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19-293MR ASIC wins appeal against Westpac subsidiaries
The Full Federal Court has today upheld ASIC’s appeal from a decision of the Federal Court regarding Westpac subsidiaries, Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM).
ASIC’s appeal concerned 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 Full Court today reversed that decision, finding that in calls to 14 of the customers, the 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 their customers, failed to comply with other financial services laws in the Corporations Act, including the ‘best interests duty’.
ASIC welcomes the decision of the Full Court, which provides clarity and certainty concerning the difference between general and personal advice for consumers and financial services providers.
While unanimous in their decision, the members of the Full Court delivered separate reasons with Justice Jagot describing Westpac’s conduct as ‘systemic sharp practice about what must have been one of their clients’ major financial concerns, their superannuation’.
Other comments from the judgment include:
‘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.’ (Chief Justice Allsop at )
‘Westpac took unfair advantage of that asymmetry 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. 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.' (Justice O’Bryan at )
The Full Court also dismissed WSAL and BTFM’s cross appeal, thereby affirming 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.
The parties are to agree on the declarations and orders to be made by Court. In the absence of agreement, the parties are to make submissions and the Court will decide on the declarations and orders.
ASIC alleged that during two telephone campaigns, WSAL and BTFM provided personal financial product advice to customers, specifically recommending that customers roll out of their other superannuation funds into their Westpac-related superannuation accounts. WSAL and BTFM are not permitted to provide personal financial product advice under their Australian financial services licences.
On 21 December 2018, the Federal Court found that WSAL and BTFM breached the Corporations Act (section 912A(1)(a)) but that ASIC did not make out its case that ‘personal advice’ was provided to 15 customers (19-001MR).
On 25 November 2019, Westpac filed an application seeking special leave from the High Court to appeal the decision of the Full Federal Court. A timetable to progress the application is yet to made. The application will be contested by ASIC.
Editor's note 2:
The special leave application is listed to be heard on 24 April 2020.
Editor's note 3:
On 24 April 2020, the special leave application was heard and granted. An appeal date has yet to be set.
Editor's note 4:
On 26 August 2020, the hearing date for the appeal in the High Court was listed to be heard on 7 and 8 October 2020.