Westpac Securities Administration Ltd & Anor v Australian Securities and Investments Commission [2020] HCATrans 155 (7 October 2020)

Last Updated: 7 October 2020

[2020] HCATrans 155

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S69 of 2020

B e t w e e n -

WESTPAC SECURITIES ADMINISTRATION LTD

First Appellant

BT FUNDS MANAGEMENT LTD

Second Appellant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

KIEFEL CJ
BELL J
GAGELER J
KEANE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO BRISBANE AND MELBOURNE

ON WEDNESDAY, 7 OCTOBER 2020, AT 10.02 AM

Copyright in the High Court of Australia
KIEFEL CJ: Mr McHugh, I will read out the appearances so that we do not have too many crossovers at the lectern.

For the appellants, MR R.G. McHUGH, SC appears with MR J. R. WILLIAMS, SC and MS E.R. DOYLE‑MARKWICK. (instructed by Allens)

For the respondent, MR A.J.L. BANNON, SC and MR J.G. RENWICK, SC appear with MR T.J. KANE and MR M.S. KALYK. (instructed by Australian Securities and Investments Commission)

Yes, Mr McHugh.

MR McHUGH: Your Honour, I would say Mr Williams lately of senior counsel.

KIEFEL CJ: Thank you. I do not think that was on the appearance slip.

MR McHUGH: It would not have made it, your Honour.

KIEFEL CJ: Right. Thank you.

MR McHUGH: Your Honours, I am proposing to work closely from the skeleton that was provided. If I could invite the Court to take up first, please, the book of authorities, the first volume of the joint book, and to turn there to page 39.

GORDON J: I am sorry, Mr McHugh, could you explain to us what you are actually looking at by reference to the title of the case or whatever you are taking us to, or the legislation.

MR McHUGH: So, page 39. It is the start of Chapter 7 of the Corporations Act and it is section 760A which sets out the object of the chapter.

GORDON J: Thank you.

MR McHUGH: As your Honours would be aware, this is a chapter that goes on for very many sections. The objects are expressed at a high level of generality and they are more than one in number. But I was going to point particularly to paragraph (a) which strikes a balance or refers to the two competing sides of what I would say require a balance. That is:

confident and informed decision making by consumers of financial products and services –

and, on the other hand:

facilitating efficiency, flexibility and innovation in the provision of those products and services ‑

Then also paragraph (b) is important:

fairness, honestly and professionalism –

No doubt we will come back to those throughout the course of the argument and in construing the provisions.

The proposition that is in paragraph 2 of the skeleton from this morning is not only that it is necessary to strike a balance, but that the chapter is really predicated on consumer autonomy. It runs through the whole chapter, and that will inform various aspects of my argument. But one thing that is important, right from the start, is that nowhere in the whole chapter does anybody find any requirement that consumers have to receive a particular standard of advice before making a particular decision. We will see a little bit later the way the advice regime works, but it is not necessary even that there be any advice at all before making a decision, and that is contrary to something that we see very much emerging in the Full Court judgments about the need for advice and decision‑making on an informed basis before making a particular decision, so, as I say, I will return to that a little bit later.

So, the scheme of the chapter, in at least one important dimension, starts with what is a financial service, and if your Honours take up section 766A, which is at page 85 of the book. Financial service is important because, as we see in subsection (1)(a), what is included within provision of financial services is:

provide financial product advice –

which is what this case is about. I will come to 766B in a moment, but you will see from (a), (b) and (c) that financial services are defined in important respects by reference to financial products, so I should take your Honours to where they are defined. If your Honours come back to section 763A, which is on page 74 of the book, there is a somewhat opaque generalised definition in subsection (1), that is:

a financial product is a facility through which, or through the acquisition of which, a person does one or more –

of various things, including:

manages financial risk –

So, it is a very abstract definition. One gets a much more concrete content to the concept of financial product a few pages further over at 78 in the book, at section 764A and that one gives definitions by reference to particular kinds of products. And your Honours see in subsection (1)(a) that the first is “a security”. I will not take your Honours back to the definition of that, but it is a very broad definition indeed – shares, things of that nature. Paragraph (b), interests in registered schemes. Paragraph (ba), unregistered schemes – that is, managed investment schemes, interest where they had not been subject to the registration regime.

Paragraph (c), derivatives. Paragraph (d), contracts of insurance that are not life policies, which is a distinction drawn. Then (e) is life policies of certain kinds. Of particular importance for the present case is paragraph (g):

a superannuation interest within the meaning of the Superannuation Industry (Supervision) Act 1993.

And that is what we are dealing with here, the interests in the BT funds that we are concerned with, of that kind. And then over the page, paragraph (h), an RSA – that is, a retirement savings account, and then various other kinds of facilities, including in paragraph (l), margin lending facilities. So financial products are very broadly defined.

And then in 765A your Honours see there are certain exclusions from the definition, including paragraph (c), which excludes health insurance, for example. And paragraph (g), reinsurance. I do not need to dwell further on that, but that is the scheme of the approach to financial product.

If we turn then to section 766B, which is on page 86 of the book and we just start with subsection (1):

For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion . . .

(a) is intended to influence a person or persons in making a decision in relation to a particular financial product –

So here, relevantly, superannuation. And then your Honours see in paragraph (b), or:

(b) could reasonably be regarded as being intended to have such an influence.

The Full Court gave that a very broad interpretation, the concept of recommendation or statement of opinion. It includes implied recommendations and implied opinions and as we will see when we come to the facts that they can be, on the Full Court’s approach, somewhat indirect indeed. That is, it is the nature of the conduct that gives rise to an implied recommendation, as I will develop when we come to the particular calls.

This was, in a significant respect, a marketing activity, what was going on here. Westpac was calling people who had already said they wished to have a search conducted for their superannuation in almost all of these cases and offering a service of rolling over. And the approach taken in the Full Court, and at first instance, was that merely by doing that in the circumstances in which it occurred, there was a recommendation that it was a good idea to roll over one’s superannuation from external accounts into the BT accounts.

So, the recommendation arose fundamentally by way of implication and, as I say, it was given a very broad interpretation. It is difficult to think of very many forms of advertising that would not come within the approach taken in the Full Court. So, the effect of it is that really as soon as one is saying something positive about a particular financial product, with an intention or in reasonable apprehension an intention of getting someone to make a decision about it, one is already within the advice regime. And that is why the distinction that we come to in subsection (2) is very important between “personal advice and general advice”. I will come back to general advice in a moment, but just dealing with subsection (3):

personal advice is financial product advice –

within subsection (1):

that is given or directed to a person . . . in circumstances where:

(a) the provider of the advice has considered ‑

which is an important word in this case:

one or more of the person’s objectives, financial situation and needs ‑

And as we will see, those should be treated as categories, or:

(b) a reasonable person might expect the provider to have considered one or more of those matters –

in paragraph (b). Just stopping on paragraph (a) for a moment, ASIC ran its case at first instance and on appeal below on the basis of paragraph (a) and paragraph (b). It lost on paragraph (a), and there is no cross‑appeal or notice of contention in relation to that.

So the case turns entirely on paragraph (b), which I submit posits a factual inquiry. It is hypothetical by reference to a reasonable person in the shoes of the customer, but it is what would a reasonable person expect had in fact occurred. It is not what would a reasonable person expect should have occurred in any normative sense. And it seems that there is now common ground between ASIC and the appellants on those issues.

The purpose of the provision, I submit, is very clear. It is to make sure that a person who would reasonably expect to be getting personalised advice will actually get personalised advice, and that is because of the way the personal advice regime picks up a vast number of obligations on providers of advice that I am coming to next. That is the purpose of this.

And one of the problems with the construction given to it in the Full Court is at a number of points that purpose gets lost, gets left behind in the analysis, because the approach becomes, we have established that there was a recommendation, even though it was by this process of implication, and there is then reasoning from the recommendation as advice at a very high level of generality.

And one finds out that the objectives in issue are at such a generic level, in this case they are objectives in the nature of wanting one’s superannuation to be more manageable by having it in one place, or wanting to reduce fees, which one would think every single person would have to believe was a good idea, and an objective that everyone would have to have – those are the only objectives that are really identified in the case. And yet because of the approach taken by the Full Court, one ends up with a situation where the whole panoply of obligations of personal advice are engaged on the basis of what are really generic and not personal objectives of that kind.

So subsection (4) then says that general advice is everything that is not personal advice. The exclusions in subsection (5) are not presently relevant and that means we can probably turn next to the general advice regime and section 949A which your Honours should find at page 365, still in the first volume. So, where general advice is given, the only requirement in the Act as to the content of the advice is the one that you see at 949A(2), and you see in subsection (1) that it is general advice that we are dealing with. Subsection (2):

The providing entity must, in accordance with subsection (3), warn the client that:

(a) the advice has been prepared without taking account of the client’s objectives, financial situation or needs –

and that taking account is obviously part of the content of consideration that we saw back in the definition in 766B(3):

(b) because of that, the client should, before acting on the advice, consider the appropriateness of the advice, having regard to the [particular] objectives, financial situation and needs –

of the client. Then:

(c) if the advice relates to the acquisition, or possible acquisition, of a particular financial product—the client should . . .

obtain a Product Disclosure Statement ‑

and it goes on. This subsection is subject to an ASIC ‑ or was subject to an ASIC class order. We have given you the references to that. The class order simplified what had to be given by way of warning in situations of oral communication. It simplified down what it is that has to be said, and we have given your Honours the reference to that. There is no issue in this case about whether or not 949A was complied with. It was never part of ASIC’s case that was particularised below that there was non‑compliance with section 949A.

As well as that my friend, Dr Renwick, disavowed any case based on a complaint that the warnings that were actually given did not comply with 949A. So the only relevance of the warnings that argued it ‑ which I will take your Honours to very shortly in the cause – but the only relevance of those is what effect they have on reasonable apprehension of consideration of personal circumstances because the warning is to the effect, we are not going to take into account anything personal to you, and it is highly material from that point of view. So your Honours do not need to be troubled by the general advice regime in section 949A. What I do need to do ‑ ‑ ‑

GORDON J: Can I ask two questions about that, Mr McHugh.

MR McHUGH: Yes, your Honour.

GORDON J: The first is, in relation to the ASIC order, which was not the subject of discussion as far as I could see in either the trial judge’s reasons or the Full Court, is it the position ‑ and you say it was not part of ASIC’s case – that your warning complied with the class order? In other words ‑ ‑ ‑

MR McHUGH: I just did not hear your Honour’s question, I am sorry. Was it part of ASIC’s case that it did comply or that it did not comply?

GORDON J: As I understood it, it was not ASIC’s case that there was any question about 949A. My question though is, in the context of looking at 766B(3), is it your contention that your warning complied with the class order itself?

MR McHUGH: No, your Honour ‑ sorry, I should say, first of all, the contention is that in substance it was complied with, and that was accepted below by ASIC, but for the purpose of the premise of your Honour’s question, which is in connection with 766B(3), the question whether there was compliance with 949A is completely irrelevant one way or the other. The words that were spoken are highly relevant to 766B(3), that is, would a reasonable person expect, or might a reasonable person expect that personal circumstances were taken into account. But as relevant to that statutory inquiry, the question whether or not there was compliance with 949A or with the class order insofar as they are concerned with general advice, is legally irrelevant. So the submission ‑ ‑ ‑

GORDON J: So, the second part of my question then is, if that contention is right does that also extend to not taking into account the fact that the callers did not comply with their own training?

MR McHUGH: Well ‑ ‑ ‑

GORDON J: In relation to warning.

MR McHUGH: So far as ‑ your Honour, I am not sure I accept necessarily the premise that your Honour has put about not complying with their own training, but relevantly, whether or not they were trained to do anything is completely irrelevant to the inquiry under paragraph (b) of subsection (3), because that is, what would a reasonable person expect, or might a reasonable person expect, and it was accepted in the Full Court, and it is not challenged by either party in this Court, that for the purposes of that inquiry, one has regard only to what would be apparent to an observer of the call, that is, the interaction between the parties. I put it too narrowly to say an observer of the call, it is the interaction between the customer and BT or Westpac, in this case that involved some prior correspondence, but a reasonable person is not going to be aware of anything to do with the training that the caller has received. That was a question that might be relevant to paragraph (a), which was did they in fact consider anything, but the training ‑ ‑ ‑

GORDON J: The reason why I asked the question is because in (b) it is “a reasonable person might expect the provider to have” done certain things. So, I ask it in that context, and especially given subsection (4) – I withdraw that – I think it is subsection (6), is it not, where you look at it each time the advice is given.

MR McHUGH: Well, your Honour, the provider acts through its servants or agents or representatives, in this case it is the callers, and the universe of information that is relevant is whatever emanated by way of documents from the provider, and whatever was said by the provider in the course of the calls through its servants or agents or representatives. And beyond that, what might have happened in training, or what otherwise might have happened so far as systems are concerned, or for example in relation to the QM Framework document, as it was described below, is, with respect, all irrelevant to the question that is posed by subsection (3)(b). That is the submission, and I must say, your Honour, so far as I understand it, there is no dispute between the parties in this Court that that is the correct approach to paragraph (b).

So, I was turning then next to what happens under the personal advice regime, which is very, very onerous indeed. If I could ask the Court to turn to volume 2 of the joint materials, and first to section 961, which appears on page 392 at the start of the volume. Your Honours, there dealing with Division 2 of Part 7.7A, which is headed “Best Interests Obligations”, and section 961(1) provides that:

This Division applies in relation to the provision of personal advice (the advice) to a person (the client) as a retail client.

In order to explain what a retail client is, I need to take your Honours back into the first volume of the joint materials, and to section 761A, that is at page 53. I am sorry, the definition is in section 761A and your Honours see towards the top of page 53:

retail client has the meaning given by sections 761G and 761GA.

If we then turn forward to page 65, your Honours will find 761G and it provides, relevantly in subsection (1), for the meaning of a retail client. Subsection (1):

For the purposes of this Chapter, a financial product or a financial service is provided to a person as a retail client unless –

various sections provide otherwise. So presumptively, services are provided to retail clients, and the person to whom they are provided is referred to throughout as a “retail client”. If we then turn through to subsection (6)(b) on page 67:

For the purposes of this Chapter:

. . .

(b) if a financial service (other than the provision of a financial product) –

so relevantly here it is the advice:

provided to a person who is not covered by subparagraph (c)(i) or (ii) relates to a superannuation product or an RSA product, the service is provided to the person as a retail client –

Relevantly, paragraph (c) is dealing with, for example, a fund that holds over $10 million – not presently relevant. So all that being so, we come back to page 392 in volume 2 of the joint materials, the joint authorities and we are relevantly within the application of the division under section 961(1). If we then turn over to page 393, there is a very significant provision in the Act in 961B. The duty in subsection (1) is that:

The provider must act in the best interests of the client in relation to the advice.

So just stopping there, if it is general advice that is being given, all you have to do is give the 949A warning. On the other hand, if you are giving personal advice, you now have to act in the best interests of the client and, although subsection (2), which is sometimes described as a safe harbour, sets out a lot of things that one can do as the provider to establish that one has acted in the best interests of the client, it is difficult to see, in light of the way in which the scheme of this part works or this division works, how one can avoid doing all of these things. So first of all in paragraph (a) one has to identify:

the objectives, financial situation and needs –

Then in (b) have:

identified:

(i) the subject matter of the advice that has been sought by the client (whether explicitly or implicitly); and

(ii) the objectives, financial situation and needs of the client that would reasonably be considered as relevant to advice sought on that subject matter (the client’s relevant circumstances) –

That becomes important in my argument later on because where those words “objectives, financial situation and needs” appear in section 766B(3), my submission is that they should be given the same meaning as one sees here, that is, so much as are relevant to the advice sought and one cannot just have some tiny, generalised objective such as manageability of superannuation. It has to be the whole of the category insofar as it is relevant to the advice sought.

Then we see in paragraph (c):

where it was reasonably apparent that information . . . was incomplete –

there is an obligation to make reasonable enquiries or at least, if one does that one will have satisfied the best interest obligation, then (e):

if, in considering the subject matter of the advice sought, it would be reasonable to consider recommending a financial product -

then what one should have done is:

conducted a reasonable investigation into the financial products that might have achieved those of the objectives and meet those of the needs of the client that would reasonably be considered as relevant to advice on that subject matter -

So that is giving content to what is meant by consideration and my submission will be a little later on that “consider” has to have the same meaning in these provisions as it does in 766B(3), and then we see in (e)(ii):

assessed the information gathered in the investigation -

and then (f):

based all judgments in advising the client on the client’s relevant circumstances -

that is, so much as was relevant to the subject matter. Now, that whole regime, I submit, gives a lot of content to the nature of the consideration that is being contemplated by this chapter. The consideration is an actual intellectual engagement with the subject matter so as to allow one to give proper advice. One sees the words “assess”, “judgments”, “considering” all as part of what one is required to do in order to act in the best interests of the client. Paragraph (g) then provides that:

any other step that, at the time the advice is provided, would reasonably be regarded as being in the interests of the client, given the client’s relevant circumstances.

That phrase, “client’s relevant circumstances”, is the one we see defined in italics and bold on the preceding page. Subsection (3) provides that in respect of basic banking products – and that is its own definition that goes on for pages that I will not take your Honours to, but in respect of such products the duty is modified, so that all that is required to satisfy the duty is what is in 2(a), (b) and (c) of 961B. But even that, as we see, involves the client’s relevant circumstances as relevant to the advice sought. Then there is a similar provision in subsection (4) in relation to what is called a “general insurance product”, that is something other than life insurance. So that is the 961B duty.

What your Honours then find in 961C through to 961F is elaboration on some of the concepts that have already been seen in 961B. So 961C, for example, refers to a “reasonable level of expertise” in assessing the subject matter. Again, my submission is that gives some content to what is meant by “considering”. Then we see again in 961E further references to, in the second line, “reasonable level of expertise”, and in the fourth line:

exercising care and objectively assessing the client’s relevant circumstances -

Then when we come to 961G there is another substantive provision of some significance on those who provide personal advice:

The provider must only provide the advice to the client if it would be reasonable to conclude that the advice is appropriate to the client, had the provider satisfied the duty under section 961B to act in the best interests of the client.

So 961B, as we have seen, itself turns on exercising judgment in considering the advice and the client’s objectives and this is now saying there is an obligation to give advice which is appropriate in the circumstances. Section 961H is a warning provision – again, one of substance:

(1) If it is reasonably apparent that information relating to the objectives, financial situation and needs of the client on which the advice is based is incomplete or inaccurate, the provider must –

give a particular warning and, again, your Honours see in paragraph (a) there that:

the advice is, or may be, based on incomplete or inaccurate information relating to the client’s relevant personal circumstances –

That is itself defined back – I will show your Honours where that is in a moment. But your Honours will see the phrase is “relevant personal circumstances”, which is slightly different from what we saw in 961B(2)(b)(ii), which was a defined term: “client’s relevant circumstances”.

The term that we were just looking at in section 961H is defined on page 52 of the first of the volumes. So if we return to the definition section, which is 761A, and to page 52 in volume 1 we see at the foot of the page a very similar definition to the one that we were looking at internally in 961B. That is at the foot of the page:

relevant personal circumstances, in relation to advice provided or to be provided to a person in relation to a matter, are such of the person’s objectives, financial situation and needs as would reasonably be considered to be relevant to the advice.

So it is a very similar concept to the one that we were looking at internally within 961B. I might explain a little bit later how that came into the Act. It came in at the same time as 766B, at the time when a section that has now been expanded upon and repealed – 945A is the section, but I will come back to that later. I do not want to confuse matters now.

So that was the defined term, “relevant personal circumstances”, that is picked up in 961H, in volume 2, and that is the nature of the warning that has to be given, but it does not take up, effectively, relevant material from the point of view of the particular client.

And then, if we come to 916J – this is on page 397 of the second volume of joint materials, 961J(1):

If the provider knows, or reasonably ought to know, that there is a conflict between the interests of the client and the interests of –

the provider and various others, then:

the provider must give priority to the client’s interests when giving the advice.

So it is not an equity solution to that problem, it is a different statutory solution to the conflict problem but, nevertheless, it is a very significant one in the way in which the personal advice regime works.

Then, if we stay on that same page, at the foot of the page, section 961K provides that each of those substantive provisions I have been taking your Honours to: 961B, 961G, 961H and 961J, are all civil penalty provisions.

If we then turn to – where to go next ‑ the next substantive set of obligations that land on somebody giving personal advice is in connection with a statement of advice. I should take your Honours there. That is in volume 1 of the book of joint materials, section 944A, and your Honours should find that at page 349 of volume 1.

GORDON J: To 946A?

MR McHUGH: 944A is the start of the division that engages the personal advice regime. So, if we start on page 349, 944A:

This Division applies in relation to the provision of personal advice –

Which is what we are dealing with under 766B(3), and the relevant circumstances are (a)(i), provided:

by a financial services licensee –

Which, of course, my clients are, and then paragraph (b):

the advice is provided to a person (the client) as a retail client.

And that is the issue under section 961G that I took your Honours through earlier in connection with the best interest obligations. So then, in the middle of the page, 946A:

The providing entity must give the client a Statement of Advice in accordance with this Subdivision and Subdivision D.

And if I take your Honours to those requirements, first to 947B, which is on page 357, and in subsection (2) the main requirements of a statement of advice are set out. Your Honours see at (2):

(a) a statement setting out the advice, and

(b) information about the basis on which the advice is or was given –

information about “the providing entity”, and then in (d) and following, information about renumeration, fee structures, that sort of thing. And then there is the reference in paragraph (f) to the 961H warning. Then under subsection (3) the amount of detail required is by reference to what:

a person would reasonably require for the purpose of deciding whether to act on the advice –

And then if we turn through to 947D on page 361, this, in subsection (1) addresses the situation where the recommendation is to ‑ this is paragraph (1)(a) ‑ to “reduce the client’s interest” in one product and increase it in another, and substantially a rollover situation that we are dealing with in superannuation, which is saying, take yourself out of MLC and come over to BT, would be engaged as a result of subsection (1). Subsection (2), the additional information includes (a):

(i) any charges the client will or may incur in respect of the disposal or reduction ‑

Or, I would interpolate, roll over, and then over the page, (iii) at the top:

any pecuniary or other benefits that the client will or may lose –

And again, I would interpolate, for example, insurance, and then (b):

any other significant consequences –

and so on. So, the regime, in respect to statements of advice, is a very onerous one, and just so that your Honours are not losing where I am going with all of this, the result of what was said in the Full Court was, because of what happened on these calls, my clients were obliged to do all of the things that I have been taking your Honours through in order to meet the statutory requirements, in light of what happened on these calls.

The only way they could have complied with the Corporations Act was to do all of the things that I am showing your Honours as we go through. So, there is one final, important, dimension to what falls on a provider of personal advice under the statute, and that is the requirement to give a PDS, a product disclosure statement. Your Honours will find that in volume 2 of the joint materials in section 1012A, which is on page 485, and in particular, subsection (3) on page 486:

A regulated person –

And if we go back a page to section 1011B, which is definitions, regulated person is defined to include financial services licensees, such as my clients. So coming back to 1012A(3):

A regulated person must give a person a Product Disclosure Statement for a financial product if:

(a) the regulated person provides financial product advice to the person that consists of, or includes, a recommendation that the person acquire the financial product; and

(b) the person would acquire the financial product by way of:

(i) the issue of the product to the person –

And then you see at the end:

(d) the financial product advice is personal advice to the client.

That would appear to be engaged in this situation as well, because my clients had been found in the Full Court and at first instance to have recommended the roll over, which would be in part an acquisition of the BT Fund, and the issuing of interests in the fund, so it seems that would be engaged.

In general, in any event, whenever one is in subsection (3), one has to provide a PDS in respect of the product. Now, that may not have been such an issue here, because these people were all members – all of the customers that are the subject of this case were existing customers of BT, so they presumably already would have had a PDS but, in general terms, that is what the regime requires.

So there is one last feature of the statutory scheme that I should take your Honours to that is relevant to the way the case proceeded below, and that is section 912A, which your Honours will find in volume 1 of the joint materials. That will be at page 279. So this is a general obligation that falls, as your Honours see in subsection (1), on a financial services licensee. It is not an obligation that is directly affected by personal as opposed to general advice. As soon as one is given any advice at all as a regulated, licensed person, one is within this section. So, I am not saying this only falls on people who are giving personal advice, but there is an important point about the fact that one is giving personal advice. If we look at subsection (1)(a), the first of these obligations is to:

do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly –

“The financial services” are relevantly either personal advice or general advice and it is obvious, I submit, that the nature of the advice being given has a real bearing on the specific content of whether or not those particular financial services are being provided efficiently, honestly and fairly.

Now, one thing very important about this section is at the time of the conduct in this case, this was not a civil penalty provision. It now is, as a result of amendments made, I think a year or two ago. But as I understand it, they are currently in force. So there are a few things I wanted to say about the section. The Full Court accepted that the case that was made by ASIC at trial, and to which the Full Court held ASIC, was one that was predicative on a finding of personal advice.

What had happened at trial was that the trial judge was with me that there was no personal advice, but nevertheless found against me on section 912A(1)(a), on the basis of general advice. And the Full Court held, Chief Justice Allsop gave the reasons with which the other two members of the court agreed, that that was outside the case that ASIC had brought and that ASIC was not entitled to do that. ASIC has not challenged that in this Court. So the only way that we come within a contravention of 912A is on the footing that there was personal advice given within the meaning of 766B(3) – that is the first point.

Now, I should make this clear in this Court. My client is not challenging in this Court that if it gave personal advice within the meaning of 766B(3), that it breached this section because it would have had to have breached the best interest duty at 961B. It was required to do that under 961B, it did not do that, it did not set out to comply with the best interest duty, and for that reason it would have to have breached 912A. It would not have provided the services efficiently, given that it failed to act in the best interest of the client.

But Westpac makes this submission in this Court. If only general advice was given, which is the issue in this case, I certainly do not concede that there was any breach of 912A(1)(a) in the way in which the trial judge had found and, more importantly, it is just not open in this Court for ASIC to contend – and as I understand it, it is not contending – for a finding that there was a 912A(1)(a) breach in the absence of a finding of personal advice. So essentially your Honours do not really need to be troubled by 912A because I accept if there was personal advice there was a contravention of 912A(1)(a); if there was not personal advice then it is not open to the Court to inquire into the question.

I should just point out two other provisions or paragraphs of 912A while I am on this page. Paragraphs (b) and (c) ‑ compliance with the conditions on the licence and compliance with the financial services laws – were also found to have been contravened and although they do not add anything of substance, they follow as a matter of logic from the earlier contraventions, in particular because my clients were licensed to provide general advice but not personal advice, and so there is a licence contravention if in fact they had provided personal advice. But your Honours need not be troubled further in relation to that at this point.

So that brings me away from the scheme of the statute in overview and to the particular facts of the case. I am not proposing to take your Honours through all of these calls, but I do need to take your Honours through one closely to illustrate the way they work, and I will point out a few features that emerge from one of the others. I think at trial Justice Gleeson was taken through all of them. I think my friend, Dr Renwick, ended up having to do that. I am certainly not going to try to impose that on the Court because relevantly the issues that are important for the analysis of what the Full Court did in relation to 766B(3) are illustrated in the customer 1 call, and also the earlier correspondence.

Before I get started on the correspondence, I will point out one thing in the Chief Justice’s judgment below. So if your Honours take up the core appeal book, Chief Justice Allsop’s decision at page 195 of the core book, paragraph 62, what his Honour was addressing there was what the primary judge had said in relation to the correspondence that preceded the calls. Her Honour’s approach was that the preceding correspondence was not relevant, and the Chief Justice said at paragraph 62:

No submission was put that this approach was in any way wrong.

My submission is that is not right. The way I have conducted this case from the start, including in the Full Court, was that the correspondence was relevant contextual material.

KIEFEL CJ: I am sorry, Mr McHugh, would you mind restating that submission, I did not quite follow it.

MR McHUGH: Sorry. So, what the Chief Justice is saying here is that no submission was put in the Full Court that the approach that Justice Gleeson had taken was wrong. Justice Gleeson’s approach was effectively to say the prior correspondence did not really have any bearing on the call. Your Honour will see that at 244 and 245 just immediately above 62 in the quotation from Justice Gleeson. Her Honour had said:

there is no reason to assume that customers receiving an unsolicited telephone call would have recognised that the messaging of the call was the same as messaging they had received in prior written communications.

Or:

that the state of mind of an individual caller . . . was affected by the contextual correspondence ‑

Now, all I want to point out is, to the extent that the Chief Justice Allsop seems to be saying at paragraph 62 that I was not making a case that involved the correspondence, that is not right. I took the Full Court to the correspondence, I took the primary judge to the correspondence. So, I just ‑ ‑ ‑

GORDON J: Can I ask a question about that? I had understood what his Honour was saying was, I can look at the correspondence and that is the context in the sense that has occurred, but that the Act requires me to consider whether or not personal advice has been given each time the advice is given, and as a result of that I can park the correspondence, at least in part, because the Act requires me to look at the advice at the time the advice is given, and that is the cause.

MR McHUGH: If that is the way to read it, then I certainly accept what your Honour puts to me, and I accept what your Honour puts to me that it is necessary to determine whether advice is given on each occasion that it is given, to determine whether or not it is personal or not. My submission is only that for the purpose of answering that question in respect of these calls the earlier material is relevant contextually. And I will go to that now and show your Honours how that is so.

GORDON J: Can I ask one more question and then I will not ask any more. I had understood from your notice of appeal that you did not challenge the ultimate findings by the Full Court which upheld the primary judge’s findings both about the recommendations having been made in terms of their content and also the accompanying statements of opinion. Am I right about that?

MR McHUGH: That is correct.

GORDON J: Thank you.

MR McHUGH: I fought that issue very hard at first instance. I fought it very hard in the Full Court, I have lost twice, and I have accepted that I have lost that issue. But it is important to bear in mind the width of the way in which the reasoning led to the implication of those recommendations and opinions, because it has a bearing on what a reasonable person might expect under subsection (3), given the context in which the recommendation was said to have been made.

So, I need to go to the appellant’s book of further materials. They are in an order that – it may be – I am not sure if it is chronological, but in any event, customer 1 starts in the middle of the book. If I could take your Honours first to page 34 of the book and your Honours will see in the covering page at 34 this was a letter to customer 1 dated 23 July 2014. In order to preserve the privacy of the customers they have not been named throughout the proceedings; we have just been referring to them as customer 1.

But this is a letter dated 23 July 2014, and as your Honours see it is addressed to someone in particular, as opposed to some of the other documents that are generic because that is all that was left within the system. But just dealing with this one on page 35, this encloses the annual super statement for the year, ending 30 June 2014, and your Honours, I think it might be all but one – virtually all of the customers received a letter of this character. If your Honours look in the second paragraph, in the third line there is a sentence that begins:

However, if you combine your super into one account, you could save on administration fees –

So there is the potential saving of administration fees:

and enjoy the convenience of having all your super in one place –

which is the concept of manageability that runs throughout these interactions.

To help you get started we’ve enclosed a Rollover form, simply complete the form and return it in the reply paid envelope and we’ll do the rest.

Now, patently, this is rolling over into BT is what is being offered here, in a letter from BT to the customers. Then under the heading, “Let us help you find all your super”:

Did you know that there’s $18.2 billion in lost and ATO‑held super in Australia and some of it could be yours? With your consent we can search for any other super you may have on a regular basis.

Then there is an invitation to visit BT’s website and enter a particular security code individual to the customer:

We’ll search for any other super you may have on a regular basis. It’s that easy, so why not get started today?

The first thing I would say about that is almost all of these customers had responded to this invitation to do a search and BT or Westpac had conducted a search on their behalf to find other super. That is the case in respect of, I think, all but two of the calls. I will be corrected if I am wrong about that.

Clearly, that is the provision of a service to these customers, the offer to do that and it is clearly helpful from the point of view of a customer because helpfulness is a theme that runs through the Full Court’s decision. But just as clearly the help that is being offered there is to roll over into the BT fund. BT is doing this so that the customer will go on to roll over money into BT. That would have been obvious to anybody who was receiving this letter – any reasonable person.

Then, over the page, your Honours see there is a heading, “We’re here to help” – that is, to give good customer service, obviously. Your Honours see in the second line of that paragraph, line 10 on the page, the reference to “any general questions you may have”. That is then distinguished from what happens in the next paragraph:

if you have a Financial Adviser, then we recommend you speak to them for personal advice tailored to your specific financial situation, objectives and needs -

because clearly this communication is not doing that – this is general. At the foot of the page your Honours see a disclaimer and a warning – I am not going to suggest that anyone would have been particularly remembering this disclaimer. I am giving it as an example of the 949A warning. Your Honours see about six lines or five lines from the end, in the fine print, there is a sentence that begins:

This letter doesn’t take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.

So that is an example of the 949A warning on the footing that what was happening here with general advice.

If your Honours turn through to page 37, or turn across the page, which is the actual super statement itself, your Honours see that in this case in the blue box in the bottom right‑hand corner as it happens there was a financial adviser noted on the file. Under the heading “Your adviser” there is the name of a particular financial adviser who was involved in that case. If we then turn through to page 67, we get a generic document, because that was what was on the Westpac systems, but there is a record somewhere within the system showing that this was a thing sent to customer 1.

So your Honours see on page 66 of the book this is the form of a letter sent on 29 September 2014 to customer 1 providing the results of the superannuation search, and that means your Honours should ignore the date on page 67 because that is just a generic date, and the reference to Mr Adam Sample, that again is all generic. But this was personalised to customer 1 with her details put in and then this was the content of what was sent. Your Honours will understand this was after she had responded to a search.

There is a finding in the primary judge’s judgment. I do not need to take your Honours to it. It is at paragraph 153 where her Honour found that there was a search conducted as a result of customer 1 accessing the website on 10 September. So then two weeks later this letter is sent out:

Thank you for providing us with your consent to search for your lost super as well as other super amounts.

Below that where it says, “Type of super found”, again these are the generic results. These are not the actual customer 1 results that we find out later when we get to the call, but they would have been the actual ones in this letter. Then “Next steps”:

Having your super in multiple places may mean you’re paying multiple sets of fees. By bringing it together in the one account, you could potentially reduce fees and paperwork.

So those same two messages we had seen before:

If you would like to combine your other super into your BT Lifetime Super . . . Account, complete the enclosed Rollover form and return it to us.

So clearly they are inviting the customer to do that for something that will evidently be in BT’s interests if the customer wishes to do that. It will be more funds under management. So it is up to the customer to choose whether or not she wants to do that, and BT is making no secret of the fact that it would very much like her to increase her investment. So the rollover form that is referred to there is on page 70, and again this is the sample generic form of the rollover form but in the bottom right‑hand quarter of the page your Honours see “TO fund name” and again it is “BT Lifetime Super – Employer Plan”. There were additional communications in writing, but they do not add to what I have taken your Honours to in between those two.

I will point out one thing while we are here. If we go to the book of further materials at page 208 there is an extract of the ASIC Moneysmart website. This is where ASIC gives general advice to consumers about consolidating superannuation funds. On page 209 you see at the top of the page under the heading “Consolidating super funds Reduce your super stress” the statement:

How many super statements did you receive this year? Do you find it hard to keep track -

So that is manageability:

Have you lost some of your super over the years? You’re not alone.

Below that:

Why you should consolidate your super -

as a statement, and then the heading a little further down to the same effect:

The benefits of putting all your small super into one account include:

• Saving costs by paying only one set of fees -

and the following two bullet points I would lump together as manageability:

• Reducing your paperwork

• Making it easier to keep track of your super -

Those are the same things BT was telling customers. They are the same things that come up in the calls and they are also the same things that the customers identify as their objectives, to the extent that they were held to be objectives in this case, highly generic and, with respect to ASIC, obviously correct that it is a good idea.

It is a huge problem in this country that because of the compulsory superannuation regime people have many different superannuation balances. One of the examples we come to in this case there are eight different superannuation accounts being eaten away by administration fees. It is a good idea to consolidate. So that at least seems to be uncontroversial. When you come down a little further, there is a heading in the middle of the page “How to put your super into one fund” and ASIC then makes this suggestion:

Before you decide to move funds

Before you consolidate your super funds here are some things to check -

that is, it is up to you as the customer to make these decisions:

• Are there any termination fees

• Will you be able to get the same level of insurance in your chosen fund

• That your employer can contribute to your chosen fund -

that is, the new one. There is certainly no suggestion here that you need personal advice within the meaning of section 766B(3) before you do this, because the whole ‑ ‑ ‑

GORDON J: Is that right? Mr McHugh, I thought in the middle of the page, at least in relation to defined benefit funds, they suggested getting advice.

MR McHUGH: I am sorry, your Honour is quite right about that. If you are in a defined benefit fund, which is unlikely to be most of the people that we are talking about in the context of what we are dealing with at the moment – I understand federal judges are in a different category, but the vast bulk of consumers these days are not going to be in defined benefit funds. Your Honour is quite right:

think very carefully and get advice before leaving.

Even that does not say get personal advice, but one would probably have to interpret it that way. Nevertheless, the point I was trying to make about the bottom half of the page was, ASIC itself is proceeding on a footing of consumer autonomy, and that there is no need to get personal advice before you do this.

Now, one of my friend’s complaints is – and, indeed, it is part of the reasoning in the Full Court, that the Full Court held across all of the judgments really that there was problem here because it would have been appropriate to tell people to get personal advice. That is the nub of the reasoning we get to in the Full Court decision quite shortly and my submission is that is just not found anywhere in the Act. It is not found in the Act. It is in fact contrary to the scheme of the Act, to add that as a normative requirement. Even ASIC itself is not saying you have to get personal advice. So that was the written communication.

Let us turn then to the call for caller 1. So I think I just said to your Honours that this letter with the results of the superannuation search was 29 September 2014. The phone call appears at page 117 in the book, and it is four days later on 3 October. Some of them are much further apart, but in this particular case it happens that it was four days later. The central question in this appeal is might a reasonable person expect that as a matter of fact BT had actually considered one or more of the customer’s objectives, financial situation and needs in making an implied recommendation to roll over in this call. That is the crucial question.

If we start at the top of page 118, Alan is the name of the caller, and your Honours will see, if your Honours come to the other calls, he is the caller in, it would be close to half the calls, from recollection. He says he is calling from BT, he is looking for customer 1. He says hello, and she says she is at work. He says:

okay, not a problem. Look, it was just a quick courtesy call regarding your BT Superannuation account, we’ve just had some superannuation search results.

So, that is clearly a reference to the thing that was sent out four days earlier. The idea of a courtesy call, it is customer service marketing and so on. She says yes, and then he says:

Do you have a few minutes to talk or would you like us to call you at some –

and she says:

Yeah, that’d be all right, yeah, that’s okay.

He then says at line – and I will work from the transcript line references - line 13:

Not a problem at all, as I said, we’ve got some results here we’d like to help you bring them over to your account to potentially save you on fees.

So the first point is the word “help”. That is the high point of ASIC’s case, on the facts, that there was an expression of helpfulness, but it is important to note what the nature of the help is that is being offered here. It is help:

to bring them over to your account –

that is, to bring them over to your BT account. That is the first part. It is certainly not offering in any general sense to advise her, it is offering to provide a service to her that she may well want to take up, given that she has asked for a search to be conducted of her other superannuation. The other point about this is that the implied recommendation to roll over is right here at the start of the call, that is, it is an offer:

to help you bring them over to your account –

Those words, on the reasoning in the Full Court and at first instance, are sufficient to support the recommendation on its own. There is an implied recommendation that it is a good idea to do it and it is in respect of a particular financial product, and so therefore you have advice straight away at that point, but that is before she has said anything, the customer has said anything about her personal circumstances at all. My submission is that is highly relevant to whether or not a reasonable person would understand there to be any recommendation based on her personal circumstances. The second half of that sentence:

potentially save you on fees -

that is one of the two statements of opinion that were held to be conveyed. Again, that is before the customer had said anything. But one important point, and I might have to come back to this to expand on this later, it is very clear in Chief Justice Allsop’s decision that the opinions were not personal advice. His Honour held that they were general advice, as opposed to the recommendation to roll over.

I will come back to this later because I do not want to get distracted on it now. It is paragraph 76 of Chief Justice Allsop’s judgment and the other two judges, it seems, approach it on the same basis, that is that what is relevantly personal advice in this call is the recommendation to roll over, as opposed to the opinions because they are so generic and clearly not based on anything personal to the particular customer.

So the important thing to focus on is the recommendation to roll over. So, she, after that introductory exchange at line 16, she says, “Yeah”, and then the caller says at line 17:

So before we continue I do need to let you know the call is being recorded and everything discussed today is general in nature, it won’t take into account your personal financial needs. Is that okay?

The customer responds:

All right, yeah, not a problem.

Now, my submission on the facts here is, absent something extraordinary happening later on in this very short call, that is the end of the question so far as subsection 3(b) is concerned. No reasonable person would expect or could expect that anything in the nature of personal advice was going to be imparted after that and one must bear in mind as well that the nature of the advice found against my clients is an implied recommendation from the nature of the call and when one is implying a recommendation one would have to do it against the background of that statement and say well, even if there is a recommendation, it certainly has been made clear to the customer that it is not going to be based on anything personal to her. It is important that she gives her assent to that. The customer says, “not a problem”. So, line 21:

before we get started can I ask you a few quick questions so I can help you.

The nature of the help was already identified back up at line 14, that is to bring the funds over to the account. The customer says yes. Then at line 24 the caller says:

Great, all right. So what was the main reason you asked to look for your superannuations?

Now, I will just interpolate here – there was evidence which was relevant to the paragraph (a) question not the paragraph (b) question about why they asked these questions. As a matter of fact the evidence was they do it in order to built rapport with the customers. It is a conversation starter, it is a marketing technique and they are trained to do that. The customer is not going to know that one way or the other. I am sorry, was your Honour Justice Gordon was about to ask a question, I am sorry.

GORDON J: I think that is called social proofing.

MR McHUGH: Well, the social proofing comes a little bit further on. It is the invitation to the social proofing. But your Honour is quite right, it is the introduction to the social proofing that comes further on. So, we see he has asked the question, what was the main reason you asked us to look for them, and she says:

Because I know I’ve got a few out there ‑ ‑ ‑

He says yes, and she responds at line 4:

and I wanted to roll it all into one.

So that is another highly material thing from the point of view of the reasonable expectation about personal advice. She has already decided that she wants to roll over, and clearly enough one would say into the BT fund. That is a decision that she has already made. Why would a reasonable person think that Westpac was giving her personal advice about a decision that she had already made and that was in Westpac’s interest? There is no reason to think that Westpac would do that. She has already requested a search specifically as she says she wants to roll it all into one. So then at line 7, the caller asks:

and what did you see as the main benefits of bringing them altogether to the one place?

We will have to come back to what is meant by “objectives, financial situation and needs” in the Act. But my submission is those words “main benefits” are not directed to the statutory concepts in the way in which the question is asked – it is part of the rapport building. She says:

Just – well, like you said, fees, it’s the whole thing.

He murmurs assent and then she says, line 11:

Because they’re all over the place and I got little bits here and little bits there, so you lose those.

The caller says:

I see, yeah, right, right. So it sounds like manageability and also the saving on the fees, potentially. Is that right?

Just stopping there, these are what are held to be her objectives, for the purpose of the call, ultimately - manageability and saving on fees. They are highly generic and my submission is, as we go through the call, no reasonable person would expect that any recommendation to roll over into the BT fund was based on those objectives as being personal to her. They are highly generic. As we see in what Justice Gordon rightly points out is the social proof that comes next, the caller says at line 16:

Fair enough, no worries. Look, they are the two main reasons our clients do like to bring their supers together, it does make a lot more sense from a management point of view, for sure.

So that is the second of the opinions. The first one was the potentially saving on fees. The second one is the making sense from a management point of view and clearly it is a marketing technique to encourage the customer to feel comfortable with the decision.

That is part of the basis upon which there has been found to be a recommendation to roll over, and the statements of opinion that I have just been referring to. But what is very clear about that social proofing dimension is that no part of it is saying this is specific to you or it is a good idea for you. It is saying lots of other people think it is a good idea. It is a good idea in general terms.

That is the reason, ultimately, why Chief Justice Allsop says that the opinions were not personal advice because no reasonable person would think or expect that they were given in respect of what the particular customer was saying or based on her circumstances. So she agrees with that at line 19. Then at line 20:

Now, what we can do is we can go through your superannuation search results and we can actually help you bring them altogether over the phone now –

So again the nature of the help is to bring them together in a way in which BT will be patently acting in its own interest, not adversely to the client’s interest – that is the decision that she wants to pursue. It is a free service, it is good for both parties. But there is no mistaking that this is something that it is in BT’s interest.

Certainly there is nothing in that word “help” in the way it is used anywhere in this call that amounts to some kind of representation that BT will be acting in her interests. But that idea of acting in the customer’s interests is essential to the reasoning in the Full Court that we are going to come to shortly. So my submission is that the idea of helpfulness does not advance the case from the point of view of ASIC.

KIEFEL CJ: Mr McHugh, might the question at line 7:

what did you see as the main benefits –

be seen from a customer’s perspective as an inquiry into their thinking?

MR McHUGH: I accept that, and that is why it has been bound ‑ ‑ ‑

KIEFEL CJ: It is the exchange about this and the response which is the key to all of this, is it not?

MR McHUGH: It is, and so the point your Honour just made with me is why they are found to be the objectives, the customer’s particular objectives. The question is what is then said about them and is there any advice given to the customer that appears to be based on them in any substantial sense?

KIEFEL CJ: Well, the response is that others are saying the same thing. That could be taken by the customer as confirmation that the issues that they see are the right ones.

MR McHUGH: It is certainly intended to give the customer some comfort about the decision the customer is making or the view the customer is expressing. It is a very different thing to say, using the language of the statute, that the customer, as a result of this exchange, particularly given the advice warning that we saw 10 lines earlier, saying nothing will take into account your personal financial needs, which immediately precedes these questions, it is very clear from that that whatever is being said about these objectives it is not insofar as they are particularly the objectives of that customer.

It is not in any way that they are personally appropriate to her, that they are anything other than legitimate concerns for her to have, acting in her own interest, which is the whole premise of the Act. But she has just been told, “I’m not going to take into account anything that is personal to you, your personal financial needs – everything is general”.

GAGELER J: But then there is a very, very clever change of language, is there not? She is told that her personal financial needs are not being taken into account, but then her specific personal objectives are being exploited.

MR McHUGH: Well, your Honour, that is a distinction, with respect, that would be lost on an ordinary reasonable consumer.

GAGELER J: That is part of the problem, is it not?

MR McHUGH: My submission is that there is no problem at all. She is being told very clearly, “I’m not going to give you personal advice”. She is then asked what is it that she is wanting to achieve. Bear in mind that the nature of the objective, particularly about manageability – it is difficult to see this even as a financial objective at all, in the ordinary sense of what will my retirement income be or when can I retire, or I want to own my own house or I want to pay off my mortgage in a certain period of time. This is a purely mechanistic thing about organising one’s super, for example.

But the word that was used was “benefit”. “What is the reason you want to do it? What are the benefits that you see?” All that she is told is “Other people see the same benefits as well” and that cannot reasonably be understood, I submit, as Westpac saying, “I have” – or the caller saying, “I’m advising you to do this rollover, based on your personal circumstances, based on your objectives, financial situation or needs”.

They have already made the offer to her to roll the money into a fund, right back at line 13 on the first page. It follows correspondence from BT inviting her to roll over into BT and she has announced herself that she had already made up her own mind to roll over and that is why she wanted a search done.

Against all of that, it is just unreal, I submit, to say that a reasonable person might expect that the recommendation, which is implied, to roll over, is based on anything personal to her and certainly not the statutory concept of her objectives, financial situation and needs.

GAGELER J: You will come to this, but you are using the language “based on”, which of course is not the statutory language.

MR McHUGH: No, it is part of the construction of the word “considered”, and as we saw in 961B, what the best interests obligation requires is judgments, assessment, thinking about it - it is clear that in order to satisfy the best interests obligation what the provider giving personal advice must do is actually take into account and base the advice on the customer’s objectives, financial situation, needs, as relevant. So my first submission is a reasonable person would not understand any of this as being based, as advice based on anything personal to her at all.

GORDON J: Can I just ask one question about that submission, Mr McHugh? You compare the call that you have just taken us through in terms of the warnings with those which were set out in the correspondence sent to the plaintiff, or sent to customer 1, and you took us to them, both at further materials 36 and again at 67, saying, listen, if you are going to look at this more particularly, you might want to get tailored advice. The change, by the time the call is made, is quite marked.

MR McHUGH: Your Honour, that does not, with respect, answer the statutory question that the ‑ ‑ ‑

GORDON J: Well, it might in this sense. If you are asked, by reference to (b), to consider whether or not from the position of the reasonable person or the test that is set out, a reasonable person might expect you considered - and you have the change in language where all of a sudden positive benefits are in effect reinforced, does that make a difference?

MR McHUGH: My submission is that it does not make any difference that there is a change from what has come earlier, and the change is a change in respect of what is in fine print at the bottom of the letter. If someone had read that, they would understand ‑ ‑ ‑

GORDON J: .....just at the bottom of the letter. You took us to those two ‑ ‑ ‑

MR McHUGH: The reference to the financial – I am sorry, your Honour is quite right. The reference higher up on the letter to “You should go and get financial advice if you want to”, but that is not inconsistent with what happens here. The ultimate question is, in light of the communications as a whole and in particular the call, might a reasonable person expect that the advice that is being given is in any way personal to the customer and my submission is it is just not. Even if your Honour is against me on that submission about it being in any way personal for the customer, there is still the issue that we will come to of construction which is what is meant by “objectives, financial situation and needs” in the context of subsection (3).

KIEFEL CJ: That might be a convenient time for the Court’s morning break.

MR McHUGH: Certainly, your Honour.

AT 11.20 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.36 AM:

KIEFEL CJ: Yes, Mr McHugh.

MR McHUGH: Your Honours, taking up something that I was discussing with Justice Gageler a moment ago about “considering”, whatever else might be said about the word “consider”, it seems not to be controversial that it has to be considered in giving the advice. It has to be, in some way, taking account in giving the advice. And if that is what “considered” means, and one looks at what has happened in this call, the relevant advice is the recommendation to roll over. On page 118 of the book at line 13, that advice has already been given, by implication, in the offer to help her bring them over to her account, and in particular, to potentially save you on fees.

So if the reason why it is a good idea is saving on fees, that is a generic reason that has got nothing to do with the particular customer. And one of the points that I am going to develop, by reference to some of the other calls because it is more explicit in some of the other calls, the Westpac caller does not know anything about the circumstances of the particular customer. It becomes very, very clear in some of the other calls, but it is ‑ in my submission, there is nothing in this call that indicates the Westpac caller does know anything specific to the caller.

And so, one of the points that I want to make at some ‑ I want to give some emphasis to is a reasonable person would have to understand that the caller is not in a position to give any kind of real consideration to these objectives for the purpose of formulating advice that is appropriate to the client, in giving advice at all, they do not have the information that you would need. I will develop it later, but the sorts of things you would need, and the Full Court held, in order to do this job in accordance with the best interests obligation, as personal advice, one would have to know what the other rates of return were, what the fees were on the other accounts, what the investment mix was, matters of that kind, and it is obvious that this caller does not have any information about the other accounts at all; we will see that in the balance of this call, that they do not know anything about it.

One of the submissions that I make is that a reasonable person would understand, would have to understand, that Westpac is just not in a position to give any consideration to the objectives as personal objectives of the particular customer, as opposed to the sorts of generic statements that are being made.

BELL J: Mr McHugh, the call begins with the caller telling the customer that BT has obtained some superannuation search results, so from that we infer that the customer would understand that her superannuation fund has obtained details of the other superannuation accounts that she holds, is that ‑ ‑ ‑

MR McHUGH: Well, your Honour, at least some information.

BELL J: Yes.

MR McHUGH: It becomes very clear that the Westpac people do not even know what the balance is in these other funds, all they have is the identity of the fund. So, there is that much ‑ the reasoning Justice Jagot adopted was to say that one bit of personal information that was known was that there were multiple superannuation accounts.

BELL J: It is not only the fact of multiple accounts, it is the identity of the other superannuation providers. And it may be an unrealistic expectation, but conceivably a reasonable person receiving such a call might think that BT would know if the fees charged by its competitors were lower than BT’s, and to the extent that there was an implied recommendation to roll over, the customer might take that to indicate that it would be advantageous, or at least not disadvantageous in terms of the fees.

MR McHUGH: Nothing in the call itself supports that the process of reasoning by the reasonable person that your Honour has just put to me ‑ there is nothing in the call that would enable a reasonable person to make those steps. First of all, the speculative step about what it is that BT knows about the information, but beyond that ‑ about the other accounts ‑ but beyond that, that that has in some way been taken into account in giving a recommendation to roll over where there is no suggestion that anything of that kind is going to happen. And quite to the opposite the statement is everything discussed today is general in nature, it will not take into account your personal financial needs. Now, against that express statement the kind of speculative process of reasoning that your Honour is suggesting to me I submit is just not reasonable and therefore would fail the paragraph (b) test.

GORDON J: Can I just add a couple of things into that. This is a relationship of trustee and beneficiary. These people have accounts with Westpac, these callers are the agents, on agreed fact, and that their conduct is conduct of Westpac. They are described as the super activation team and in one of the calls they in fact describe them as the super adviser or something – I forgot what the language is now. It is very difficult to slice and dice it that way and say, one gets this sort of general warning at the beginning and then one can in effect carve off what follows from the conversation in those circumstances.

MR McHUGH: Your Honour, I am not trying to slice or dice anything. I am saying the nature of the call with that warning at the beginning is very emphatically saying we are not going to be discussing ‑ or I am certainly not going to be giving you advice based on your personal circumstances. It is not a matter of slicing or dicing. It is saying that that affects everything that comes thereafter so far as a reasonable person interpreting it would be concerned. So far as the trustee relationship is concerned, relevantly a trustee and the obligations that a trustee has to a beneficiary, or to beneficiaries as a class, is an obligation that annexes itself to trust property. It is not at large. BT is not in any way a fiduciary of these people in respect of money that is not yet in the fund.

The trust obligations that BT has are trust obligations annexed to the trust property which is in the existing fund and they are particular obligations that are defined by whatever the trust instrument is. But my submission is that certainly the fact that there is an existing relationship is part of the context. I do not deny that. But the trustee aspect of it, I submit, is not something that a reasonable person in the shoes of an ordinary consumer would be taking into account, because by enlisting the language of the trust one is moving into a very technical area where in fact if one understands anything about that technical area it is not relevant to what is happening in this call.

In fact, one of the complaints is that the effect of the decision that the advice is personal is effectively to impose a best interest obligation, and the ones that we saw in 961J about conflicts, for example, in a situation where it does not otherwise exist. There is a circulatory in the reasoning in the Full Court because the reasoning essentially is a reasonable person would think that BT was acting in its interests and as a result of that there is then imposed on BT the 961B obligation so there is a real circularity to it. So, my submission is that the trust aspect, from the point of view of a reasonable ordinary consumer does not add to the inquiry.

Now, I was at the foot of page 119, and I was dealing with the section that starts at line 20. So I had already referred to the nature of the help that is being offered, that is, the help to bring them over. But we then run into an administrative issue, which is that it is necessary to have the tax file number, and that is throughout all these calls, that there end up being issues about identifying the tax file number. So the caller says:

Did you have that with you?

And customer 1 says she does not:

no, I haven’t.

She says:

it’s at home.

And I will not take your Honours through everything on page 120, but the point is that it turns out she is in Perth, and by the time she gets home from work it will be too late for BT. So at line 18 she says:

let me call my husband. He’ll have my tax file number, he’s at home.

And that is because she is obviously keen herself to proceed with the roll over service. And then she says toward the bottom of the page:

Give me a call back in about half an hour?

And the caller says that:

Sounds good –

And then over the page:

I’m just letting you know ‑ ‑ ‑

. . .

Any insurances on the other accounts that we’re bringing over will be cancelled upon transfer because the accounts will be closed.

So that is not saying, to come back to your Honour Justice Bell’s question, the caller knows anything about insurances on the other accounts. It is saying, if you have got any, you should know that they will be cancelled. And she says:

That’s fine, yeah, all right, not a problem.

And he offers to call her back in half an hour. Now, as I said before, in my submission, no reasonable person could expect that BT had taken anything personal to the customer into account, in light of what was happening there, in recommending that she roll over, when that was the whole purpose of the call in the first place.

It is a patently commercial call saying, we would like you to go roll over into our fund. That is how the call starts. It is not reasonable to interpret what happened on the call as any kind of statement of advice or recommendation based on things personal to her because the nature of that recommendation is something that entirely precedes the call.

So if we turn then to page 122 in the book, which is the next page – this is now again on the same day, 3 October, the call made to customer 1 that was the follow‑up after half an hour. And then if we turn to 124, that topic of the tax file number is taken up immediately on line 5. And then we see at line 8 through to line 12, again we get the general advice warning. And these two calls have to be read together. It would not be right, I submit, to separate them out. It would not make sense when they referred to each other; that is, one anticipated the other, and the other was pursuing what had been taken up in the first one.

Again, the general advice warning is given. So, if the customer had been under any of the speculative illusions about, “BT may know something about my other accounts that is specifically relevant to me, and it is basing a recommendation on that,” again, the general advice warning is repeated here and would have to dispel that and the customer says, all right, that is good, so she has agreed to it. They then go through various identification matters and then at line 19:

I’ll just have a look here. We’ve found for you four supers –

and then they are listed out. And:

Are you aware of any others at all?

That little exchange there does not suggest that the caller has looked at any of these superannuation accounts before because he is saying:

Now, I’ll just have a look here.

As though it is happening for the first time. It is also apparent from what follows that the caller does not even know the identity of what these are because your Honours will see one of them is “Labour Union” at line 20, but at line 23 the caller says:

LUCRF is not here.

And then it emerges across the page at line 4 that Labour Union is LUCRF, and then at line 6 the customer says something about another fund and the caller says, no, does not know about that. The customer says at line 11:

I probably haven’t got anything in there.

And then at line 13 the caller says:

it could have been potentially swallowed up by fees and that’s why it hasn’t turned up in the search.

With which she agrees. Then the customer says:

I’ll process these four for you today and then I’ll –

This is now at line 18:

I’ll send across the confirmation email. Just reply to that email with any other accounts that you might have and I’ll process those accounts for you as well.

So this is providing the service that the customer wants to get and that the customer had indicated on the other call had already been what they wanted before they sent out for the search. Then at line 24 you see again the warning about insurances. Then at line 7 there is a script about tax file number use, and I do not need to take your Honours through that. That is on all of the calls, the tax file number recorded message.

Then on page 127 at line 7 the caller seeks confirmation that it is okay to use the tax file number, and she says yes and at that point she provides the tax file number and then below that an email address. So these are just the mechanics of providing the service. Then if we turn over to page 128 at line 11 there is what is described as:

one final script, it goes for 60 seconds as well ‑ ‑ ‑

. . .

‑ ‑ ‑ and then I can process your request.

Then line 15 – and this is relevant to the issue your Honour Justice Bell raised with me ‑ at line 18 it goes on:

you are aware you may ask your super provider for information about any fees or charges that may apply or any other information about the effect this transfer may have on your benefits and have obtained or do not require such information –

In light of that, what I was describing earlier as the speculative process of reasoning that the customer might think that Westpac knows about the other accounts, it is completely inconsistent with that. The script is saying very clearly it is on you to work out if there are these issues with your other accounts. If there are fees or charges or benefits you are going to lose, that is up to you to deal with and you have decided that you do not want to do it. That script is – we can check ‑ I think it is on almost all of the calls. It is on 13 of the 15 calls, that script.

So then we come over to line 11 on page 129. Again the confirmation is sought and given. Then line 13:

Fantastic. Now, did you know roughly how much you might be bringing over from those four accounts, by any chance?

So plainly BT does not have a clue about these accounts, does not even know what the balances are, and is asking the customer and the customer herself says:

Wouldn’t have a clue.

And then the caller says:

Do you remember how long you were working for [them] ‑

And again that shows that Westpac does not know anything about it. That exchange goes on for a few lines, and then at line 7 on page 130 the caller adds them all up and says that it is:

eight years – eight, 10 years, something like that?

And she says she thinks that is about ‑ she says:

Yeah, I would think about that.

So that is the information that BT has got from the customer. It is clear from that that any – first of all, they did not have other information about the accounts, one would not reasonably think that they knew anything about the accounts, that is the external accounts, but any advice that is given is clearly not being based on that, because the advice has already happened earlier in the call. And then, at line 10 there is a question about:

when was the last contribution into this account?

That is, the BT account. He checks and sees that it was on 19 September, so it is still coming in. That is also a relevant factor here, that she has made the choice that she wants to be with BT, that is her current ongoing superannuation account. She is happy to be with BT, it appears, because here she is making a decision about consolidating her super, she is rolling over her other super accounts, of which there were four, she is currently in the BT one, but she is free to leave it if she wants to, but here is a consumer making an active choice that she wants to consolidate her other accounts into the one which is her current, ongoing, active one, where the money is still all coming in. So then, line 16:

did you have any further questions for me today before I processed your request?

Line 19:

not a problem at all . . . Just to recap, I’ll process the – your request in the next 10 minutes. You’ll get a confirmation email –

And then at 23:

everything gets rolled over in two or three weeks, so it’s all in the one spot and nice and organised for you.

So those are those two opinions that we had before, and that then is the end of the call.

Now, my submission is, viewing that as a whole, this is clearly not what section 766B(3)(b) is aimed at. A reasonable person would not understand that as a situation in which you would expect that Westpac had taken into account the personal objectives of this customer in recommending a roll over. The whole context is a marketing exercise trying to get the money to come over, and in particular, there is no suggestion in any of this, when one reads it fairly, that Westpac is setting out to act in the interests of the customer as opposed to its own interests. It is providing a service to the customer that the customer wants to take up, and the customer does so. And my submission is, apart from anything else, there is nothing wrong with the call in any objective sense at all, but that there is certainly no application of subsection (3)(b) to this call.

Now, the other point that we have made in the propositions document that I wanted to emphasise is the one that I took up straight after the short adjournment, which is about the caller’s evident lack of knowledge about the customer’s relevant details. That is paragraph 13 in the outline, and I have given some references to some of the other customers, but I will take up one in particular, which is illustrative, which is customer 8. If we go back in the book to page 97, this is a call to customer 8 in October 2014, and if we ‑ again Alan is the caller. Your Honours see at the foot of page 98, the general advice warning:

everything discussed today is general, won’t take into account your personal needs.

And the customer, who is a male, agrees with that. And then you see there is the question right at the beginning, at line 5:

So what was the main reason you asked us to look for your superannuations?

And, again, we find out straightaway:

To rollover other funds.

Those words “other funds” must be referring to funds other than BT. So the whole reason this customer has asked for the search in the first place is because the customer wants to roll over their other funds into BT. And, again, the whole interaction after that is fairly characterised as my clients giving effect to a consumer choice made by the customer acting in his own interest.

If we turn over to page 100 we get down to line 15, and the customer says:

If you found an MLC one, we don’t want that to come over.

So that shows clearly enough that the customer has got a sense of their own interests, but:

Everything else you found can come over.

And the caller says, that is fine, I can help you do that verbally. And then over at line 8 on the next page, it turns out there were a total of eight accounts that were found. Then down at line 18 on that page, the customer says:

My wife knows more about my superannuation that what I do.

There is then an arrangement where she is put on the speaker phone, so she can participate in the call. And then over the page, at 102, again, at line 9, we get the general advice warning again, so this customer has also had it twice. And then lines 16 and 17 they have found eight funds, BT says.

Then we get over to 103. There are two MLC accounts. You see that at line 4, that there were two MLC accounts. And this seems to have puzzled the customer at first. And then the customer, at line 9, says:

Can we ask which ones?

And his wife also asks the same question, by saying “Yeah”. Then the caller says:

Well, I can tell you the account numbers but I can’t tell you how many – how much is in the funds, because I don’t know that, unfortunately.

So very clearly saying, I do not have information about your accounts. And then – I will not take your Honours through all of the discussion in between – in several respects it is similar to the ones your Honours have already seen. At page 105 is the tax file number recorded script. And then if we come through to 108 there is the second of the recorded messages that I referred to in the customer 1 exchange ‑ ‑ ‑

GORDON J: Do they all contain the last line that:

Your super specialist will now ask you to agree to the statements made.

MR McHUGH: To the extent that it is this recorded message, your Honour, I think that is right. Would your Honour just pardon me a moment, so I can answer that.

GORDON J: It first appears in relation to customer 8, at the top of page 109.

MR McHUGH: Yes, I see that. No, I am sorry, I am looking at the wrong one. At page 129 is the same so, your Honour, we can have that checked. But, your Honour, the answer is probably yes, but I will check that. Or I will ask somebody else to check it.

GORDON J: Thank you.

MR McHUGH: I should say, I assume the reason your Honour is asking me that question is because the idea of super specialist might be treated as, in some way, akin to an adviser or something like that. My submission is that that is not the right way to read this at all. It is the person who is speaking to you, who is a specialist in this account, will now ask you to do something. It is just a job title.

And then we come down a little further on 109 and there is a question about insurance. At line 16 the caller says:

I notice here that you also don’t have any insurance.

Clearly enough he is talking about the BT account:

Were you aware of that?

The customer’s wife says:

We have private insurance . . .

We don’t need any more.

The caller says:

Oh, okay. Not a problem at all. Now, regarding your investment mix you’re currently invested in the default fund -

That is with BT:

and you currently don’t have an adviser here on file. Just wondering whether you’d be interested in a bit more tailored advice regarding where your superannuation’s ‑

The customer says:

That would be fantastic.

So they are very interested in this idea of getting tailored advice. Then at line 7, the caller says:

Well, look, what we can do is we actually have a – I can send you details through or I can put you through now, actually, if you have time to our limited advice team, and they basically – the initial consult is free, and if you decide to take them up on their advice they charge a small fee out of your superannuation balance.

The customer says yes and then the caller says:

And basically they’ll take into account your circumstances and make a recommendation based on what investment options we have and what might be suitable for you in order to achieve your retirement goals. How does that sound?

So very clearly there is a contrast between what is happening on this call and personal advice. A reasonable person would understand that distinction, and in particular the customer’s wife understands because she says:

And what is the fee?

That is the question she asks straight up. She wants to know how much it is going to cost her, and a perfectly natural question. On the next page at line 3, the caller says,

All right. So the investment advice, it’s 250 -

That is $250. There is then a whole discussion about the fees and when it is paid and so on, and line 21 at the bottom the customer asks:

they would still take the 250 out of the first?

He must be referring to his balance, and the caller says:

No, no, no. So there’ll be a point where, you know, he’ll ask you, “Do you want to go ahead with it, because after this we’ll charge you the amount, and then I can help you ‑

The customer says:

Oh, okay.

The caller says:

there’ll be a very distinct part of it where you’ll - you know, you’ll know when you’ll be paying the money –

The customer says:

Oh, okay, no, no.

His wife says no, and the customer says:

No, we’re all good.

The customer’s wife says:

I’ll just read the brochure next time it comes and see which is the better option -

because she will decide for herself, consistently with the premise of the Act which is consumer autonomy.

Now, just in light of that exchange it is, I submit, not real to say that a reasonable person hearing that exchange would think notwithstanding the two general advice warnings, notwithstanding that the caller knew nothing about the other two accounts, notwithstanding that the customers have been offered personal advice which is going to cost them money, as one would expect, because personal advice is a significant undertaking, notwithstanding all of those things, how would a reasonable person think that there was a recommendation here to roll over that is based on the personal circumstances of these customers when the customer has said right at the start of the call that what they want to do is roll over. They want to roll over their other funds into BT, and what they are given is the service that they have asked for, but that does not involve any implied recommendation based on their personal circumstances, as a straight matter of fact, I submit. So, the call continues after this point, at line 20 – this is on page 112, the caller says:

with those six other accounts do you know roughly how much might be in them at all?

There is then a discussion about how much there might be in them. At line 9 on page 113, the customer’s wife says that in one of them it was around four, presumably thousand. There is then a bit of an exchange, but at line 17 she then asks:

Does that sound right?

The caller says:

Oh, you’re asking me?

The customer and his wife both say yes, and the caller says:

Oh, look, I have no idea. Like, all I see is what fund it’s coming from and the account number. I know - I know nothing about it.

Now, in light of that, nobody could reasonably think that Westpac had done some comparison with other accounts, and as the caller says at the top of the next page, 114:

everything else is private information –

So the only thing that can be given is, if you look at page 114, line 22, the customer asked:

Can you just tell me what the balance is of my BT at the moment ‑

and the caller is in a position to do that, but the customer’s wife says no, no, I have got the balance. So that is lines 9 and 10, they do not need it. So my submission is that illustrates very powerfully the point that the callers do not have, in these calls, any knowledge about the other accounts other than what the account number is and where it is coming from. That appears more obviously in some, that example is a strong one, but it is consistent with the other calls in which there is no suggestion that BT does know any of that other information.

So against that background on the facts, and I should have said this earlier, the reason that I dwelt so closely on customer 1 is that all throughout this case, everybody has made customer 1 the model upon which conclusions are reached, and then after that, all of the other conclusions have followed, one way or the other, for all the other customers.

GAGELER J: Mr McHugh, you do accept that there is an implied recommendation?

MR McHUGH: I do.

GAGELER J: So it is not just providing a service.

MR McHUGH: No, no, your Honour, sorry, I am talking about what is then happening in the call, the substance of the call is. There is the implied recommendation, I accept that finding, but in circumstances where the customer is wanting the particular service, and the correct characterisation of what happens after that is, although there is the implied recommendation in the way in which it has been found, nevertheless the substance of what happens thereafter is the giving effect to the customer’s desire, rather than a recommendation that would reasonably be understood to be based on the personal circumstances of the customer. That is my point on that, your Honour.

So that was what I was going to say about the calls, and that takes me, in the outline, to paragraph 14, and the point that ASIC accepts that the inquiry under 766B(3)(b) is a purely factual one, but that is, although it is hypothetical in the sense that it is what would a reasonable person think, it is what would a reasonable person think Westpac had in fact done.

So the first ground of appeal focuses on what we have described as the normative element that is introduced into the reasoning process in the Full Court. I have to deal with the judgment separately, from this point of view, because they are not uniform, but they all have a normative element running through them. The way in which the normative element is introduced is not always the same.

It is most straightforward to do it in Justice Jagot’s judgment first, and then Justice O’Bryan’s, and then come to the Chief Justice’s at the end, where the reasoning is a little bit more elusive, but I will approach them in that order. But you see the way in which we have described the normative element in paragraph 15, that is, normative premises which, importantly, are not found in the Act anywhere. There is no evidence in support of them, and they are not statutory norms.

First of all, the advice provider should act in the customer’s best interests when making one of these recommendations to roll over, and secondly, that in order to do that it was necessary to consider the customer’s personal circumstances and they reason from that to what appears to be a factual conclusion about what a reasonable person might expect the appellants to have considered, and my submission is that that process of reasoning is just at odds with what we have just seen in the calls.

So I need to start in Justice Jagot’s judgment. If I could invite your Honours to take up the core appeal book in her Honour’s judgment at paragraph 266, which is on page 273. So in the Full Court, as I said earlier, all of the judges accepted that paragraph (a) – that is, whether Westpac had in fact considered these matters – was not made out. Perhaps if we pick it up at the end of paragraph 265, the last sentence there:

The customers, of course, knew nothing about the QM Framework, the fact that the calls were scripted generally . . . or that the answers they were giving to the very specific questions they were being asked were in fact irrelevant to the caller’s implicit recommendations.

Her Honour says at 266:

The callers’ lack of knowledge of these matters is one of the reasons I have reached a different view from the primary judge about s 766B(3)(b) . . . In my view neither the general advice warning . . . nor the context of the calls . . . negatived –

what her Honour finds is otherwise to be found in the calls. Now, my submission is even that is not approaching them in the correct way. One should start with a general advice warning, which is at the start of the call, and work out whether anything in the call negatives the general advice warning, given the way in which the thing proceeds. But if we turn to 269, what your Honours find there is a highly normative statement:

as I have said, there was a pre-existing relationship between Westpac and each customer. Given that pre‑existing relationship, a reasonable person in the customer’s position would not expect that Westpac might act contrary to the customer’s interest in the context of offering a service about such an important matter as the customer’s superannuation.

So it seems to be the importance of superannuation that leads to this assumption. That is nowhere to be found in the Act and, in my submission, it is just not based in anything, and it is not right. Then we get over the page to 270:

Fourth, the calls were about the customer’s superannuation, which may have been inferred to have been of the utmost importance to the customer. No reasonable customer would expect that their current superannuation provider would be giving them an implicit recommendation to rollover their other superannuation into their BT account if it was contrary to their interests to do so.

Now, there are many things going on in this paragraph that I need to take up. The first one is, clearly there is a normative lens through which everything is being viewed. The second point is, in the third line her Honour refers to an “implicit recommendation”. At this point her Honour has divorced that from the context in which it occurred, which is what is plainly a marketing call in which BT is trying to get people to roll money over into their existing account. It is clearly the purpose of the call.

GORDON J: May I ask about that because I had thought that her Honour had rejected that contention in 268 when she said I am not going to treat earlier communications as merely promotional or marketing because of the recommendation that had been made in the earlier communications. I had assumed that that reasoning flowed through to 270. Am I wrong to read it that way?

MR McHUGH: No, that is part of her Honour’s reasoning, but my submission is that is another part of why her Honour’s reasoning is wrong, I submit. It is not so much that the earlier communications are the key to this. It is clear from the call itself what is going on. The very first thing of substance that is said on the call is, “I’m calling to help you roll over your superannuation in response to a super search that you yourself have initiated”, and it is clear from the context, including the earlier communications – the call itself makes clear that the context is BT is trying to get people to roll funds over. That was the first point about this sentence.

Secondly, the words “if it was contrary to their interests to do so”, well, that is a premise that is not established here at all, that it was in fact contrary to anyone’s interests to do so. The possibility that is the more real one is whether or not they would make the recommendation not knowing whether it was a good idea from the customer’s point of view or not, and my submission is in the nature of the way the Act works and the relationship between the two parties, it is perfectly normal to think that Westpac would not be inquiring into that question.

The premise here is there is an existing relationship and the customer is happy to be a customer of BT and the customer wants to roll over other funds into BT. Why would BT question that in the context of these calls? Why would it stop and say, “Don’t do that until you’ve got personal advice. Don’t do that until you’ve thought about it harder”. There is nothing wrong with being a customer of BT. The customer is happy to be in BT. The customer has said the customer wants to roll over into BT. Why would Westpac look into that at all?

So Westpac’s position about those other matters, about what will happen in relation to other funds, is essentially an agnostic position, whereas what her Honour is positing here is if it was contrary to their interests to do so, which is just not the situation here at all. So what her Honour is really saying here is that a reasonable person would not expect an existing financial services provider to offer the customer more of the same of what the customer has already got without giving them personal advice first. That is the reasoning in this. That is really what it boils down to, and my submission is it just cannot be sustained.

GORDON J: It is not really the same though, is it? It is substituting A for B.

MR McHUGH: Which relevantly from the point of view of Westpac is going to be giving them more of the same product, a product that it is perfectly fine for the customer to be in, the customer wants to be in and the customer has indicated a desire to roll over. They have initiated the search. They are obviously wanting to consolidate. My submission is that there is just no basis at all to think that there is any reason why an existing financial service provider in offering the customer more of the same would have to, or that a reasonable person would think that the provider would have to ask the customer, “Have you thought about all these other things? Is it in your interests?”.

Or indeed go as far as her Honour is going here and that a reasonable person would impliedly think – sorry, I have expressed that badly – that a reasonable person would think that the recommendation was based on some analysis of the client’s own subjective personal interests in that situation. With respect, my submission is it is just not real. Then paragraph 271:

the tenor of the calls, with the repeated emphasis on the purpose being to help the customer . . . would have reinforced in the mind of the reasonable person in the customer’s position that the purpose of the call was in fact, as stated, to help the customer –

and then her Honour goes on and says:

by Westpac ensuring what was done was in the customer’s interest –

Now, that is not what is being said on these calls. It is very clear that the nature of the help being offered is the help to roll over the funds. I took your Honours to that in the calls at a few points. That is the specific nature of the help, and certainly, from the point of view of a customer who wants to receive that service, it patently is helpful. But nowhere in the calls does Westpac say anything, expressly or by implication, along the lines of Westpac ensuring that what was done was in the customer’s interest, even if, at the same time, it was in Westpac’s interest. So again, my submission is it just cannot be made out on the phone calls that we have been looking at.

Then the other paragraph I should take your Honours to is 278. In 278, her Honour says that she agrees with the primary judge’s reasons at 395, which I will come to in a moment, and her Honour Justice Jagot quotes from a few of those paragraphs at 278. Now, what is interesting about this is that 395 in the primary judge’s judgment, if we turn back in the book to page 119, which is where 395 is set out, what her Honour is doing here is saying these are reasons why, as she says in the first two lines:

might lead a reasonable person to think that the “financial product advice” should have been given in circumstances –

that is, personal financial advice should have been given. So that is a normative proposition that her Honour is addressing there, she says these are reasons why you might think that is the case. But her Honour rejects that. Earlier, at 394, her Honour says, in the second line of 394:

In my view, the following circumstances would suggest to a reasonable person that the caller who provided the “financial product advice” did not consider –

That is, as a matter of fact:

any of the customer’s objectives –

And so on. And certainly, I embrace everything that her Honour puts there at 394. At 395 her Honour is dealing with a different possibility, which is a normative one. And the paragraphs that Justice Jagot quotes are the ones, at subparagraphs (4) and (5) of 395. And then at 396, what Justice Gleeson was doing, she says:

However, in my view, those matters would not lead a reasonable person to have expected the callers to have considered one or more of the customers’ objectives –

That is, as a matter of fact, and the last few words of that paragraph:

unlikely to have occurred ‑

again, are addressed to the question of fact. So, my point about this is that in Justice Jagot’s judgment at paragraph 278 is clearly a series of normative statements upon which her Honour’s reasoning is founded, and the basic complaint I make is that those normative statements are not found anywhere in the Act, and they do not have an existence outside the Act in any evidence or otherwise.

GAGELER J: Do the expectations, or can the expectations of a reasonable person have a normative element?

MR McHUGH: It is theoretically possible to do that, I accept. In principle, it is possible to do that, for there to be a normative element; it is essentially a presumption of regularity, in some sense.

GAGELER J: Well, not really, it would be just an assumption of decency, reciprocity, the sort of things we take for granted in everyday life.

MR McHUGH: But, your Honour, the point I was making is that the way in which it is relevant to the factual enquiry is that one starts with a normative proposition of decency, or whatever it is, and one then assumes that it is complied with. That is the only point I was making. That is the way that it can be logically relevant to the factual conclusion. What do I think actually happened here? I start with a normative proposition, I assume that was complied with, that becomes a contributing factor in my reasoning to a conclusion about what actually happened. I do not say in principle one cannot do that.

My complaint here is that the normative premises themselves are not found in the Act and that they do not exist elsewhere. And just to put it at the level of decency, for example, is not what your Honour is doing here; her Honour is doing something much more specific, and my submission is it is just not sustainable in terms of normative propositions, particularly given that they are not in the Act, when one has regard to the actual facts of the calls that we have been though.

What we are looking at in these paragraphs I have just taken your Honours to, from 269 and so on, is a description that is not in accordance with what is happening on these calls, and a reasonable person would not interpret these calls in that way. That is my basic point. Certainly, I accept logically it can be part of the process of reasoning to a factual conclusion, that there is normative step but it is the normative steps that I am objecting to in what her Honour is doing.

In Justice O’Bryan’s reasoning it is not as clear whether it is the process of reasoning we just described or if it is instead an interpretation of subsection (3), paragraph (b) as normative, as opposed to factual. It is not as clear in Justice O’Bryan’s reasoning, which is where I am going to go right now. So, if we turn to 387 which is page 309 in the book. So, the heading above 386 identifies that we are dealing paragraph (b) of 766B(3)(b), and then at 387 what Justice O’Bryan says is:

While recognising the advantage enjoyed by the primary judge in considering the totality of the evidence, with respect I am unable to agree with her Honour’s conclusions. In my view, the content of the calls, in the circumstances in which they were made, would have led a reasonable person standing in the shoes of the recipients of the advice to expect the provider to have considered one or more of the recipient’s objectives ‑

and so on. And then his Honour identifies a number of circumstances. Before I get into them there are eight that his Honour identifies. The first five of them help ASIC, the last three help me. But of the five that help ASIC, the submission that I am going to make is that they are substantially normative in their nature. Paragraph 388 starts with:

the advice concerned superannuation and, specifically, the consequences of consolidating multiple superannuation accounts. For most customers, that is a very significant financial decision.

So that seems to be the basis of what follows as a normative proposition. This, I submit, can only be relevant to paragraph (b) on the basis that the provision is in some way normative or, alternatively, the process of reasoning that Justice Gageler and I were engaged in a moment ago. Because his Honour does not unpack what is the importance of the significance of the financial decision. His Honour says it:

affects the future financial return on the customer’s overall superannuation ‑

and so on. But his Honour does not in any other way relate it back to the paragraph, other than to say, in the last sentence:

I consider it to be a factor that points in favour of the circumstance described in paragraph (b).

So at that point it is not clear how his Honour is using it. Then paragraph 389 talks about “an existing customer relationship” and, again, my submission is that that must be normative in light of the discussion that we have been having before and going back, I think, to what your Honour Justice Bell took up with me before about the information that somebody might have. It is very clear that the callers did not have information about the customer more generally that was relevant to that. And the significance of the relationship gets spelt out, as we will see in the next paragraph because at 390 Justice O’Bryan says:

Third, the effect of the first two factors is cumulative. An individual that has invested superannuation with an institution would reasonably expect that institution to act for their benefit and in their interests –

so that is very much the normative premise here:

in relation to their superannuation affairs. Such an expectation arises from the nature of the product, which is held by a financial institution on trust –

and I have already made submissions about the relevance of that:

In my view, the combined facts that a financial institution calls and gives advice to an individual who is a member . . . about rolling over superannuation points towards the circumstance described in paragraph (b).

So, again, exactly whether his Honour is saying that the word “expect” has a normative element or it is the process of factual reasoning we discussed is not completely clear from that. And then in 391:

Fourth, during the course of the calls, the callers asked the recipients about the considerations that were relevant . . . In most of the calls, the questions were preceded by a statement to the effect that the caller was asking the question so as to be able to better help the recipient of the call.

And I have addressed your Honours about the nature of the help being offered in these calls:

The social proofing language would ordinarily reinforce the impression in the mind of the reasonable person receiving the call that the caller was taking account of the answers given by the recipient. The social proofing language conveyed that the answer given by the recipient was valid or reasonable.

So, to the extent that this reasoning turns on this idea about helping, my submission is it is not sustained on the calls themselves. And in 392:

The fifth factor is that each of the calls conveyed an implicit recommendation for the customer to act.

And we see, as we go through this, that again there is a strong normative element to this. Two lines from the end of the page:

Conversely, if the advice conveys a recommendation, the expectation referred to in paragraph (b) is more likely to arise.

That is from the very fact that it is a recommendation, as opposed to just a statement of opinion, which is what his Honour is talking about in the middle of the paragraph. Now, the first point is the scheme of 766B is completely neutral about opinions and recommendations as to whether or not one is more likely to be personal or general. They are both within subsection (1); it is all financial product advice. So the scheme itself does not give an indication about that.

And if I can give your Honours this example. A stockbroker can send out a note to all of his or her clients, saying, “I currently think such and such a stock is undervalued. You should buy it because it’s undervalued”. That is general advice. That is a recommendation, on any version – it could be an express recommendation – but that statement does not carry with it any suggestion that anything involved in the recommendation is personal to clients in any way at all. So the fact that there is a recommendation, I submit, does not add anything to this analysis unless you add in this normative element that “When you are recommending something to me, you should be acting in my interests”, and that is really the heart of what his Honour, I submit, is saying here.

So then when we get to 393 and so on, these are the factors that favour Westpac on this issue, including at 393 the general advice warning. And if we come through to 396, his Honour says:

On balance, and having regard to all of the factors referred to above, in my view paragraph (b) of s 766(3) is satisfied in this case.

So that is his Honour’s conclusion. But when we come over to the top of the next page in the second half of that paragraph, his Honour says:

Notwithstanding the general advice warning that was given at the outset of the call; notwithstanding no fees were charged for the offer of help; and notwithstanding that it was apparent that the callers did not have information about the customer’s external superannuation accounts, in my view a reasonable person standing in the shoes of the customers might expect the callers to have considered one or more of –

them. Now, my submission is that that really is a strong indication that underlying all of this, then, must be a normative dimension to his Honour’s interpretation at paragraph (b), because if it was apparent that the callers did not have information about the external superannuation accounts, so that they would not have been in a position to give any consideration to it, and a reasonable person would understand that, and his Honour still says a reasonable person might expect that consideration was given, it must involve a normative dimension. His Honour’s reference there to not having:

information about the customer’s external superannuation accounts –

is the point at paragraph 395 on the page before. The:

lack of knowledge . . . is a factor that points away –

And:

It would suggest to a hypothetical reasonable recipient of the advice that the caller is not aware of the recipient’s personal circumstances, and therefore the reasonable recipient would not expect the provider of the advice to have considered those circumstances.

Then 397 his Honour says:

There is nothing strained about that conclusion. It is consistent with and gives effect to the objects of Chapter 7 of the Act, particularly the object to promote confident and informed decision making by consumers of financial services and fairness, honesty and professionalism –

So two points about that. As we have seen, the objectives are not only consumer protection or confident decision making. The decision of this Court in Carr, or at least of Chief Justice Gleeson in Carr, which is on our list ‑ I will not take your Honours to it, it has been picked up many times since then – makes the point that when you have a statutory scheme that balances different interests, you cannot answer the question of statutory interpretation just by reference to one of the objectives. The question is, how far does the statute go in giving effect to that.

And the other point that emerges from this is the reference to fairness, honesty, and professionalism really shows the normative dimension, because what his Honour is saying, clearly enough, in light of what has preceded it, is that somebody should not be recommending a roll over without giving personal advice, without taking into account personal circumstance. That is his Honour’s conception of what is professionalism in this situation.

So against that background, let us turn to the decision of the Chief Justice starting at paragraph 5, which is on page 174 of the book. His Honour summarises his conclusions here, but he identifies very clearly the approach that he takes to the whole judgment in this first paragraph. His Honour says, in the second sentence:

In summary, Westpac’s attempts to have customers transfer funds from their external accounts with other superannuation funds into their BT accounts were carefully calculated to bring about this desired result by giving no more than general advice. It was marketing by telephone selling. The difficulty is that the decision to consolidate superannuation funds into one chosen fund is not a decision suitable for marketing or general advice.

Now, the Act does not support that in any way at all. That is a conclusion that his Honour has adopted which has no statutory foundation at all, and it is contrary even to ASIC’s own MoneySmart website, which says go away and work these things out for yourselves. But that is fundamental to his Honour’s reasoning. At different points in the analysis it is less clear how it operates, but when one unpacks what his Honour has done it becomes very clear that that is what he is saying. So, the judgment goes on:

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.

And again, the Act does not support that at all. It really involves the assumption, at this point, that one is acting in the best interests of the client, as we see. So, a few lines further down:

It gave personal advice, because when the telephone exchanges are considered as a whole and in their context, including importantly the “closing” on the telephone by getting the decision made during the call, there was an implied recommendation in each call that the customer should accept the service to move accounts funds into his or her BT account carrying with it an implied statement of opinion that this step would meet and fulfil the concerns and objectives the customer had enunciated on the call –

Now, there is a lot in there. I will deal with this point about implied statement of opinion, about meeting and fulfilling concerns, when I come to a later paragraph where his Honour expands upon that, but I do want to address this point now about what is called the “closing”. We see further on in this paragraph:

Perhaps Westpac could have avoided this conclusion and result by the callers ensuring that the customers had the opportunity to consider their own positions and, having done so, later communicate an acceptance, if they wished. This was, however, not the intended model of the engagement. “Closing” was to take place, if at all possible, on the call over the phone.

Now, this reasoning is quite dense, but this is my attempt to analyse what his Honour is saying here and what is normative. There is a premise in here that is not fully articulated, but is necessary to this reasoning, and again which is not found in the Act anywhere, and that is that there should be, in effect, a mandatory cooling‑off period before somebody rolls over their superannuation if they have not had appropriate personal advice.

That is what his Honour is really saying here. And it has to be personal advice based on their circumstances. And what the reasoning then says is, well, there was not any cooling‑off period here, because it happened on the call, and therefore a reasonable person would expect that Westpac must have taken into account the customer’s circumstances because unless you do that there has to be a cooling‑off period.

As I say, that is not in the Act and it does not have any basis outside the Act either. It amounts to having a reasonable person say, no one would expect me to make a decision about this in the one phone call unless their recommendation was based on my personal circumstances. That is really what his Honour is saying, and that is the significance of this point about the closing, it has a strongly normative element to it.

If we go to the other end of his Honour’s reasoning at paragraph 150, which is on page 213 – I should make clear to your Honours, this is in a section of his Honour’s reasoning after he has made a finding of personal advice. That is clear from the heading at the top of page 212. But this paragraph will show again the normative dimension of his Honour’s reasoning. Paragraph 150 we can pick up on the second page of the paragraph at 214, following from the bottom of the page before:

These factors lead to the conclusion that, while a decision to consolidate may be straightforward or obvious, a decision to consolidate into BT is not straightforward or obvious, and, as a general proposition, could not be prudently made in the interests of the customer without a consideration of the personal circumstances of the customer directed to, at least, comparative fee levels and rates of return of other funds held.

The passive voice is used in the third line there:

could not be prudently made in the interests of the customer –

But this is the customer’s decision all along and nothing changes that. So his Honour goes on:

A customer might not, of course, want the bother of that analysis and might decide that BT is as good as any fund, especially since Westpac has taken the trouble to set up a system to help customers consolidate. But customers were not given that choice.

Now, of course customers had a choice. Nobody had to stay on the phone. Nobody had to do anything. The reason the customers have agreed to take the call is because, as we have seen, they have issued a search in 13 out of 15 cases that they are wanting to roll over, and it is their choice to do that. Then his Honour goes on:

They were deliberately encouraged to think that it was a straightforward and obvious decision to consolidate into BT on the limited proposition that they may potentially save on fees and would have a more manageable account and on the recommendation to accept the rollover service. Westpac thus intended that these customers make a decision at the conclusion of the exchange and communication, having discussed their concerns and impliedly stated that those concerns would be fulfilled.

And again, I will come back to that in a moment:

The information the callers had was inadequate to advise a consolidation into their BT accounts, unless proper consideration was given to the kind of matters to which I have referred in order to give personal advice ‑

KIEFEL CJ: Consistently with what you said before with respect to a cooling‑off period, is it your submission that his Honour is saying that Westpac could not recommend roll over into BT without the customers having advice?

MR McHUGH: Exactly, exactly. Sorry, without either Westpac having given them personal advice based on ‑ ‑ ‑

KIEFEL CJ: Or someone else giving them advice.

MR McHUGH: Or them deciding it for themselves. It is within his Honour’s language that it could include a decision that was being made by themselves.

KIEFEL CJ: Or is his Honour at the earlier part on page 214 really pointing towards independent advice?

MR McHUGH: Well, clearly it could be either. But at least his Honour is saying the customer has to be given time to give what is described in the third last line as “proper consideration” to the kind of matters to which I have referred. But again his Honour uses the passive voice, so it is a bit difficult to know specifically what he is saying.

GAGELER J: But all of this is under the heading that begins at paragraph 147:

Consequences of the finding of personal advice

These are the flow‑on effects. This is not part of the analysis of whether personal advice was given.

MR McHUGH: I accept that. And, your Honour, that is why I said that at the start of this, that this paragraph comes in this later section. But the point I am trying to draw out of it is, the normative premise that is in here is reiterated at this section of the judgment, so it runs through his Honour’s judgment. Now, having done that, I want to go back into the section where his Honour makes the decision to show that this normative premise that runs through the whole judgment is manifested in the crucial paragraphs where his Honour reasoned.

GAGELER J: Your point about normative premise is difficult for me to actually quite understand. You do not say, I think, that the reasonable person cannot have a normative element to the.....You seem to be saying that the particular normative considerations taken into account by the various members of the Court were, what, not soundly based in the evidence? Is that the point?

MR McHUGH: It is slightly more complicated than what your Honour just put to me. The second part of it is right. The first part, the way your Honour summarised it was that I accepted that there could be a normative element to be an analysis of what one might reasonably expect. The answer to that is, if what that means is that in answering that question one asks, “What would a reasonable person think should have happened?” as the end point, divorced from any consideration of what actually happened but what should have happened, then I say no, that would be wrong. That is not what the section is saying, and I understand my friend is in agreement with me about that.

Instead, what is at least theoretically possible, depending on the circumstances of the particular case, is that one might reason to a factual conclusion within the paragraph, through a process that involves a normative analysis, I would expect this to be what happens because that is what people are supposed to do, and so on, and in respect of those normative premises that the Court relies on, all members of the Court, my submission is they are just not soundly based all. They are certainly not in the Act and they do not have a basis elsewhere either.

The effect of it is a real circularity because what runs through it is one must act in the best interests of the customer and that is the very thing that the Act says you only have to do when you are in the personal advice regime, which is 961B. The Act is predicated on the idea that you do not have to do that unless you are giving personal advice. Yet the analysis that has put my client into the personal advice regime is predicated on the idea that they should have been acting in the client’s best interests. That is the way ‑ ‑ ‑

GORDON J: Mr McHugh, another way of looking at it is to look at these things not as normative considerations but as facts. If one goes through each of the things you have taken us through, they are facts that arise, which were found by both the trial judge and again by the Full Court ‑ the relationship of the parties, the nature of the advice, the circumstances leading up to the advice being given. As I understand, you do not shy away from the fact that there was a recommendation attached with the statements of opinion. There are other matters as well, of course.

MR McHUGH: What your Honour is describing as facts includes the statement that the decision was not suitable for marketing or general advice or that the decision required attention to the personal circumstances of a customer, that is paragraph 5 of ‑ ‑ ‑

GORDON J: As Justice Gageler pointed out, that is under the heading the “Consequences of the finding of personal advice”, what precedes it.

MR McHUGH: No, I am in paragraph 5, your Honour. I am sorry, I am back in ‑ ‑ ‑

GORDON J: So that is.....paragraph.

MR McHUGH: I am back in paragraph 5 which was the initial paragraph.

GORDON J: It is a summary paragraph. That is picking up what is set out in paragraph – as I read it, the consequences of it to explain it.

MR McHUGH: Your Honour, with respect, that is not right. If your Honour goes to paragraph 5, his Honour says:

For the reasons that follow the appeal should be allowed and the cross‑appeal dismissed. In summary, Westpac’s attempts to have customers transfer funds from their external accounts with other superannuation funds into their BT accounts were carefully calculated to bring about this desired result by giving no more than general advice. It was marketing by telephone selling. The difficulty –

that is, the reason why it was not general advice:

is that the decision to consolidate superannuation funds into one chosen fund is not a decision suitable for marketing or general advice.

So, what his Honour is clearly saying is the reason why this is not general advice is because it should not be given as general advice. It is not suitable to be given that way. My submission is that is not just a fact, that is an assertion of a normative proposition and my complaint about it is that the Act only requires this to happen if one is already giving personal advice. The effect of the reasoning here is to put us into that regime on a premise that does not exist until one gets into personal advice.

That is the nature of the complaint and the various normative propositions are not propositions that are found in the Act anywhere and are otherwise not well founded. But my real complaint here is that, when one reads the cause, the analysis, which we are looking at in the Full Court judgment, just does not accord with what is actually happening on the calls, it does not accord with the reality of what is happening, of what a reasonable person might expect reading through those calls as they are.

Your Honours, I was going to turn to a topic which involves a series of paragraphs that I need to go through in some complexity. As it is two minutes before time, it is probably a good time, if it is convenient to the Court.

KIEFEL CJ: Yes. Thank you, Mr McHugh. The Court will adjourn until 2.15.

AT 12.43 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

KIEFEL CJ: Yes, Mr McHugh.

MR McHUGH: Thank you, your Honour. I was going to answer, before I proceeded with the Chief Justice’s judgment, the question that Justice Gordon asked earlier, which was whether or not, at the end of the script that I referred to, there is always the reference to the “super specialist”, and the answer is yes, it is in each of those scripts when they are played, and as to when they are played, I said before, I thought it was in almost all of them, it is in 11 of the 14 calls that are the live calls, if your Honours would understand there were 15 originally one on one. So 11 of 14, the three in which that script does not appear are customers 9, 12, and 14.

GORDON J: Thank you.

MR McHUGH: May it please the Court. So, your Honours, I was going to turn into the Chief Justice’s judgment at page 195 in the core book. If we pick it up at 64, this is the way his Honour approached the question of what the recommendations were and what the opinions were. So first of all, at paragraph 64, and I do not need to take your Honours through the detail, but I will just pick up what the conclusion is, his Honour refers to the fact that:

the primary judge found that Westpac made an implied recommendation that Customer 1 should roll over her external accounts into her BT account –

So that is what I will call the recommendation. Then, at 65:

Secondly . . . the primary judge then found that Westpac made a statement of opinion to Customer 1 that by rolling over her external accounts . . . she would potentially save on fees –

and then, at 66, the second of the two opinions:

that Westpac made a statement of opinion to Customer 1 that combining superannuation accounts made a lot more sense from a management point of view –

That is the second opinion. Then his Honour says at the start of 67:

I do not see any error on the part of the primary judge in these findings as to recommendation or statement of opinion.

So, his Honour effectively endorses and adopts that. A little bit further down on that same page on 67, the last three lines on the page:

the partly explicit and partly implicit statements of opinion about potentially saving on fees and manageability were made.

That is an acknowledgement by the Chief Justice that the opinion is also a matter of implication. So, if we turn across the page then to what is the subsection (3) issue, that starts in the heading above paragraph 68, I will not take your Honours through the detail of that, but when we get to paragraph 75 on page 201 the Chief Justice agreed with the primary judge that the caller did not, that is did not in fact consider the objectives of customer 1, nor did any other caller consider the objectives of any of the customers for the purposes of paragraph (a), so I do not need to dwell on that.

But paragraph 76 is where his Honour turns to the question of whether a reasonable person under paragraph (b) might be in a different position and his Honour says that that is the case at least in relation to the recommendation:

It can perhaps be accepted that the reasonable person in the position of the customer would not expect the caller to have considered her objectives in giving the statements of opinion found by the primary judge. They were general statements of opinion that mirrored and reinforced her own view, which could not reasonably be seen to have been made after consideration of the personal objectives of the customer. They are advice of a kind, but general advice . . . But such opinions could not reasonably be seen as personal to her, or as considering her personal objectives.

So his Honour rules the two opinions out of personal advice. I should say that the other two judges, Justice Jagot and Justice O’Bryan, seem to have adopted a similar approach, but it is not as explicit in their reasoning. In Justice O’Bryan it is probably a little clearer. At paragraph 392 in the judgment which is page 310 - your Honours will recall I went to this earlier, but his Honour referred in 392 to the importance of the “implicit recommendation for the customer to act”, and that seemed to form an important part of the reasoning, especially at the bottom of the page. So it seems that Justice O’Bryan at least was focused on the recommendation rather than the statements of opinion in this section.

Then Justice Jagot seems to have focused on the recommendation. We have already been through the material. I will give your Honours the references again. It is 274, and in 277(6) and (7). So that was the way the court approached it. So the focus for personal advice is on the recommendation. Then at paragraph 77 the Chief Justice – this is back on page 202 – the Chief Justice proceeds saying:

The recommendation is, however, in a different position. In one sense, the recommendation might be seen to be based only on the two statements of (general) –

that is, not personal:

opinion that were made.

That is the point his Honour was just making in 76. Now, just stopping there, to the extent that the opinion is implied based – sorry, that the recommendation is itself based on the opinions that are themselves implicit, one is going through a process of reasoning that is becoming further and further abstracted from the calls. It is not a completely impermissible process of reasoning that one has opinions that are partly implicit and then a recommendation that is itself based on the opinions to some extent. So one is getting some distance away from the calls. If the opinions themselves were not personal, which is the point his Honour is making in the first sentence here, it becomes very difficult to see how the recommendations could be personal, at least to the extent that they are based on the opinions. His Honour then goes on:

however, the recommendation can be seen in significant part to arise from the taking of the customer to the point of decision in the call – getting the tax file number and “closing” the consolidation decision.

That is the whole topic I addressed in the context of paragraph 5 before lunch. I am not going to revisit that, what my submissions are about that aspect of it.

This implied recommendation to accept the service that arises from the whole of the engagement and exchange, including its closing, can be seen to carry with it a further statement of implied opinion that accepting the service will meet or fulfil the stated concerns and objectives of customer 1 –

So now we have a further opinion that is based on an implied recommendation that itself is based on two implied opinions, at least in part. So one is becoming further removed, I submit, from the call. Then his Honour says:

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

His Honour refers to various aspects of the call, including that it was expressed to be one of assistance. That is the help topic that I have addressed separately earlier.

The customer was asked to enunciate her concerns. Potential advantages were discussed. The customer’s concerns were explored. Statements of opinion (albeit expressed in terms of potentiality) were made about the advantages. The customer was taken to the point of decision, politely and helpfully, but with the focus and determination reflected –

his Honour referred to that earlier.

The whole exchange, finishing or closing with the decision to take up the service, contained an implied recommendation to accept the service –

So that is the recommendation:

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

My submission is that that expectation is the same normative theme that I was referring to earlier at paragraph 5 and later at paragraph 150 as running through the whole judgment, but that is the basis of it. His Honour then says:

Another way of putting it, though it does not have to be put this way, is that the recommendation carried with it an implied statement of opinion that the customer’s concerns and objectives would thereby be met and fulfilled. The recommendation took account of –

That seems to be considered:

and paid regard to, the customer’s objectives by fulfilling them.

That is all a little elusive, what is meant by “taking account of” and “by fulfilling them” in this context, but I would make these submissions about this passage of his Honour’s reasoning. The first one is, as I pointed out earlier in the context of the calls, that the customer has already decided, in most of these calls, to roll over before the call. There is a reason they are wanting to do it, there is a reason they have searched, that they have asked Westpac to search for their superannuation, so that is an important point. To the extent that the recommendation is itself implied, it is based on opinions which his Honour had held were not personal advice but general advice, so that is inconsistent with the expectation.

We have seen how little Westpac knew in the calls about the customer’s other accounts, so the caller was not in a position to give any consideration when making the recommendation to the personal circumstances of the customer. Given that the offer to roll over was made at the start of the calls, as we have seen, my submission is there is just no basis in fact for the expectation that his Honour refers to at line 40 in the book, and it really has to be the normative point that started at paragraph 5, and that is, I submit, the underpinning of the whole reasoning in this crucial section about personal advice.

I should also point out that the implied statement of opinion that is referred to at about line 43 on the page was not one of the statements of opinion that had been particularised by ASIC as part of its case against Westpac. It does not seem to be being used on that basis by his Honour. It seems to be used as a step in the reasoning towards the reasonable expectation, that things were considered, as opposed to being its own separate, independent opinion. But it was not one of the opinions that was identified by ASIC. For what it may be worth to your Honours, they are all set out in the primary judge’s judgment at paragraphs 264 through to 365, and I am certainly not going to revisit that.

So if we turn then to paragraph 79, the Chief Justice looks at the matter from a different perspective and says looking at it from a perspective favourable to Westpac, one could say:

the whole circumstances should be characterised as if, after being told by the customer that she was concerned with fees eating away at her accounts . . . the caller said: “That is what many of our customers say. As a general proposition, consolidation can potentially save on fees and will generally enhance manageability. For those general reasons I recommend accepting our service”.

Now, his Honour does not say why that is wrong here. There is, I submit, a very important point about this whole passage of the Chief Justice’s reasoning which is that nowhere does his Honour address the general advice warning that was given in this section. His Honour does not mention it in the section dealing with whether or not personal advice was given. It only comes up later in one of the consequential discussions further on. One sees a glancing reference to the idea of a warning when we get to paragraph 80. His Honour says:

The better and correct characterisation of what happened is, however, that, by making the implied recommendation in the whole exchange and taking the customer to the point of decision –

so that is the closing idea:

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.

That seems to be the closest that his Honour comes to the concept of the general advice warning. My submission is that there is not an absence of a warning, there is actually a warning on each of the calls, often given more than once, and it is a flaw in the reasoning to take that into account as crucial to this issue about personal advice. Then his Honour talks about the tone of the call as being one of assistance. His Honour refers to:

the existing relationship –

which seems to be again this normative idea, and:

taking the customer to the point of decision –

That is the closing, that:

meant that the recommendation could reasonably be seen to have taken up and considered the customer’s objectives and concerns, such that they would be fulfilled and met if the service was taken up.

So my submission is the reasoning is not based on what is actually happening in the calls. It is based on something that is completely outside the calls – what I have called the normative expectation which is not supported in the Act, and in fact is contrary to the scheme of the Act, where acting in the client’s best interest only comes about as a result of giving personal advice.

So that is what I wanted to say about the first ground. I can move fairly quickly through what remains and the second ground. The Full Court gave a construction that sets a very low standard for what is meant by the word “considered”. The proposition that we advance in paragraph 16 of the outline of oral argument is taken from the primary judge’s judgment – I do not need to take your Honours to it – but it is the idea that what is involved in the concept of consideration is some kind of active process of evaluating or reflecting upon the subject matter of it, appropriate for the provision of financial product advice.

I should take your Honours back to 961B and show why that would have to be right. If we start though first in 766B, the word we are focusing on appears in subsection (3). It appears in both paragraph (a) and paragraph (b) and the language in (a) is “has considered” and in paragraph (b) “to have considered one or more of those matters”, being the “objectives, financial situation and needs”. My submission is that it must have the same meaning in the second volume of the joint book of authorities in section 961B which is on page 393, that these are two sides of the same coin.

GAGELER J: Mr McHugh, what do the words “appropriate to the provision of financial product advice” add?

MR McHUGH: This is directed partly to a submission – this comes from her Honour’s judgment and that was ‑ ‑ ‑

GAGELER J: Well, it is your proposition?

MR McHUGH: No, I am accepting it, but I am explaining how it came about.

GAGELER J: Yes.

MR McHUGH: It was put at first instance that it was enough that there was some acknowledgement of the fact that the words had been spoken at all, so that when the caller says to the customer, “Tell me what you’re interested in, tell me what your concern is. What is the reason why you’ve rung” – or sorry, “Why you wanted the super search”, and the customer responds with whatever the answer is, that as soon as there is any acknowledgement of that at all by the caller, that that amounts to consideration, even just saying, “I have heard those words”.

So it was the concept of actively listening in the sense of hearing what had happened at all was, on ASIC’s case at first instance, enough to satisfy consideration. So that is where that comes from and the point is the context here is it is consideration for the purposes of advice. Section 961G itself says the advice has to be appropriate. So it has a statutory foundation there that it has to be consideration as directed to appropriate advice. That is what it adds to it, and it is really to answer the point that it cannot be, “I have heard the words and I acknowledge them”, it has to be taken into account in some way in the course of giving advice.

But it is not intended here, appropriate to the provision of financial product advice, to add more than the point that it has to be actively taken into account in the course of formulating the advice. It is not supposed to be itself, that word “appropriate”, an evaluative comment about whether or not you have done your job properly. It is the nature of the activity rather than the standard. That is what I am trying to get at. So in 961B on page 393 in volume 2, in paragraph (2)(b)(ii) we see the words:

the objectives, financial situation and needs of the client that would reasonably be considered as relevant to advice sought –

So that is one point at which the word “considered” is used. Then in paragraph (e) the word “considering” comes up twice:

considering the subject matter of the advice sought, it would be reasonable to consider recommending a financial product –

Then in (i) again the words:

that would reasonably be considered as relevant to advice on that subject matter –

At least in the opening words of paragraph (e), the word “considering” there has to have the same meaning at it does in 766B(3)(b), I submit, and it is clear that the content of that has to be taken from what is in (ii) about assessing:

the information gathered in the investigation –

and then in paragraph (f), basing:

judgments in advising the client on the client’s relevant circumstances –

They are defined back up at (b)(ii) as so much of the objectives as would reasonably be considered relevant. So the nature of it is there is some substantial engagement with the subject matter. I mentioned a moment ago 961G. That is the one that talks about – or sorry, imposes the duty that:

The provider must only provide the advice to the client if it would be reasonable to conclude that the advice is appropriate to the client, had the provider satisfied the duty under section 961B to act in the best interests of the client.

As I said earlier, that itself turns on judgments being formed based on that information. So my submission is that there has to be some actual evaluation or reflection upon the objectives in order to come within 766B(3)(b), and one does not see that in the cause. The other section I should refer to your Honours which is mentioned in paragraph 16 of the outline is the former 944, 945A, your Honours will find that in volume ‑ ‑ ‑

GORDON J: Can I just ask you about that idea that is reflected in both the primary judge and also the Full Court’s view that 766B(3)(b) is there directed to catch those circumstances where a provider of advice cannot avoid the provision by not doing the very thing they say you should do?

MR McHUGH: No, I agree with that, your Honour. The purpose of the paragraph (b) requirement or threshold is to ensure that somebody who thinks they are getting advice that is tailored to them actually gets that. That is the whole point of it, to make sure that if you would reasonably think that the person who was giving you advice was taking into account your personal circumstances that then engages the 961B regime which ensures that in fact that is what you get, that is the purpose of it.

But that point or that purpose does not answer the question about what is meant by consideration and how much consideration is enough. It ties in with what is the third ground I am going to come to, which is the one about what is meant by objectives, financial situations and needs and how much of it one has to have taken into account. These things all go together, but ultimately ‑ ‑ ‑

GORDON J: In that context you would deal with the statutory amendment and include “one or more of”?

MR McHUGH: I am sorry, I just could not hear the words your Honour said.

GORDON J: Sorry. It is at that point that you will address the legislative change to include the phrase “one or more of”?

MR McHUGH: Well, I was going to do that now by reference to 945A, so, your Honour, that is probably the right point to do it. If we go to volume 3 of the joint book of authorities and turn through to page 780, so this is a provision that is now deleted or now repealed but which was brought in at the same time as the 766B regime and section 945A on page 780, what this does in an almost embryonic way is set out some of the things that end up going into 961B and 961G later on. So, subsection (1):

The providing entity must only provide the advice to the client if:

(a) the providing entity:

(i) determines the relevant personal circumstances -

and that is that definition I took your Honours to before, about so much as are relevant to the subject matter of the advice:

makes reasonable inquiries in relation to those -

So that is very similar to 961B(2)(a) to (c). Then:

(b) having regard to information obtained from the client in relation to those personal circumstances, the providing entity has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all of the circumstances -

So that is clearly the same concept of consideration I have been referring to in 961B, if anything even more explicit there. Then in:

(c) the advice is appropriate to the client, having regard to that consideration and investigation.

That is 961G. Now, this was the subject of an explanatory memorandum in the Senate, which your Honours find in paragraph – sorry, in volume 5 of the joint book of authorities. If your Honours turn through to page 1099 in the book, at the foot of the page at 1099 there is a paragraph 3.99. This does not seem to have been picked up in the Full Court judgment, but it was part of the submission put to the Full Court:

Proposed amendments to the definition of ‘personal advice’ in subsection 766B(3) will necessitate consequential amendments to subsection 945A(1).

So to respond to your Honour Justice Gordon’s question, the amendments to 766B(3) were the ones about “one or more of” and then we see in 3.100 there is a reference to:

an additional requirement for a providing entity to determine the ‘relevant personal circumstances’ –

in 945A and then at 3.101:

The purpose of this provision is to ensure that a providing entity will only be required to make reasonable inquiries of a client’s objectives, financial situation and needs to the extent that these could reasonably be considered relevant to the advice being provided.

Then in the next paragraph, 3.102:

Where a client’s objectives, financial situation and needs could reasonably be considered to be relevant to the personal advice being provided, the providing entity will be required to make reasonable inquiries in relation to all three of these matters.

I emphasise that word “matters” because it is treating “objectives” as a category, “financial situation” as a category and “needs” as a category.

However, in circumstances where only one or two of these matters –

that is, one of these categories:

could reasonably be considered relevant, it will only be necessary for the providing entity to make reasonable inquiries in relation to those matters. For example, a client’s financial situation may not reasonably be considered to be a relevant personal circumstance in relation to advice concerning a motor vehicle insurance product, but may reasonably be considered to be a relevant personal circumstance in relation to advice concerning a sickness and accident insurance product.

Now, that is the issue we come to in the third ground about “one or more”, but it is clear from that that when 766B(3) came in the legislature was contemplating that objectives, financial situation and needs were, relevantly, categories.

The submission that I have been developing in relation to the second ground is the earlier point about consideration. The reason I was referring to section 945A – the now repealed section – is that it makes clear that the nature of the consideration had to be such as was reasonable in all the circumstances. In my submission, that is clearly the same meaning that is being carried through later on.

So the Full Court took a different approach to this. If I can take your Honours into the core appeal book at - if we pick it up in the Chief Justice first at paragraph 25. His Honour was addressing the question of what is meant by “consideration” there, and his Honour says, at about line 43 on the page:

to pay attention or regard to. –

So his Honour at that point seems to be contemplating that that would be enough, which I submit is a very low standard. Then over the page at 26, his Honour says he agrees with:

ASIC’s submission that a provider of advice may “consider” the relevant matters by making allowance for, paying attention to, or having regard to the relevant personal circumstances -

which I submit is too low a standard, but then his Honour goes on, two sentences further on:

The matters that one considered in the making of a recommendation or of a statement of opinion are ones to which the provider had regard or took into account in making such, and so in the giving of advice.

So his Honour does seem to accept that whatever else might be said about “considering”, it has to be what occurs in making the recommendation or stating the opinion. Then, if we go to - I would say this. I did take your Honours earlier to the last three lines of paragraph 77 where his Honour talked about considering something or taking it into account by fulfilling it. As I said before, that reasoning was elusive as to how his Honour applied that. Then, if we turn to Justice Jagot’s judgment at 247, that is paragraph 247, page 266 in the book, her Honour said at the top of page 267 in the second line:

In that context, “considered” should be taken to mean nothing more or less than the required matter being “taken into account” in the giving of the financial product advice.

But at the end of the paragraph her Honour says:

It is not necessary to go further to analyse the extent, degree or quality of the consideration; any taking into account . . . will suffice.

So there is not a minimum standard stated there, and then in the next paragraph, her Honour says:

As ASIC submitted, 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 before it may be said that the person has considered one or more of the relevant matters.

So Justice Jagot seems to have rejected the idea of intellectual engagement, and her Honour says:

If “considered” means nothing more than “taken into account” –

it is just a factual question, and then, in Justice O’Bryan’s judgment, we get at paragraph 375, which is page 306, where his Honour was dealing with what was meant by “consideration”. His Honour went a little bit further than the other two members of the Full Court. His Honour said he agreed with Justice Gleeson - with her Honour’s conclusion that the word “considered”:

involves some narrowing of the ordinary meaning of the word . . . The phrase “intellectual engagement” is unobjectionable if all it conveys is that the mind of the provider of the advice was engaged with –

the objectives and so on:

However, the phrase “active process of evaluating” refers to a particular standard or level of consideration that is not mandated by the statutory language. The further requirement that the evaluation or reflection upon the person’s objectives, financial situation and needs “be appropriate to the provision of the financial –

That should say “product”:

advice” adds a further requirement that is not within the statutory language.

Now, my submission is that is anchored in what you get in 961B and 961G, that it is the same meaning of “consideration” and it would not satisfy 961B or 961G for the consideration to be at the very minimal level that is set out in the majority judgments when addressing the same word in 766B(3).

So the question then becomes - and my submission as I have said at paragraph 17, is that that construction, that undemanding construction which comes from dictionary definitions rather than from an attempt to engage with statutory purpose, in my submission, is in fact inconsistent with the purpose of the provisions, which is to ensure that a person who reasonably expects that advice will be based on and tailored to their personal circumstances receives advice that actually is.

By setting the standard so low, the Full Court has gone far beyond that and put providers of advice in a situation where they will have to give tailored, personalised advice even though there is not a reasonable expectation on the part of the customer, or a reasonable customer, that advice is going to be based on or tailored to their personal circumstances at all.

The point made in paragraph 18 is one that I addressed in the course of going through the calls, that the amount of information that was available to the callers is very clearly extremely limited and was not enough to allow the callers to do any kind of evaluation of the customer’s objectives in order to provide personal advice.

One way in which we can illustrate what it is that would be required is if we take up Justice O’Bryan’s judgment at paragraph 412. Here his Honour is in a section dealing with best interests of the customer and what his Honour is dealing with at paragraph 412 on page 315 is in the second line:

The callers failed to obtain the most basic information that would have been required in order to act in the best interests of the customers.

That is, to give proper consideration and to give proper advice appropriate to the customers:

That information would likely have included the amounts held by the customers in each external superannuation fund –

and as we have seen, it was apparent to a reasonable person observing these calls that Westpac did not know that:

the investments options chosen by the customers in each external fund –

and again, there is no suggestion that Westpac knew that:

the relative historical and expected future performance of the investments in those external funds –

and again, no basis to think Westpac knew that, and then:

the range, nature and scale of fees charged in each external fund –

and it is clear from some of the warnings that are given that Westpac is saying questions about fees are matters for the customer to work out, Westpac does not know, and then:

the nature and amount of insurances –

So they are the things that you would have had to know about in order to give consideration so as to comply with 961B. That is the point his Honour is making there. The same material would have been needed, I submit, before a reasonable person could conclude that consideration was given to those objectives, for the purposes of 766B(3). Because of the absence of that information, a reasonable person would not conclude that those objectives had been considered. Westpac just was not in a position to consider them.

So that is an important limb of this argument. The last point I wanted to make was that the point in the second half of my paragraph 18, that it is only through adopting the very low threshold that the court adopted that Justice Jagot had available to her the reasoning that we find at 275. If we go to paragraph 275 in the judgment, that is also as it happens on page 275. So, her Honour says:

To take but a few examples, why would a reasonable person in the position of customer 1 not have expected that having had elicited from them by the caller that fees and manageability were relevant to combining the customer’s superannuation accounts, the caller did not then consider that objective of the customer when responding that they were two main reasons Westpac clients do like to bring their superannuation together . . . Why would a reasonable person in the position of customer 5 not expect that the Westpac caller had considered the response elicited from that customer that they wanted to be able to keep track of their accounts -

and so on. What her Honour does not do there is explain in what way Westpac could have considered those objectives given the lack of information that Westpac had at that point. It is just not clear what the consideration possibly could be unless it involves a very low standard of simply acknowledging that the objectives have been identified. So, my submission is that the Full Court was in error in not giving the same meaning to “consideration” in 766B(3) as it has to and, indeed, it did in 961B.

The third ground of appeal I can deal with very quickly, I have already touched on parts of it. As I said, when we looked at the explanatory memorandum a moment ago, these are clearly categories and in light of the provisions in 961B that I will just return to quickly – that is volume 2 again - in light of those provisions in 961B(2)(b)(ii) and then in (f) - that is the definition of the “client’s relevant circumstances” - here the statute is providing a touchstone for what it is that one needs to do to satisfy the best interests obligation. One has to identify so much of the:

objectives, financial situation and needs of the client that would reasonably considered as relevant to the advice sought -

and then in (f), “based all judgments” on that. So that is what the statute says you have to do once you are in this regime. My submission is that the same standard should apply to put you into this regime, that is when it comes to objectives, financial situation and needs, and the reasonable expectation that section 766B(3) refers to, what it is contemplating is that a reasonable person expects that what you have taken into account is enough information to make it relevant – sorry, enough information that it can be said that you have taken into account what is reasonably to be considered as relevant to the advice sought on the subject.

That will depend on the particular circumstances. If one has a situation with an actual financial adviser and there is an exchange between the financial adviser and the customer seeking advice about retirement goals or a superannuation strategy or whatever it might be, at that point clearly from the nature of the relationship, one is going to be able to infer from that an expectation that all the relevant material be taken into account.

One is given an inquiry form at the start. One has to set out a whole lot of financial information. In that situation clearly a customer is entitled to expect first of all that all relevant information has been taken into account, secondly that the judgments are based on that. That is a world away from the situation in these calls where the recommendation that the so‑called advice that is given, that is the finding that is against me, is only implied from a transaction in which Westpac is clearly saying please give us more money, more funds under management. We will roll that over for you if you want to.

That is the nature of the advice in the context in which it arises and in that context it is just not reasonable for anybody to think that the information that was being considered by Westpac was so much as was reasonably to be considered relevant to the advice sought on the subject matter. That is why I said earlier in the morning that even if your Honours were against me on my general proposition about the calls, that a reasonable person would not think that anything personal was being taken into account in forming that recommendation, even if your Honours were against me on that, certainly not enough is being taken into account to come within 766B(3) because it is just a tiny amount of information that would be relevant to those topics. Going back to the point about what Justice O’Bryan said of all the things that would have taken into account, one could not reasonably consider that that was what was going on in this situation in the circumstances of these calls.

The consequence of the approach taken to “one or more of” in this case is that the trigger for entering the personal advice regime is completely disproportionate to the consequences – statement of advice, PDS, best interests requirement and so on. My submission is that that is just unreal and foreign to the statutory purpose. While Chief Justice Allsop and Justice O’Bryan both accepted that these were categories: objectives, financial situation and needs, neither of them gave a criterion for working out how much of the category had to be taken into account.

I will finish on that point, taking your Honours to where that appears in the judgments. In Chief Justice Allsop that appears at paragraph 29. That is at the top of page 183. Paragraph 29, in the fifth line of the paragraph:

It is the consideration of sufficient aspects of the objectives, the financial situation or needs of the person so as to make the conclusion that there has been a consideration of that subject appropriate (and so the advice being seen as personal to the individual).

Now, first of all, that does not provide a criterion of what are sufficient aspects nor do the words “a consideration of that subject appropriate” provide a criterion. Then when we turn to Justice O’Bryan, that is at paragraph 371 in his Honour’s reasons - that is page 305, his Honour says in the second line “to some extent”:

requires only that the provider has considered to some extent one or more of the recipient’s objectives, financial situation or needs –

So, again, there is no criterion. The upshot of that, I submit, is that the trigger – the gateway – really becomes a matter of idiosyncratic ideas of what is fair to put people into this regime and that is not the way the statute works. So, unless there is anything further with which I can assist the Court – I need to point out something in the notice of appeal. It is an error which is quite a significant one. It only involves one word. It has been the subject of correspondence.

If your Honours in the core appeal book turn up page 361, it is the last full page in the book. In the orders sought, paragraph 7a) of the notice of appeal says that the order sought should be that “the appeal be allowed”. The order should be that the appeal be dismissed, which is consistent with what your Honours see in paragraph b), that “the cross‑appeal be allowed’. That was an error of proofing, but it is an important one and it is not controversial as that is the purpose of the appeal. So, unless there is anything further with which I can assist the Court, those are my submissions, and I need as a matter of housekeeping to prepare the lectern.

KIEFEL CJ: Thank you, Mr McHugh. Yes, Mr Bannon.

MR BANNON: Your Honours, if I could start with our propositions document. We have identified five propositions on that first page which we submit is the appropriate actual context in which to consider the legal issues as they arise. The first is the proposition that Westpac gave financial product advice to a person, the customer, within 766B(1), insofar as it made a recommendation that was intended to influence the person in making a decision in relation to the financial product and the Westpac superannuation product. Now, it is conceded that that recommendation was made. It is not the subject of an appeal.

So the starting point of the analysis in this Court is that there is a relationship of adviser. There were many submissions made in courts below this was a marketing exercise and could not be regarded as advice, but it is important, if in one sense obvious, to recognise that once we are in this Court there is no issue but that they were giving financial advice. So, when one sees statements by the Full Court that the customer would have regarded Westpac as seeking to help them and it was reasonable to do so, part of that discussion was in the context of whether or not advice was being given.

But in terms of when one now looks at those matters of what a reasonable customer might have done in the particular circumstances, things such as was it reasonable to think that they were being helped must be taken as correct because it must be reasonable for the customers to have considered themselves as recipients of advice in circumstances where Westpac now accepts to this Court that it was giving advice, albeit they say only of a general nature. That carries with it a number of matters, namely, the reasonableness to expect helpfulness, to expect that they are acting in the interests of the customer, albeit they may still have been acting in their own interests, but not in a way of conflict.

Then, secondly, the second proposition which we identify is that during the course of the calls each person informed the caller of the person’s objectives in response to questions designed to elicit that information. Now, there is no ground of appeal against the finding that the statements made by the customers were statements of the person’s objectives within the meaning of section 766B(1)(a).

Submissions were made below, certainly before the trial judge, I am not quite sure how far they were pressed before the Full Court, to the effect that these were too general to be objectives. But that is no longer pressed, so to the extent that our learned friend has prayed in aid the generality, what he describes as generic objectives, the fact of the matter they are objectives, however one describes them, which are within the relevant section. They are the person’s objectives and hence they are qualified for consideration in relation to whether or not it is personal advice regardless of the generality.

Indeed, if one pauses and thinks about it, the fact that an objective may be shared by many other people does not make it less an objective and, indeed, and I will come to this, the fact that it may be shared by many other people makes it far easier for a reasonable person to think when the caller says yes, we are familiar with those objectives, that that is something they consider and take into account because they are pre‑loaded with the sort of experience as advisers of the type who are in this Court have been in their occupation. An experienced lawyer, when approached by a client, is posed a factual question, can give an immediate answer based on experience; an inexperienced lawyer may have to go away and research. The same may be said about financial advisers.

The same may be said in debate in court where a court may ask an advocate a question and expect a response and expect it to be considered. Albeit it may be immediate, the reasonable expectation in the court is that the advocate will have done their work in anticipation of being able to answer those sorts of questions. So the alleged generality of the person’s objectives is not antithetical to the conclusion of the Full Court, indeed, it supports it and, indeed, the way in which the caller has used the generality was to say yes, in effect, others are doing that, i.e. we are familiar with it, which we are given ‑ ‑ ‑

KIEFEL CJ: Would you say they are saying these are matters of common concern?

MR BANNON: Correct, yes. Hence we are in ability to say that this product is for you. We are familiar with that object, just like someone might go into a financial adviser - I am looking for something which gives me a fixed interest rate of 15 per cent which is secure, I have just the thing for you. An adviser has considered that objective and produced the product, because they have that product on their shelf. The important point, for present purposes, there is no appeal against the finding of the persons’ objectives.

There is something of a quibble in our learned friend’s submissions in reply and we have given the paragraph there, “ASR [3(a)]”, as to whether or not they were questions designed to elicit that information. We say the findings make that clear. It would be an odd outcome that you get objectives accidentally, particularly when one sees that the whole process was a carefully supervised and considered process which was designed to achieve a particular object, as the findings make clear.

In the fourth paragraph on that page we say a reasonable person in the position of the customer might expect that the caller was interested in the person’s objective so elicited and that the caller listened to the person’s objective so elicited. That is perhaps, we have interpolated there, a stepping stone on the way to the ultimate conclusion. A couple of the judges on the Full Court including the primary judge made findings which we say are consistent with that.

But as a matter of ordinary logic, before one gets to the question of “considered”, would a reasonable person being asked a question by what we now know is their adviser, “What are your aims?”, a reasonable person was entitled to think they have asked that question because they are interested in the information and, secondly, when they speak, they will not interrupt me, they will listen to it and what they say after that is said after they have listened to it.

Then the fifth proposition which is, we respectfully submit, particularly important, and again a matter in respect of which there is no challenge, that the recommendation in each call was made, at least partly, after the person informed the caller of the person’s objectives and by conveying to the person that the person’s objectives would be served by the Westpac product.

Now, again, we have given a reference in our first dash point at the end of it to what we would submit is something of a quibble by our learned friends in reply as to whether or not the findings were temporal, in the sense of that their implicit recommendation came after the eliciting and statement of the objectives. While one may accept that the findings of both the primary judge and the Full Court took into account the whole of the conversation, including things said before the objectives were elicited, a key aspect of their findings was that there was an implicit recommendation or part of the recommendation was implicitly made after receipt of the objectives effectively saying this product suits you - my words, but that is the effect of it.

There are a lot of paragraphs there; they concertina to a shorter number, but I will take your Honours through the various paragraphs to make that clear. We say that brings us to the position in what we have set out in paragraph 6, that Westpac’s argument is the Full Court erred in concluding that Westpac gave that advice, which they accept, in circumstances where a reasonable person might expect Westpac to have considered that person’s objectives, being objectives which it deliberately elicited for the very purpose of making a recommendation, the effect of which was that it was an obvious and uncontroversial decision which could be made there and then and indeed, those objectives would be fulfilled.

Now, we have added a sentence there at the end which is a little bit clumsy, and perhaps your Honours might ignore it for the time being. If I could just perhaps put it this way. What Westpac really relies on in this Court is to effectively throw a burden back on the customer in terms of what the customer should be expected to have understood and it is done in a number of ways. When one is considering this section 766B(1)(b) as to whether or not someone might reasonably consider – if we now all agree that it is the customer in the particular circumstances of the particular call, what that person may reasonably consider – might reasonably expect whether objectives were taken into account, we submit that the theme of our learned friend’s submissions consist of this, namely that when one tries to put some meaning to the word “consider” it has an evaluative judgment which carries with it the sorts of things which an adviser, acting properly, would take into account. There is a level of content which has to be satisfied at least in the eyes of the customer.

Now, what that does is require the court to interpret that section from the point of view of the customer, that they must have some sort of understanding of that level of complexity because how else would they ever reasonably expect that Westpac in this case had considered that without some understanding of words like “evaluative judgment” as opposed to what the Full Court said – did they take it into account?

How would any customer satisfy, or how would the section ever be satisfied in the case of a reasonable customer without attributing to that customer a level of knowledge of the law, and in a difficult area of the law, as to how “considered” is used – because it can be used in all sorts of way, it can be used as a transitive verb, it can be used as a intransitive verb, it can be used as a preparatory step until one gets to a considered opinion. There are all sorts of ways of doing it; there is a level of complexity about what is involved in our learned friend’s submissions, but that is attributing to – the need to attribute to a customer that level of understanding which we say is antithetical to the nature of the section.

Secondly, our learned friends invite this Court to say well – it is not quite clear under which ground it comes, but accepting it is a live issue – a reasonable customer in this circumstance could not possibly have thought that this had been considered by the adviser because anyone would know, or somebody would know that there are a whole lot of things that need to be taken into account before you could make that recommendation.

The sorts of things are cancellation fees, amounts of superannuation and all sorts of – you know, a long list of things. They refer to the breach sections of the judgment and say there they are. But again, that is attributing to the notion of “a reasonable person” a level of intellectual refinement which we say is antithetical to the nature of the section. It is effectively saying - Westpac effectively says customers should know what needs to be taken into account in relation to moving things from super to super.

Then the third aspect of our learned friend’s submissions is to say, well, this notional customer can only be satisfied, or the element of the notional customer – what they might reasonably expect in terms of objectives - if it relates to all relevant objectives, or such objectives as are needed to be known. Again, how does that customer know for the purposes effectively under the Act what all the objectives are? In these particular circumstances, the customer is asked, “What are your objectives?”, and they tell them and it is reasonable for them to think that they are objectives because the court has found, and it is not disputed, that they were objectives, and it reasonable to think that they would have been asked about their objectives, because that is what the answer was.

What is wrong with simply saying we are asked those objectives, they come back with a recommendation in the light of those objectives, which in effect says they will be fulfilled. What more does the section need to do other than to say the objectives which – the ones which were sought, elicited and given at a level of complexity to say it is other objectives which may or may not exist – we do not know whether they exist. The assumption from what my learned friend says is that they exist, that the customer had objectives. There is no evidence of that. They may or may not have had. To say that that is something that the customer should have realised, Westpac might not be expected to have taken into account because, what, the customer had not volunteered them or Westpac had not asked them. There is a level of unreality, we would respectfully submit, in the construction which requires those elements.

That is why we submit if one appreciates the factual context, if one accepts what we say are the findings, namely that this was a very sophisticated technique of advising or influencing a decision which included in each of these cases an essential step of asking these objectives to seal the deal, in effect, on the phone call, a very sophisticated technique to say, in effect, the sky will fall in if your Honours uphold this judgment because that means all sort of general advice will become personal advice.

There is one simple answer to that. People do not normally ask for somebody’s objectives and then use those objectives in making a recommendation. There is no need to do that. If one wants to know the answer as to why they did it, their own internal documents indicated that they did it because according to the training program it was designed to link the objectives which were disclosed with the features of the product, to do the very thing, we say, might reasonably be contemplated by the consumer.

KIEFEL CJ: And the implicit recommendation which occurs after the objectives are ascertained lies in asking the customer if they want the matter processed today; something to that effect. Is that what it is?

MR BANNON: Well, the objectives are, “Why do you want to do this?”

KIEFEL CJ: I understand the objectives ‑ ‑ ‑

MR BANNON: Yes.

KIEFEL CJ: I am more interested in the recommendation which is said to have occurred after that. It is accepted that there is a recommendation which precedes that, which cannot be affected, of course, by what the customer says.

MR BANNON: Yes, or it can – I am sorry, your Honour, yes.

KIEFEL CJ: I will come back to that later.

MR BANNON: Yes.

KIEFEL CJ: But what I am interested in at the moment is how would you describe the recommendation, the implied recommendation arising from what is said after the objectives of the customer are ascertained and it is said, well, other people share that. The recommendation does not lie just in that, it is in that together with saying that it will be processed today, or?

MR BANNON: It varies in each case, but fundamentally it is, yes, good, this is the product for you, there are different levels of particularity, but the important point is the confirmation, or recommendation implicitly, that if you are looking for a product with those features we have it for you.

KIEFEL CJ: I was really concentrating on the terms of the telephone call.

MR BANNON: Of the actual words. I will track through the judgment, where we see what parts are relied upon. But part one ‑ ‑ ‑

KEANE J: Is not the burden of what the salesmen are trying to do, the marketers are trying to do, is to get the customer signed up then and there, on the phone call?

MR BANNON: Yes.

KEANE J: In other words, the recommendation is that there is no reason why you would not do this now.

MR BANNON: Yes.

KEANE J: Let us get it done now and you will be sweet.

MR BANNON: Yes, exactly, your Honour, yes, because the objectives which you have identified - here is something we have prepared earlier which fills those objectives, no reason to think about anything more.

KEANE J: Yes. Everyone - lots of people agree that that is a sound objective.

MR BANNON: Yes.

KEANE J: It might even be suggested that all that social proofing is directed to convincing the customers that the answer is overwhelmingly obvious, and whatever their personal circumstances might be in terms of insurance or fees the generic, general benefits are so overwhelming and so universally recognised that you would not stay to consider anything else.

MR BANNON: Yes, I accept that, your Honour, and indeed, the findings of the Full Court proceed down that part, if not as, perhaps, encapsulated as crisply as your Honour has just done. The other matter which is worthy of mention, if I may say so to your Honours, and Justice Keane in particular, the section itself contemplates that there may be a consideration by the adviser which qualifies as personal advice, which is only one of the objectives, financial circumstances and personal needs, each of which are different. So part of the - a sense of our learned friend’s submissions, with respect, seems to be, well, you could not - nobody could reasonably think they were giving advice based just on objectives. You have to take into account other things, but the Act does not contemplate that.

BELL J: I must say, Mr Bannon, I did not quite understand Westpac’s submission in that way. I may be wrong, but I understood Westpac accepts you have one or more of three categories and the point is in relation to each category they would contend it is necessary that the consideration be of the person’s objectives relevant to a decision about a superannuation roll over and, to that extent, they would contend the generic objective, “I’d like to make the management of my superannuation easier and, if possible, get some lower fees”, is insufficient to embrace the concept of consideration of the person’s objectives in the context of advice concerning a superannuation roll over.

MR BANNON: Yes. Part of the difficulty with that approach is that the section does not distinguish between types of objectives and this, no doubt, was part of the concern at lower levels of the legal process, was to try and persuade the court they were not relevant objectives but, having failed on that, these are objectives which someone could reasonably think have been taken into account. But I think the point I was really addressing is to say, to the extent our learned friends transgressed upon objectives to say there was other information of a financial nature which they needed to know, it runs the risk of moving away from the section’s reference to objectives as being implicitly a sufficient matter which someone could take into account.

BELL J: Perhaps save in this respect. If a person’s objectives in rolling over a number of superannuation accounts into the BT fund is to overall reduce the level of fees and it is clear to that person that the caller has no knowledge of the fees being charged in relation to the four other accounts that are the subject of consideration, then one can see the argument that the consideration of personal objectives identified as fee reduction might be thought to be wanting in an exchange in which it is clear that information is not known.

MR BANNON: The difficulty of analysing it at that level of granularity in circumstances where there is a marketing technique - or a sales technique which has been developed, which is designed to close the deal, in language which reasonably suggests to the customer, implicitly, “These objectives which you have got can be dealt with. Don’t worry about any more details”, of the type that your Honour is referring to as matters raised by our learned friends. By saying, “This is it, let’s go, let’s close the deal”, yes, in a perfect world the customer might be well advised to pause and think, “Maybe I should be thinking about X, Y and Z.” But is it reasonable for a customer in these types of calls, the way they are managed and developed, to have that sort of thought process? Or is it unreasonable for them not to think, “Well, these people are advising me” – that is my point 1, they accept they are advisers – “looking after my interests”. It is reasonable to think that they have taken that into account, “They know much more about these sorts of things than I do as to the overall – even if it is long‑term reduction in fees.”

KIEFEL CJ: Mr Bannon, is the mischief to which this provision is addressed that persons – or customers in this case – not be misled into believing that their circumstances have been addressed, or is it a wider purpose about the receipt in fact of advice? How would you describe the concern of the statute in relation to paragraph (b)?

MR BANNON: I think the overall concern of the statute – superannuation does seem to occupy a special place in some ways. An overall concern of the statute is that superannuation is so important, not only from an individual’s point of view but from a public benefit point of view, because the theory of super is if people hang onto, maximise or do not deplete for spurious reasons super, then that is for the public good because then they are not required to be looked after by governments in future.

So there is a concern to ensure that people who have super do not do something which has an adverse consequence for their super, and that therefore, if they are being influenced to acquire a product – and this is the start; we only get to it if they are influenced to acquire a product – the concern is to ensure that if they are reasonably under the impression that the adviser has taken into account their circumstances, that must be true. That is, the adviser must have actually taken into account their circumstances.

KIEFEL CJ: So there is an element of them not being misled?

MR BANNON: Yes. It is not framed that way.

KIEFEL CJ: Yes, I understand that. But the underlying purpose is rather important here, I think.

MR BANNON: Yes, I accept that.

KIEFEL CJ: Not least because the tenor of Westpac’s submissions with respect to the Full Court’s reasons appears to be that the underlying purpose as seen by their Honours is that customers should receive advice.

MR BANNON: Yes.

KIEFEL CJ: Should actually receive advice, which is a rather different angle, I think, in relation to mischief or purpose.

MR BANNON: Well, receive proper advice, if they are going to be pressed in a way which suggests to somebody reasonably that their circumstances have been taken into account. I think that the difference is – and we actually see it in the Westpac training outcomes – they effectively say, “Whatever you do, you cannot be seen to be driving a particular outcome”. They themselves are saying that because if you do that, you are giving personal advice, and it says it does not matter what warnings you give, if you are driving to a particular outcome for a particular person, i.e. to say, “This product is good for you”, that you are going to cross over the line. So, as Justice Allsop says, they well knew internally what problems this could occur.

BELL J: Well, they were seeking to avoid what they would acknowledge are the considerable burdens associated with giving personal advice, to say nothing of consideration of their licence conditions.

MR BANNON: Yes.

BELL J: But the scheme is one that is concerned to distinguish general advice from personal advice. It is not a scheme that is concerned with dealing with deceptive conduct in marketing.

MR BANNON: No, I accept that.

BELL J: So, to the extent that Westpac were seeking, consistently with their licence, not to have enthusiastic callers tip them into personal advice, so be it. It does not really answer the question here raised.

MR BANNON: No, but the fact that they recognised in effect that the conduct which they actually engaged in would be personal advice ‑ ‑ ‑

GORDON J: Do you need to go that far, Mr Bannon? I had understood your position to be that you have findings which are not challenged for the fact that financial product advice was given with an intention to influence.

MR BANNON: Yes. I do not need to go that far; your Honour is right.

GORDON J: I think the proposition then is, as I understand it, here they elicited, after the general warning, personal objectives.

MR BANNON: Yes.

GORDON J: A reasonable person might consider those personal objectives were considered because they were reinforced by the terms of the call giving rise to the recommendation, and to adopt Justice Keane’s language, then the sealing of the deal by the end of the conversation which itself reinforces that what they were suggesting was good for them. Did you need any more than that, in that sense?

MR BANNON: No, we submit ‑ ‑ ‑

GORDON J: Then the flipside, as I understand it, which Mr McHugh takes issue with is Chief Justice Allsop’s analysis is, well, is that bad in the sense of it was that the legislation is imposing onerous obligations on Westpac and he says, whether it is right or wrong, two things, you do not make the call, which is one option, as I understood your earlier submission, or secondly, you do make the call but you tell them to go and get personal advice.

MR BANNON: Yes, rather than press on and make sure they do the deal over the phone. Your Honours, against that background, can I trouble your Honours to ‑ ‑ ‑

BELL J: Just before you do ‑ ‑ ‑

MR BANNON: Yes.

BELL J: ‑ ‑ ‑ can I just take this up with you? Can you explain how the question is answered by a consideration of whether, at the conclusion of the call, the caller leaves open that the person think about it and get back to BT if they are interested? How does that transform what might otherwise be general advice to personal advice, or cause personal advice to cease being personal advice and be general advice? It is just unclear to me what.

MR BANNON: Saying “I will ring you tomorrow” probably would not stop it being personal advice. Having taken the steps that they did do, then it was personal advice, but I think the fact that they were pressing to seal the deal over the phone informs the proposition that they were effectively saying this recommendation suits you for the reasons that you want now.

BELL J: I see. I understand.

MR BANNON: How are you going to back out of that would be another question, but what we do know is that they did not back out of that.

KIEFEL CJ: And you do not need any further advice.

MR BANNON: Yes. So, if I could, as properly as I can, take your Honours through the paragraphs of the judgment which are referred to in that outline, but I will just do them in the order they come. Firstly by reference to the primary judge’s reasons at paragraph 45.

GORDON J: Sorry, Mr Bannon, what is this analysis directed at?

MR BANNON: The paragraphs of all the judgments which underpin the propositions in paragraphs 1 to 5.

GORDON J: Thank you.

MR BANNON: So within the primary judgments, judgment at page 27 of the appeal book, paragraph 45 through to 47 are findings of her Honour, which was in part related to answering the proposition that this was just marketing and not advice, but nevertheless they are relevant findings when one comes to consider some of the matters taken into account by the Full Court on what a reasonable customer might expect. I will not go through them, but I will just draw your Honours’ attention to those particular ones – at 47:

While I accept that a customer receiving a call from Westpac would assume that Westpac was making the call self-interestedly, I also consider it quite likely that the customer would believe that Westpac was making the call in the customer’s interests. Importantly, in the context of an unexpected telephone call, the customer would not necessarily be on guard and alert to the possibility that Westpac might be seeking to obtain a benefit which (to Westpac’s knowledge) may have an adverse outcome for the customer.

At paragraph 50, the QM framework and social proofing document is described, and 50 to 52 just describe it as a document which was used to teach and monitor, and it was effectively a guideline and it had, at 54, four parts – (2) was “Gather”, (4) was “Closing”. Over the page at paragraph 56:

The “Gather” phase involved asking the customer questions to “gather, uncover, clarify and develop” an understanding of the customer’s requirements.

KIEFEL CJ: Is the methodology employed in this marketing very important to the statutory question?

MR BANNON: I am sorry, your Honour?

KIEFEL CJ: Is the methodology employed in this marketing really very relevant to the statutory questions?

MR BANNON: It informs the factual finding which is that the implicit recommendation was made using the objectives because this is the strategy all four members of the court said was basically applied ‑ ‑ ‑

KIEFEL CJ: But this is all about the – the statute is about the customer’s perception?

MR BANNON: Yes.

KIEFEL CJ: Who has no knowledge of any of this?

MR BANNON: Has no knowledge of any of this, but what – what we say is in considering whether it was reasonable for a customer to expect their objectives to be taken into account – were being considered by - taken into account by Westpac, part of the factual background against which Westpac denies – part of the factual background of that is that was the very intention of what they were doing and that is exactly what they did do. The ploy – part of the strategy was to link the objectives with the features of the product. I accept that does not answer the statutory question, but it informs the findings of recommendations of the type your Honour was raising with me beforehand.

BELL J: The findings in essence turn, do they not, on the fact that the caller sought to have the customer outline his or her objectives and then the social proofing that followed. The fact that there might be a deal of psychology built into that is neither here nor there, surely.

MR BANNON: True.

KIEFEL CJ: I would have thought it was more relevant to penalty, ultimately.

MR BANNON: Well, yes. Can I just give these references and I will not waste any more of the Court’s time?

KIEFEL CJ: Do not let me deter you, there are other members of the Court, if you think this is ‑ ‑ ‑

MR BANNON: I think it is a sufficient ‑ ‑ ‑

KIEFEL CJ: If you consider this is an important part of your ‑ ‑ ‑

MR BANNON: I am sorry, yes, thank you, your Honour. It is sufficient for me to identify the paragraphs. So it is 56(2), 57(1) and (2), and in particular in (2):

“related the motivation/benefit back to what was picked up during the Gathering Requirements”. According to the QM Framework, this was done to “link the customer’s motivation to the features of the product/service that was found during your questioning”.

Then paragraph 65 on page 33, the chapeau to 65 indicates that his Honour is making these as findings to the “following extent”. Subparagraph (4):

The calls to the 15 customers reflected the terms of the QM Framework to varying extents, including . . . uncovering the motivations then linking those motivations to influence the customer to roll over their external superannuation accounts -

Then 65(5), perhaps less relevant, but I refer to it. Then in relation to each of the calls, firstly at paragraph 247 on page 89, this is customer 1. The first few lines involve her Honour’s finding about the implied recommendation:

The main purpose of the call was to achieve that outcome, including by engaging in an exercise of marketing including “social proofing”.

At about line 25 on that page:

The question “what did you see as the main benefits of bringing them altogether to the one place?” reinforced the idea that consolidation was beneficial, as did the social proofing statement that “they are the two main reasons our clients do like to bring their supers together, it does make a lot more sense from a management point of view, for sure.” The concluding language of the second call: “everything gets rolled over in two or three weeks, so it’s all in the one spot and nice and organised for you. How does that sound?” conveys the message that the rollover service has provided a benefit to the customer -

in the terms of the benefits which they identified that they were seeking to get. Then 252, this is now customer 2. The last line of the chapeau to 252 at about line 45:

my finding that the caller also recommended the rollover service by the following language –

in particular, subparagraph (4) – and (4) and (5) were the two statements at the end after the objectives were identified. Then paragraphs 254 through to 260 there is a sequence of paragraphs. About the middle of that paragraph at line 40:

As to the social proof, the caller asked customer 4 why he had wanted to find his other superannuation accounts, summarised his answer –

and her Honour says although it did not talk about commonly held, nevertheless that was still an affirmation of those findings – sorry, an affirmation that those aims would be achieved by the product, as appears from the top of the next page at the end of that paragraph. The balance of the paragraphs down to 260 indicate that they could all be related to one or other of those calls.

Perhaps I will not go to them, but 380 and 382 of her Honour’s judgment identifies the various objectives which are now accepted as the person’s objectives. At paragraph 387 her Honour makes a finding which goes to the issue of whether there was actual consideration. Her Honour says:

Accepting that each of the 15 calls was conducted in accordance with the QM Framework, I do not infer from that fact that the callers “considered” any “objective” or –

This was subjective consideration:

To the contrary, the QM Framework did not require or encourage consideration of those matters. To the extent that such information is elicited, the QM Framework encouraged the callers to use it “drive an outcome” -

The outcome was the rollover. Then at 395 our learned friends criticise her Honour Justice Jagot by referring to 395(4). Her Honour used 395(4) not as a normative requirement, but (4) is actually a factual finding by her Honour. The chapeau which indicates these are matters which you might take into account, in fact, in finding that a customer might reasonably expect matters are being considered. But (4) stands independently.” It is an important one, apropos earlier discussion:

Westpac conveyed the impression to the customers that the recommendation was an obvious and uncontroversial course of action for the particular customer –

based on what the objectives had been elicited and told. Again, these are not factual findings in the challenge before your Honours. Then at paragraph 404 – this is in the context of her Honour’s – perhaps I should indicate this. At page 120 of the book there is a heading above paragraph 400 “Failure to ensure services provided “efficiently, honestly and fairly”.

I think my learned friend explained that the primary judge accepted that ASIC had run a case which said even if it was general advice, nevertheless, the obligation which is accepted, namely, that even with general advice 912A(1)(a) requires that general advice must be provided “efficiently, honestly and fairly”. Her Honour found that, albeit it was general advice, the processes they used meant that they breached that.

The Full Court said that that case was not open to ASIC. But, as we will see, the Full Court relied in part on her Honour’s findings on breach in a way which was relevant – sorry, it supported the findings of breach of the relevant duty, where it was personal advice, but some of those findings inform the issues with which your Honours are concerned and that is why I am referring to a couple of these paragraphs.

Paragraph 404 is an example. Then 445 – it is in a context where her Honour has found that the framework was basically followed in most cases, in almost all cases. It is the first sentence of that which is relevant. Then 446 picks up the same finding of fact in 395(4), the third line:

Westpac conveyed the impression to the customers that the recommendation was an obvious and uncontroversial course of action for the particular customer . . . The callers’ attitude of helpfulness also reinforced the impression that the recommendation was appropriate for the particular customer and that there was no possible lack of alignment between the interests of the customers and Westpac.

I might make a passing comment. In the light of some of her Honour’s findings it may be – well, as we succeeded in the Full Court these findings seem to almost dictate personal advice, but be that as it may, we do rely on a finding such as that and the Full Court did as well. Then at 448 it is just a summary of breach. Then if I could do a similar exercise in relation to Justice Allsop’s reasons, and as promptly as I can. Firstly, the much looked at paragraph 5 on page 174, we submit that contrary to what my learned friend has submitted, his Honour’s reason for it being personal advice is not that it was:

a decision that requires attention to the personal circumstances –

which is referred to at line 20. The relevant part of this paragraph is about line 25, after the words “It failed.” His Honour finds:

It gave personal advice, because when the telephone exchanges are considered as a whole and in their context, including importantly the “closing” on the telephone by getting the decision made during the call, there was an implied recommendation in each call that the customer should accept the service to move accounts funds into his or her BT account carrying with it an implied statement of opinion that this step would meet and fulfil the concerns and objectives the customer had enunciated on the call in answer to deliberate questions by the callers about paying too much in fees and enhancing manageability. This was personal advice, for the reasons discussed later.

But that captures effectively what we have captured in our paragraph 6. It has all the elements which, when one considers the matters, as his Honour later develops, these satisfy personal advice because once you have all of these elements, why would not a person in that circumstance reasonably expect that the matters which had been deliberately elicited had been taken into account or considered by its adviser.

Then paragraph 37. His Honour refers to the paragraph 65 findings of the primary judge and paragraph 39, having referred to those. That is a repetition of things I have covered before but in any event that is where his Honour refers to that. At paragraph 58 his Honour says:

there are similarities in the approach that Westpac’s callers adopted . . . no doubt due, in large part, to the guidance –

Again that is reflecting that the QM Framework was essentially followed. Then at 64 his Honour undertakes a process where his Honour addresses each of the primary judge’s reasons, and I have taken your Honours to those. But at 64, and then through to 67, his Honour accepts the reason. The statement on page 196 within paragraph 67 at about line 45, so that your Honours have been taken to. Again, this is his Honour’s finding, consistent with what her Honour the primary judge found, that the “objectives and concerns” would be met.

Then there is a series of paragraphs which we have listed in our outline, which I do not need to go through, that essentially consist of his Honour identifying the primary judge’s paragraphs on this issue of the implied recommendation taking into account the objectives, and agrees with each of them. That would take us up to then, in his Honour’s judgment, paragraphs 145 and 146. Then paragraph 150 on page 214, at line 20 – this is in the breach section, but it also informs what his Honour has already said previously:

They were deliberately encouraged to think that it was a straightforward and obvious decision to consolidate into BT on the limited proposition that they may potentially save on fees . . . Westpac thus intended these customers make a decision at the conclusion of the exchange . . . having discussed their concerns and impliedly stated that those concerns would be fulfilled.

That is the relevant part of that paragraph. Then, similarly, in the process in relation to Justice Jagot’s findings, firstly at paragraph 218, on page 257 the paragraph starts, and then over the page, which is the paragraph subject of criticism of our learned friends, at about line 15 of the page:

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.

Again, that was in a context where there was still a debate as to whether or not there was advice, but now that one accepts there is advice, all of that is just a reference to what is a necessary fact, does not involve any normative consideration. Then at 219, the whole of that paragraph, her Honour refers to the implicit recommendation, and this paragraph, 219, indicates, as far as her Honour is concerned, that this had an implicit recommendation and thereafter she identifies the parts which support that, consistently with the primary judge and Justice Allsop, and those are paragraphs 219 through to 235, and I do not need to go through that, but where her Honour is referring to particular parts, it is to be understood in the context that her Honour is confirming the primary judge’s findings about implicit recommendations. In 235 on page 263, her Honour says:

The clear message –

Then 266, about halfway through:

In my view neither the general advice warning which was given at the commencement of each call, nor the context of the calls, nor any other matter on which Westpac relied negatived the fact that a reasonable person in the position of each customer might have expected the Westpac callers to have considered one or more of the identified matters which the callers deliberately elicited from the customers.

One of the problems with referring to generalised warnings, the warnings are a factor to be taken into account, my learned friend is absolutely right. There was no argument that they had breached the requirement in 949 to provide a warning because it was not part of the case. It was our learned friend who prayed in aid the so‑called warning as a reason why no reasonable customer might have expected that Westpac was taking into account or considering the objectives that it elicited from them.

But each of their Honours referred to that, they took it into account, it is not a complete answer, and if one actually goes to the so‑called warnings, I think in all but three cases the only reference is to personal needs, not taking into account your personal needs, it does not actually say “personal objectives”, I think in about three cases they do. So it is a bit hard to - I suppose the way that one puts it, the way their Honours put it, is it reasonable for somebody who has been asked their objectives and told the product will fulfil those objectives, not to expect that those objectives were being taken into account because, in some other part of the conversation, they said this is general advice. I mean, customers do not understand ‑ ‑ ‑

BELL J: Well, that submission is a little counter in a sense to the whole analysis that the Chief Justice made. His emphasis was on the need to look at this dynamic exchange between two individuals on the phone. The notion that a person would divine, “The warning relates only to my personal needs” might be thought a bit fanciful. I mean, it was a warning but, as I understand it, in your submission swamped as it were by the subsequent invitation to discuss what their objectives were.

MR BANNON: Yes, and that is the matter the Full Court relied upon. I am not suggesting that the answer to it is the use of needs versus objectives. It is the “swamping”, as your Honour uses the word, and that was the way in which the Full Court used it. So that is 266. Then 274, there is reference to the brief time. I have effectively addressed that. Experienced counsel advises they need only a moment to consider properly some matters in certain circumstances. Over the top of the next page, page 275, her Honour says:

The vice in this is that the customer was being implicitly advised . . . As far as the customer was concerned what they said was being considered and taken into account.

Then 275, this is a series of questions which her Honour is raising. Our learned friends did suggest some sort of normative approach. What her Honour has found, in effect, is that a reasonable customer would have expected – not only might have but would have expected – these objectives to be taken into account. In effect, this is almost a Socratic dialogue with her Honour. Why would that not be the case? There is nothing in there which suggests that her Honour was applying a normative approach and, indeed, just about all of those things are based on facts, which reduces to the last sentence of paragraph 275:

Why would a reasonable person in the position of customer 6 not have expected that Westpac would have taken into account –

that is the correct statutory test –

the customer’s stated objectives -

That is posed as a rhetorical question, but it involves no impermissible trespassing to whatever that dividing line is. My friend raises about normative because there is some element of ‑ “normative” is not a word which, no doubt it is just me, I find particularly elucidating, but every time one is talking about what a reasonable person might do, one has to posit what a reasonable person might do, think or expect.

So it necessarily involves some positing of things which do not actually happen. Whether that is described as “normative” I do not know, but necessarily it involves an element of positing those matters but certainly none of their Honours transgressed whatever that dividing line is.

That is 275. At 277 her Honour makes a number of findings:

(2) The calls were by a representative of Westpac who knew the customers had multiple superannuation accounts and were represented to be about helping the customers with their superannuation. In this context, the caller was in a position to consider the information deliberately elicited from each customer.

(3) As noted, the general advice warning occurred early in each call and was followed by a lengthier conversation . . . As ASIC put it, in this context the reasonable customer would have expected that Westpac was calling and asking such specific questions because it was intended to consider the responses in the process of “helping” the customer. Having been asked about their own objectives, no reasonable person in the customer’s position would have expected the caller to disregard those objectives, particularly not when the callers took care to reassure the customer that they had correctly understood their objectives by repeating them and asking if they had been correctly understood.

That is an important and relevant factual finding. Then:

(5) As noted, the reasonable customer would have expected that the information being elicited was considered by the caller. The callers were at pains to present to the customer that they had correctly understood their objectives which would have reinforced this expectation.

(6) It may be accepted that the caller exhibited a lack of knowledge of the customer’s situation during some of the calls. But in each call the caller sought to elicit information from the customer about their objectives for their superannuation and then implicitly recommended that the customer rollover –

That is reasonable for someone to expect that they had taken those into account. So, whatever perceived hurdles may otherwise be considered, potentially considered by someone as a lack of information, what her Honour is saying is when notwithstanding that Westpac comes back and says, “These are your objectives, this is the product for you”, it is reasonable for a person to expect that those objectives have been taken into account.

Then, in subparagraph (7) in the second sentence:

In ASIC’s words, a customer’s particular circumstances were deliberately elicited and then used to reinforce that the rollover was an obvious course for that particular customer.

So a number of judges had used that expression. Then at paragraph 278, that is where her Honour agrees with [395](4). My learned friends criticise that but it is a factual finding reinforced by paragraph 404, I think it is, of the primary judge’s decision. Then at 281 her Honour is confirming the primary judge’s conclusion that the QM Framework was basically followed, which supports the relevance of the QM Framework. Then at 284, her Honour refers at about line 37 to that part of the Framework:

The caller was directed to relate the customer’s motivation back to what was picked up in the Gathering Requirements and to link the customer’s motivation to the features of the product/service that was found during your questioning.

Then lastly, Justice O’Bryan’s reasons at paragraph 344, firstly. This is where his Honour in a series of paragraphs confirms her Honour the primary judge’s findings about the implicit recommendation. Just before (a) about line 35 on that page, there is a reference to paragraph 357 – I think that should be 252 – and his Honour relies on the matters which we have emphasised.

Then his Honour, through to 348, makes similar findings to the other judges, in particular at 347 relying on the process in the QM Framework reflecting the actual calls. At 391 - or perhaps I can just go back to 386. Similarly, with both of the other members of the court, each judge stated the test to be considered in the terms of the statutory language, and 386, third line:

would not expect the provider of the advice to have considered –

and then 387, again the words “to have considered” in the last few lines. Then every one of these other paragraphs conclude, or have a reference to, as my learned friend directed your Honours’ attention to, these are factors which favour the circumstance described in paragraph (b). It is difficult to suggest that three judges, where they set up the statutory test, repeatedly used the words “have considered” should be understood as not applying that statutory test by my friend’s interpretation of some of these paragraphs as normative. In particular, paragraph 391, his Honour says:

during the course of the calls, the callers asked the recipients about the considerations that were relevant to them . . . Asking that question would ordinarily create the impression in the mind of the reasonable person receiving the call that the caller sought that information because it was relevant to the matters being discussed. In most of the calls, the questions were preceded by a statement to the effect that the caller was asking the question so as to be able to better help . . . The social proofing language would ordinarily reinforce the impression . . . that the caller was taking account of the answers given by the recipient. The social proofing language conveyed that the answer . . . was valid or reasonable.

These are all matters relying on things which actually happened in each call. Then lastly 397 – it is not the last thing, but at 397 her Honour says:

There is nothing strained about that conclusion. It is consistent with and gives effect to the objects . . . particularly the object to promote confident and informed decision making by consumers of financial services and fairness, honesty and professionalism by those who provide financial services. The objects are promoted by ensuring that, if personal financial product advice is given to a person, the

consumer protections in Part 7.7 . . . apply. Those obligations attach to the provision of personal financial product advice because the recipients of such advice are likely to rely and act upon the advice.

That is part of the gravamen of the use of the personal motivations having extracted – the personal objectives, having extracted them and relied on them as influencing the decision as particularly pertinent to that particular person, and that is where it is important it is personal advice and it is important that persons receive the full protection of those provisions in relation to personal advice.

Then at 415C at page 317 there is another member of the court making that – or confirming that finding in relation that the impression conveyed was an obvious and uncontroversial decision. Then 427 in the contravention part at page 320 one has to tease out a little bit of this. One accepts that the contravention part about line 28:

Westpac took unfair advantage of that asymmetry.

Perhaps we do not have to concentrate on that so much, but rather:

by implementing a carefully crafted telephone campaign, reinforcing in the minds of its –

consumers – we can leave out the word “erroneous”:

that the decision to consolidate their superannuation . . . was straightforward and was likely to generate benefits . . . by saving fees ‑

which is consistent with the earlier findings of his Honour. Those are the parts of the judgment which I wish to emphasise to your Honours. Then I was going to proceed to address some of the legal issues. I will be a bit longer, but not terribly long. Is that a convenient time?

KIEFEL CJ: Yes, it would be. The Court will adjourn to 9.30 am tomorrow for pronouncement of orders and otherwise to 10.00 am.

AT 4.10 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 8 OCTOBER 2020