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ASIC wins appeal against Westpac Group

The corporate watchdog has successfully appealed the Federal Court’s decision in relation to its dispute with Westpac regarding the meaning of “personal advice”.

The Australian Securities and Investments Commission (ASIC) has announced that the Full Federal Court has upheld the regulator’s appeal from a decision of the Federal Court regarding Westpac subsidiaries Westpac Securities Administration Ltd (WSAL) and BT Funds Management Ltd (BTFM).

The appeal related to the Federal Court’s decision regarding the meaning of “personal advice” in the Corporations Act, including the finding that WSAL and BTFM did not provide personal advice to 15 customers in two telephone campaigns conducted by members of Westpac’s Super Activation Team.

The decision has now been reversed, with the Full Court finding that in calls to 14 of the customers, Westpac staff did provide them personal advice, in breach of WSAL and BTFM’s Australian Financial Services Licences.

The Full Court also found that WSAL and BTFM, by providing personal advice to customers, had failed to comply with other financial services laws in the Corporations Act, including the “best interests duty”. 

ASIC has welcomed the decision, which it said provides “clarity and certainty” concerning the difference between general and personal advice for consumers and financial services providers.

In making her decision, Justice Jayne Jagot described Westpac’s conduct as “systemic sharp practice about what must have been one of their clients’ major financial concerns, their superannuation”.

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Chief Justice James Allsop added: “Westpac attempted, assiduously, to get the customer to make a decision to move funds to BT without giving personal financial product advice as defined in the legislation. It failed.”

Further, Justice Michael O’Bryan stated that Westpac took “unfair advantage” by implementing a “carefully crafted telephone campaign”.

“The telephone campaign was directed to persons with whom Westpac had an existing relationship and in a real sense occupied a position of trust with respect to the customer’s superannuation fund,” he said.

“Despite knowing that the decision was not straightforward, Westpac did not advise its customers about the matters that they should consider before deciding to consolidate their superannuation. Nor did Westpac even suggest to its customers that they reflect on the decision or seek advice about the decision.

“Through the campaign, Westpac pursued its own self-interest and disregarded the best interests of its customers.”

The Full Court also dismissed WSAL and BTFM’s cross appeal, which affirmed the Federal Court’s finding that WSAL and BTFM, by engaging in the two sales campaigns, had failed to do all things necessary to ensure the financial services were provided efficiently, honestly and fairly.

ASIC noted that the parties are to agree on the declarations and orders to be made by the court, adding that in the absence of agreement, the parties are to make submissions, after which the court will decide on the declarations and orders. 

ASIC and Westpac are also currently embroiled in a dispute regarding alleged breaches of responsible lending laws.

In September 2018, Westpac admitted to breaches of responsible lending obligations when issuing home loans to customers and agreed to pay a $35-million civil penalty to resolve Federal Court proceedings under the National Credit Act.

However, the Federal Court was tentative in its approach to the matter.

Justice Perram had sought a friend of the court to consider whether the Westpac case even constituted a breach of the NCCP (reportedly stating that “there is no fact before [him] that any unsuitable loans were made”).

Following his review of the case, Justice Perram judged that a lender “may do what it wants in the assessment process”, noting that other provisions of the NCCP impose penalties if lenders make unsuitable loans as a result of that process.

ASIC has since announced that it would appeal Justice Perram’s decision to the Full Federal Court of Australia to address “uncertainty” caused by the verdict.

[Related: ASIC defends lending remit amid ‘legal uncertainty’]


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