Westpac loses High Court challenge on BT Super rollover advice claims

Westpac’s loss comes after ASIC took issue with the bank’s campaign to get its customers to switch into BT Super.

Westpac has lost a high court challenge over marketing designed to cut customers to switch into its BT Super products. Picture: Dylan Coker

ASIC has triumphed in its High Court battle with Westpac over the bank’s campaign to get customers to switch into BT Super and now faces paying an expensive price for its loss.

The court dismissed the bank’s appeal in a judgment released on Wednesday, finding Westpac had breached financial services laws, including the requirement act in their clients’ best interests and the requirement to act honestly, efficiently and fairly.

The unanimous judgment found neither Westpac or BT Funds management were licensed to provide personal financial advice during the 2015 campaign.

ASIC had taken issue with Westpac’s letters and calls to customers, alleging they constituted “personal” advice to customers, something that under law can only be provided by licensed financial advisers.

The court found Westpac had provided personal advice in the campaign, which netted BT Super $650m in customer superannuation balances.

The regulator had also provided the court with 14 case studies which it argued reflected personal, rather than general advice to customers, resulting in breaches of the law.

Westpac had presented its contact with customers as “courtesy calls”, advising each member of the availability of a rollover service.

However, the High Court found the calls were personal communication. “A reasonable person in the position of each of the members called by Westpac might expect Westpac to have in fact taken into account at least one aspect of the member’s objectives, financial situation or needs,” the court’s judgment said.

“This expectation was engendered by the fact that Westpac had elicited from each member, with whom Westpac had a pre-existing relationship, an indication of his or her personal objectives of saving on fees and improving the manageability of superannuation.”

The findings of the case are a significant step in clarifying the difference between general and personal financial advice.

ASIC commissioner Danielle Press welcomed its win against Westpac, noting the court had confirmed the regulator’s warnings the bank’s con

“By clarifying the distinction between tailored, quality, personal advice in the customer’s interest, and general advice given via a sales campaign, today’s judgment will provide clear guidance to those financial institutions that develop campaigns to sell financial products through direct approaches to retail clients,” she said.

But she warned today’s judgment should not be seen as the end, but rather the beginning of more action by the regulator to come.

“ASIC will continue to bring enforcement action against misconduct, including advice that is not in the best interest of clients,” she said.

The long running legal battle has been a gruelling fight between Westpac and ASIC.

Proceedings were kicked off in December 2016.

After initially winning against ASIC in 2018, Westpac lost a Federal Court challenge 3-0 in

October 2019 in one of a string of court battles over its tactic of selling superannuation.

Westpac then submitted that the Federal Court had erred in its decision to find against the bank.

ASIC’s victory helps clarify the dividing line between personal and general advice and closes a loophole long exploited by banks in selling in-house superannuation products.

“That the members’ objectives were ‘generic’ or generally applicable did not mean they ceased being personal objectives capable of giving rise to that expectation,” the court found.

Westpac, in its response to Wednesday’s judgment, said it acknowledged the finding of the court.

“We take our obligations to our customers very seriously,” a Westpac spokeswoman said.

The bank acknowledged the test case brought against it by ASIC acted as an “important process that would “provide clarity on the distinction between the provision of ‘personal’ and ‘general’ advice when speaking with our customers.”

Westpac’s troubled BT-Super arm was dismembered in a bank restructure in March 2019.

Hamilton Wealth managing partner James Hamitlon welcomed the clarification the judgment provided on general and personal advice.

“I think the general advice provisions have been murky for a little while and it needs clarification and by setting a precedent it’s going to provide some clarification,” he said.

But Mr Hamilton said further clarity was needed in the “grey area” created by general advice.

“The only other alternative (to legal action) is providing clarity through legislation that’s the only other alternative,” he said.

Ashurst partner in financial services Lisa Simmons said the Judgement “shut the door” on much of the strategy used by Westpac to attempt to get customers to swap to BT Super.

“The idea of calls being made with the intention of trying to have the person make the decision in short order without potentially going and getting more advice I can’t see that happening now,” she said.

“But the idea of having a campaign where you write out to people, where they opt into having someone talk to them about something, that may not be done.”

The hearing will now be remitted to the Federal Court for a hearing on financial penalties to be imposed on Westpac and BT Funds management.

However, changes to the corporations act in 2019 mean penalties will be decided under the old regime, which carried a maximum fine of $1m or three times the benefit of the actions up to a top of $2.1m

Originally published as Westpac loses High Court challenge on BT Super rollover advice claims