsection 101(1B) of the Superannuation Industry (Supervision) Act 1993. The committee draws Senators' attention to this provision pursuant to principle 1(a)(iv) of the committee's terms of reference.

[122] Superannuation Industry (Supervision) Act 1993 s 101(2); Retirement Savings Accounts Act 1997 s 47(3).

[123] Proposed subsection 47(2A) of the Retirement Savings Accounts Act 1997 and proposed subsection 101(1B) of the Superannuation Industry (Supervision) Act 1993.

[124] Explanatory memorandum, p. 54.