FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Select AFSL Pty Ltd (No 2) [2022] FCA 786

ORDERS

THE COURT ORDERS THAT:

1.    The parties are to confer and provide draft orders to chambers (within a timeframe to be agreed between the parties and the Court):

(a)    giving effect to these reasons for judgment in Australian Securities and Investments Commission v Select AFSL Pty Ltd (No 2) [2022] FCA 786; and

(b)    providing for a timetable progressing this matter to hearing on penalty.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TABLE OF CONTENTS

REASONS FOR JUDGMENT

ABRAHAM J:

1    In summary, the Australian Securities & Investments Commission (ASIC) alleges that during 1 February 2015 to 19 March 2018 (the relevant period), Select AFSL Pty Ltd (the first defendant or Select), held an Australian Financial Services Licence (AFSL) and through its trading names “Let’s Insure” and “FlexiSure” sold a range of insurance products. Through various contractual and financial arrangements, Select sub-contracted many of its sales and retention responsibilities to BlueInc Services Pty Ltd (the second defendant or BlueInc Services) and Insurance Marketing Services Pty Ltd (the third defendant or IMS), which in turn employed or contracted Sales Agents and Retention Agents, who at all relevant times were agents of Select. Mr Russell Howden (the fourth defendant) is the sole director, secretary and managing director of Select, BlueInc Services and IMS (together, the Corporate Defendants). The Corporate Defendants are all ultimately 100% owned by BlueInc Group Pty Ltd (BlueInc Group) (with Mr Howden also being its sole director and secretary), which in turn is 100% owned by Howden Family Holdings Pty Ltd (Howden Family Holdings). Mr Howden and his wife are the ultimate beneficiaries of that trust.

2    There are four components to ASIC’s claim.

3    First, alleged conflicted remuneration contraventions contrary to ss 963E, 963F and 963J of the Corporations Act 2001 (Cth) by Select and BlueInc Services by reason of four non-monetary benefits, being the Gold Coast cruise (the Cruise Incentive), the Vespa scooter (the Vespa Incentive), the Las Vegas Trip (the Las Vegas incentive) and the Hawaii Trip (the Hawaii Incentive), which were offered and provided to Sales Agents to incentivise them to sell products (collectively, the Incentives; each, an Incentive) (the Conflicted Remuneration Contraventions). It is alleged that BlueInc Services provided non-monetary benefits to its employees in contravention of s 963J, and that Select contravened s 963E when its Sales Agents accepted the conflicted remuneration. Select also allegedly contravened s 963F as it failed to take reasonable steps to ensure that the Sales Agents did not accept the Incentives.

4    Second, alleged consumer contraventions of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) by all three Corporate Defendants, relating to 14 consumers (collectively, the Consumers; each, a Consumer), 12 of whom were vulnerable consumers (of whom 10 are Indigenous) and the other two in a weaker bargaining position (the ASIC Act Contraventions or Consumer Contraventions). In relation to sales and retention conduct, it is alleged that false and/or misleading (or misleading or deceptive) representations were made contrary to ss 12DA and 12DB of the ASIC Act; that nearly all of the Consumers were coerced, contrary to s 12DJ(1); and that all were treated unconscionably, contrary to s 12CB(1). A number of the Consumers were also alleged to be unduly harassed contrary to s 12DJ(1) when they sought to cancel their policies or when Select continually sought payment of insurance premiums from them.

5    Third, alleged breaches by Select of AFSL general obligations provisions imposed upon it as the holder of an AFSL under ss 912A(1)(a) and 912A(1)(c) of the Corporations Act, on the basis that Select was not providing financial services efficiently, honestly and fairly in relation to the “Refer a Friend” program from January 2015 to May 2017, and was not compliant with financial services law in relation to: (i) the Conflicted Remuneration Contraventions; and (ii) the Consumer Contraventions (AFSL General Obligations Contraventions).

6    Fourth, alleged breaches by Mr Howden of his director’s duties, contrary to s 180(1) of the Corporations Act, as Mr Howden failed to take reasonable steps, or any steps at all, to prevent Select and/or BlueInc Services from contravening, or potentially contravening, ss 963E, 963F and 963J of the Corporations Act, and thereby exposed those entities to a foreseeable risk of harm arising from their contraventions, or potential contraventions, of the Corporations Act (Directors’ Duties Contraventions).

7    It is also contended that Mr Howden was an accessory, within the meaning of s 79 of the Corporations Act, to the Conflicted Remuneration Contraventions and the AFSL General Obligations Contraventions.

8    With very limited exception, the claims are all in issue.

9    For the reasons below:

(1)    the Conflicted Remunerations Contraventions are established;

(2)    some of the Consumer Contraventions are established, and in respect to each Consumer, at least one contravention is established;

(3)    the AFSL General Obligations Contraventions are established; and

(4)    the Directors’ Duties Contraventions are established.

10    At the outset it should it be noted for completeness that it was agreed between the parties that the legislation applicable at the time included the ASIC Act compilation No. 51 (dated 1 July 2014), Corporations Act compilation No. 72 (dated 19 March 2016) (for the Las Vegas Incentive/Hawaii Incentive) and Corporations Act compilation No. 68 (dated 19 December 2014) for all other purposes.

Factual Background

11    An Amended Statement of Agreed Facts (ASOAF) dated 17 December 2020 between ASIC and the Corporate Defendants was tendered pursuant to s 191 of the Evidence Act 1995 (Cth). It does not bind Mr Howden, and therefore it is necessary to consider the underlying evidence.

12    Select was established on 5 July 2011, with Mr Howden as its sole director. Mr Howden has over 20 years’ experience in the insurance industry in Australia. At all material times, Mr Howden was the sole director, secretary and managing director of the Corporate Defendants and BlueInc Group.

13    At all material times, Mr Howden was the sole director and secretary of Howden Family Holdings, which owned:

(1)    50% of the ordinary shares issued in BlueInc Group in the period 10 January 2008 to 14 June 2009;

(2)    100% of the ordinary shares issued in BlueInc Group in the period 15 June 2009 to 27 June 2017 (at which point the ordinary shares were cancelled);

(3)    100% of the C and D Class shares issued in BlueInc Group in the period 27 to 29 June 2017;

(4)    100% of the C Class and 90% of the D Class shares in the period 30 June 2017 to 15 October 2018; and

(5)    100% of the C Class and 92% of the D Class shares in the period from 16 October 2018.

14    At all material times, Mr Howden was the husband to the sole shareholder of Howden Family Holdings. Mrs Howden owned all the shares in that company. Mr Howden was also a director of Integrated Event Solutions (NSW) Pty Ltd (Integrated Event Solutions).

15    Since 22 August 2011, Select has held an AFSL that authorises it to provide general financial product advice and deal in life risk insurance products to retail clients, pursuant to which it marketed and distributed various Let’s Insure and FlexiSure insurance products. Mr Howden was a Responsible Manager under the AFSL throughout the relevant period. The issuer of the insurance products sold by Select was St Andrew’s Life Insurance Pty Ltd (St Andrew’s or the Insurer). St Andrew’s paid commissions to both Select and BlueInc Services. Select ultimately sub-contracted its obligations and commission under its agreement with St Andrew’s to IMS, which in turn sub-contracted many of these obligations to BlueInc Services. The internal structuring of the entities ultimately saw IMS and BlueInc Services perform obligations and incur expenses on behalf of Select.

16    Select marketed and distributed the Let’s Insure and FlexiSure products through an in-house call centre (Call Centre), which was maintained and operated by IMS. The Call Centre was staffed by Sales Agents and Retention Agents, although I note there is an issue about the characterisation of persons as Retention Agents, and the role they played, to which I will return. Suffice to say at this stage, Sales Agents primarily made outbound telephone calls to, and answered inbound telephone calls from, potential consumers for the purpose of selling insurance products. In doing so, they provided financial product advice under Select’s AFSL. Retention Agents dealt with existing customers. Those internally described as “retention agents” primarily addressed requests to cancel policies and dishonoured premium payments. All Sales Agents and Retention Agents were either employees of BlueInc Services or contracted by BlueInc Services or IMS from labour hire agencies.

17    There was a high staff turnover, with the majority of staff contracted on a temporary basis. A high proportion of the Sales Agents were backpackers or other temporary visitors to Australia.

18    Leads (contact details of potential consumers) came into the Call Centre from a variety of sources, including inbound and outbound telephone calls and digital streams, such as online surveys and social media engagement. Select also utilised a referral program, called “Refer a Friend”, which encouraged consumers who took out Let’s Insure Funeral Cover or FlexiSure Life Cover to provide contact details of family and friends. It did so by offering that consumer a $20 Coles Myer gift card for each person they referred to Select who went on to take out a policy. I will return to this scheme in more detail below.

19    Sales Agents were provided training on Select’s products, including by being given telephone scripts, and were subject to quality assurance (QA) processes conducted by Select. They were also provided training on handling objections and the use of sales techniques, such as appealing to a consumer’s impulses and using third party examples to influence the consumer’s decision making process. Sales Agents worked in separate sub-teams for the sale of different products, and reported to Team Leaders, who in turn reported to Sales Managers/Head of Sales. Sales Managers ultimately reported to Mr Howden and Select’s Compliance Committee, which comprised the Responsible Managers on Select’s AFSL and the head of the compliance function. Retention Agents were also provided training on Select’s products, compliance, and handling objections, and were subject to Select’s QA process.

20    The remuneration of Sales Agents was linked to the number of sales they made as, although they were paid a base salary, they earned commission on products sold and could obtain benefits as a result of sales. There were also incentive schemes in place, which are discussed in more detail below.

21    The sales team grew significantly during 2015, the time during which most of the Consumer Contraventions are alleged to have occurred. For example, the Compliance Report for December 2014 to January 2015 records 43 Sales Agents and six Retention Agents, but by October 2015, there were 74 Sales Agents and 10 Retention Agents. Select’s financial statements reflect its commission revenue also grew, from $12.729 million in 2015 to $19.058 million in 2017.

22    The evidence establishes that the sales conduct at the Call Centre occurred in a very competitive environment. Sales Agents were under pressure to meet daily sales targets, which increased over time as the business grew. The number of sales each Sales Agent made and the value of those sales, were recorded on a leader board visible to all staff and regularly updated throughout the day to rank the top performing agents. The Sales Agents who recorded lower sales on any one day would be identified in emails sent to the entire sales floor by the Head of Sales, and those who made no sales in the morning session would be ridiculed, for instance, by being required to wear an inflatable doughnut or by having their chair taken away. A bell on the sales floor was rung every time a sale was made. Each month, a “Top Dog Chair” was awarded to the top performing Sales Agent for that month.

23    Senior management developed and implemented a range of incentives, some of which were run concurrently. In addition to the Incentives, the subject of the Conflicted Remuneration Contraventions, other incentives were offered at times. This included $1000 Flight Centre vouchers for Sales Agents who became part of the “Million Dollar Club” by achieving one million dollars of sold premiums. Also on offer, during monthly “Super Sales Days”, were gift cards, $100 pre-paid VISA cards and iPads.

24    This was a competitive, sales driven culture designed to sell more products, by inter alia, rewarding the top performers. These practices were known to, and endorsed by, senior management, including Mr Howden, and set the culture of the sales environment.

25    That is the context in which ASIC contends these claims arise, and in which the Incentives were offered.

Let’s Insure and FlexiSure products

26    During the relevant period, Select marketed and distributed insurance products issued by St Andrew’s under the brand name “Let’s Insure” and in the period 7 January 2015 to 12 August 2016 also under the brand name “FlexiSure”. Select owns the brand names Let’s Insure and FlexiSure.

27    The core Let’s Insure product was Let’s Insure Funeral Cover, which Select promoted and distributed until 19 March 2018. Although marketed as a funeral protection product, it in fact provided for a lump sum benefit. Premiums were fixed, stepped or capped. Where fixed or stepped premiums were selected, consumers could also take out optional Accidental Death Cover (ADC) of up to $32,000, optional Accidental Serious Injury Cover (AIC) of up to $32,000 or optional Household Expenses Cover (HEC) that provided for the payment of $800 per month from between three and 20 months. In 2016, consumers could also take out an optional Accidental Death Cover Booster of up to $96,000 (ADC Booster).

28    Select also sold standalone Accident Cover (Let’s Insure AC), comprising AIC and ADC of up to $600,000, with optional Children’s Cover (CC). Another standalone Let’s Insure product was Easy Life Insurance of up to $500,000, with a terminal illness benefit included, and with optional Accident Cover (Easy Life AC) of up to $500,000 and optional CC. Easy Life Insurance was guaranteed cover, meaning that the policyholder did not need to undertake medical tests and it was not underwritten. Finally, Select sold a standalone life insurance product called Let’s Insure Life Cover of up to $1.5 million.

29    The core FlexiSure product was a life insurance product marketed under the name FlexiSure Life Cover. During the relevant period, it provided for cover between either $50,000 and $750,000, or $15,000 and $500,000. Consumers could also take out optional cover for accidental death and accidental serious injury (FlexiSure AC) between either $15,000 and $500,000, or $50,000 and $500,000, and optional CC (which covered accidental death or defined trauma events), which provided for a lump sum payment of $10,000 to $50,000.

30    The Corporate Defendants did not contest that each of the Let’s Insure products and FlexiSure products marketed and distributed by Select during the relevant period were: marketed and distributed to retail clients; a “financial product” within the meaning of Ch 7 of the Corporations Act; and a “financial product” within the meaning of s 12BAA of the ASIC Act.

31    Although the Corporate Defendants had initially challenged that the Let’s Insure Funeral Cover was not a “financial product” within the meaning of Ch 7 of the Corporations Act or s 12BAA of the ASIC Act, that challenge was abandoned at the commencement of closing submissions.

Attribution of Call Centre conduct

32    As explained above, the Call Centre was staffed by Sales Agents and Retention Agents.

33    The inter-company arrangements were such that each of the Corporate Defendants played a role in the conduct of the Call Centre.

34    Select was the holder of the AFSL pursuant to which financial services were able to be provided. Select had no employees or contracted staff. Rather, BlueInc Services and IMS provided staff for the conduct of Select’s business. BlueInc Services was the employing entity within the BlueInc Group. IMS (and occasionally BlueInc Services) engaged temporary staff for the Call Centre through labour hire providers.

35    The Corporate Defendants admit that:

(1)    the conduct of Sales Agents in all of their dealings with potential customers is attributable to Select, both in terms of the ordinary principles of agency (as reflected in s 12GH(2)(a) of the ASIC Act and s 769B(1)(a) of the Corporations Act), and for the purposes of Pt 2, Div 2 of the ASIC Act and Ch 7 of the Corporations Act; and

(2)    the conduct of Sales Agents in respect of the Consumers is taken to have been engaged in by Select by reason of s 12GH(2)(a) of the ASIC Act.

36    As to BlueInc Services or IMS, it is also admitted that:

(1)    Sales Agents and Retention Agents who were engaged through labour hire providers by BlueInc Services were agents of BlueInc Services and their conduct is taken to have been engaged in by BlueInc Services;

(2)    the conduct of those Sales Agents and Retention Agents employed by, or engaged for, BlueInc Services towards the Consumers is taken to have been engaged in by BlueInc Services;

(3)    Sales Agents and Retention Agents who were engaged through labour hire providers by IMS were agents of IMS and their conduct is taken to have been engaged in by IMS; and

(4)    the conduct of those Sales Agents and Retention Agents engaged by IMS towards the Consumers is taken to have been engaged in by IMS.

37    The Sales Agents and Retention Agents who were employed by BlueInc Services were agents of BlueInc Services and their conduct is taken to have been engaged in by BlueInc Services.

38    The Corporate Defendants also admit that all Sales Agents and Retention Agents were representatives of Select as a financial services licensee for the purposes of Ch 7 of the Corporations Act, regardless of whether they were employees of BlueInc Services or were engaged through labour hire agencies by IMS or BlueInc Services.

39    However, there is a live issue between the parties as to whether the conduct of Retention Agents in their dealings with customers, can be attributed to Select. In essence, this is said to be based on the nature of the role the Retention Agents undertook. It is appropriate to address this issue at the outset.

Relevant legal principles

40    Section 12GH(2) of the ASIC Act provides:

12GH Conduct by directors, employees or agents

…

(2)    Any conduct engaged in on behalf of a body corporate:

(a)    by a director, employee or agent of the body corporate within the scope of the person’s actual or apparent authority; or

(b)    by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body corporate, if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent;

is taken, for the purposes of this Division, to have been engaged in also by the body corporate.

…

41    Section 769B(1) of the Corporations Act is in materially identical terms to s 12GH(2) of the ASIC Act, and applies for the purposes of Ch 7 of the Corporations Act.

42    Those sections (and their statutory counterparts, for example in the Competition and Consumer Act 2010 (Cth) (CCA)), expand the concept of attribution beyond the common law which is intended to make proof of corporate responsibility easier: Perpetual Trustee Company Ltd v Burniston (No 2) [2012] WASC 383; (2012) 271 FLR 122 at [274]-[275]. The purpose of such provisions is to attribute liability to a corporation for the acts of others and to facilitate proof of corporate responsibility beyond the position which would otherwise obtain at common law: Walplan Pty Ltd v Wallace (1985) 8 FCR 27 (Walplan) at 36-38.

43    Both limbs of the sections require that the person in question engage in conduct “on behalf of” the relevant corporation. This essentially requires that the individual act in the course of the corporation’s business, affairs or activities or as the representative of the corporation, however it is “neither necessary nor sufficient” that the conduct be engaged in for the benefit of the corporation: NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558; (2000) 107 FCR 270 (NMFM) at [1243]-[1244] per Lindgren J. In this context, the phrase “on behalf of” suggests some involvement by the person concerned with the activities of the corporation; it conveys a meaning similar to the phrase “in the course of the body corporate’s affairs or activities” and encompasses acts done by a corporation’s employees in the course of their employment, but it is not confined to the employment relationship: Walplan at 37. The phrase conveys that something is done “for” the company: Lisciandro v Official Trustee in Bankruptcy [1995] ATPR 41-436 at 40,903-40,904; NMFM at [1244]; Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] FCAFC 78; (2016) 250 FCR 136 at [78]-[80] per Davies, Gleeson and Edelman JJ. As to the second limb, in Walplan at 37, Lockhart J observed (in respect to s 84(2) of the Trades Practices Act 1974 (Cth)) that:

…the second limb of the subsection extends the corporation's responsibility to the conduct of other persons who act at the behest of a director, agent or servant of the corporation. Hence the phrase ‘on behalf of' casts a much wider net than conduct by servants in the course of their employment, although it includes it.

44    The word “agent” is used in both limbs of the sections, and is not defined.

45    Central to the concept of agency is the proposition that the agent is representing the principal; “the agent [is] acting or having actual or apparent authority to act as representative of, or for, or on behalf of, the principal”: Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2013] FCAFC 29; (2013) 296 ALR 465 at [73], citing NMFM at [522].

46    There will generally be a requirement or duty not to act otherwise than in the interests of the principal: Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [177]. The formation of a relationship of agency may be constituted by either express or implied agreement. Agency is express when the principal agrees with the agent that the agent will act on behalf of the principal. Whether an implied agency arises depends on whether it is reasonable to infer from the words and acts of the parties that they intended to form a relationship of agency: Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142.

47    Whether a relationship of agency exists depends not on the terminology adopted by the parties, but on the true nature of the agreement or the exact circumstances of the relationship between the alleged principal and agent. The actual incidents and content of the relationship (the ‘factual relation’) to which the parties have consented may demonstrate that, as a matter of fact, they have consented to an agency relationship. The consent of the parties need not necessarily be to a relationship that the parties understand or accept to be one of principal and agent. Rather, it is sufficient if what they have agreed to is a state of fact that amounts in law to such a relationship, notwithstanding that it may have been the subject of express disclaimers. In such circumstances, the courts may infer an agency: South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; (2000) 177 ALR 611 at [132]-[135].

Submissions

ASIC’s submissions

48    In summary, ASIC contended that there are three primary reasons why the conduct of the Retention Agents in relation to the Consumers is attributable to Select. First, the contractual arrangements of the Corporate Defendants establish that it was Select’s obligation to provide retention services to St Andrew’s. This stands to reason given that Retention Agents provided financial product advice and it is necessary that they did so pursuant to Select’s AFSL, and this is reinforced by the fact that retention services financially benefited Select. As such, even though Select sub-contracted the performance of retention services within the corporate group, those who performed such services did so on behalf of Select. Second, in all dealings with the Consumers, the Retention Agents held themselves out as acting on behalf of Select (through its brands Let’s Insure and FlexiSure). Third, Select consented to the Retention Agents so doing, trained them and monitored their conduct. ASIC submitted that these factors establish agency at common law, and in any event, that attribution can be made to Select pursuant to s 12GH(2) of the ASIC Act and 769B(1) of the Corporations Act (given that control over the agents was exercised by Mr Howden as its sole director). ASIC identified five strands of evidence which, it submitted, supported the contention.

Corporate Defendants’ submissions

49    The Corporate Defendants submitted that the issue is which entity had the obligation to provide the services performed by the Retention Agents. They submitted that BlueInc Services had the obligation to provide these services to St Andrew’s. Therefore, when employees or agents of BlueInc Services were performing retention functions, they did so for and on behalf of BlueInc Services in furtherance of BlueInc Services’ obligation to provide these services to St Andrew’s. Similarly, when employees or agents of IMS were performing retention functions, they were doing so on behalf of BlueInc Services.

50    The Retention Agents were personnel who made outbound telephone calls to and answered inbound telephone calls from existing Let’s Insure or FlexiSure customers in relation to dishonoured payments, requests to cancel Let’s Insure products or FlexiSure products or to field consumer service queries. Retention Agents included: personnel whose primary functions related to providing general client services; and personnel whose primary functions related to dishonoured premium payments and requests to cancel insurance products.

51    The Corporate Defendants submitted that BlueInc Services contracted with St Andrew’s to provide the services performed by the Retention Agents by entering into an Administrative Services Agreement with St Andrew’s dated 23 April 2013 (Administrative Agreement), which was varied and restated in 2015 and 2017. They submitted that pursuant to cl 3.1 of the Administrative Agreement, BlueInc Services agreed “to provide the Administrative Services and St Andrew’s [agreed] to acquire the Administrative Services” and BlueInc Services “[agreed] to perform its obligations under this Agreement for the benefit of St Andrew’s”. Pursuant to cl 4.1(a), BlueInc Services was required to provide the Administrative Services in compliance with the Service Levels. Clause 5.1 reiterated that “St Andrew’s appoints Blue Inc [BlueInc Services] to provide the Administrative Services in accordance with this Agreement”. The “Key Service Functions” performed by BlueInc Services pursuant to the Administrative Agreement included “Cancellations” and “Lapse notice issue”. The “Contract Administration” functions they were to perform included “Cancellations”, “Lapse notice issue”, “Renewal notice issue” and “Direct debit/Credit card dishonour advices to Clients”. In relation to “Complaints & Service Issues”, specific functions included “Maintain a register of complaints”. The Corporate Defendants submitted that the functions BlueInc Services were to perform for St Andrew’s pursuant to the Administrative Agreement correspond precisely to the functions performed by Retention Agents.

52    In their written submissions in closing, the Corporate Defendants’ position appeared to change. While maintaining the above position, they accepted for the first time, that:

… to the extent the Retention Agents provided financial product advice, they were doing so for and on behalf of Select, pursuant to its ASFL.

53    However, the Corporate Defendants submitted:

But this is largely a false issue … Cancellations, seeking premium payments and automatically increasing premiums … are all administrative in nature. The issue, therefore, is who the Retention Agents were performing these functions on behalf of.

54    In oral submissions, the Corporate Defendants contended that in Select’s contract with St Andrew’s, they had agreed to set up the Call Centre and to provide advice pursuant to its financial services licences, and, therefore, insofar as any financial advice was given, that Retention Agent giving the advice was wearing “a Select hat”. They submitted that Retention Agents, depending on the content of the call, “may have different hats”. That is a matter that can coexist: “one can carry out two services for different organisations”. And, “otherwise, effectively, the contract between St Andrew’s and BlueInc is being given no content”.

ASIC’s reply

55    ASIC submitted that the concession is well made, but while presented as a minor concession, it is, in fact, a large concession because that was all that the Retention Agents were doing in their attempts to persuade consumers in the circumstances to hold onto their policies rather than cancel them. ASIC also noted what it said was a further concession in oral submissions when it submitted that it was the Retention Agent’s job to encourage a person to keep their policy.

56    In this regard, ASIC referred to the observations of the Full Court in Australian Securities and Investments Commission v Westpac Securities Administration Ltd [2019] FCAFC 187; (2019) 272 FCR 187 (Westpac Securities – Full Court) at [12], [20], [217] and [241], that one must look at the whole of the conversation to discern when financial product advice is being given because, often, that advice in a sales context, is being given implicitly. I note that this issue was not the subject of appeal to the High Court: Westpac Securities Administration Ltd v Australian Securities and Investments Commission [2021] HCA 3; (2021) 270 CLR 118 (Westpac Securities – High Court).

Financial product advice

57    Given the nature of this submission, and the concession made, it is appropriate at this stage to refer to the concept of financial product advice. Section 766B(1) of the Corporations Act defines financial product advice as follows:

766B Meaning of financial product advice

(1)    For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that:

(a)    is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or

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

…

58    The approach to assessing whether such advice is given is described in Westpac Securities – Full Court at [16]-[22] where Allsop CJ observed:

[16]    The primary judge, correctly in my view, at [83]-[93] of the reasons, considered it appropriate to give a broad interpretation to “recommendation” and “statement of opinion”, as words used in a provision intended to be, to a significant degree, protective. In particular, I agree with the approach of Sackville AJA in Australian Securities and Investments Commission v Park Trent Properties Group Pty Ltd (No 3) [2015] NSWSC 1527 at [365]-[366], referred to by the primary judge at [85]:

365    The construction of s 766B(1) must take into account that the language encompasses a recommendation or statement of opinion that is intended to influence a person in making a decision relating to a financial product or could reasonably be regarded as having such an influence. A person wishing to influence another person (the client) to make a decision relating to a financial product … may do so in ways other than by express recommendations or explicit statements of opinion. Information or other material may be presented to the client in a form implying that the presenter favours or commends a particular course of action without saying so explicitly. Similarly information or other material may be presented in a form that implies that the presenter’s view is that the contemplated course of action is likely to be beneficial to the client.

366    The authorities have accepted that the statutory language should be given a broad interpretation. Specifically, they support the proposition that a person may provide information or present material in a way that implicitly makes a recommendation or states an opinion in relation to a financial product.

[17]    The protection of people from potentially selfishly motivated advice is not advanced by making fine logical distinctions based on overly precise linguistic choices about words of a general kind employed by Parliament in furtherance of the protective purpose. Protection from assiduous, clever and subtle advancement of another’s personal interest may require a generous breadth of meaning of words that are taken from, and are intended to relate to, human relational experience, and a giving of practical flexibility in the application of those words to the reality of human experience.

[18]    The question is one of the practical application of the statute to the context in question to see whether an express or implied “recommendation” (that is, a commending something by favourable representation or presentation as worthy of confidence or acceptance or as advisable or expedient) or “statement opinion” (that is, a judgment or belief or view or estimation) was made. The two concepts are, of course, related. The opinion may be the basis of the recommendation; and the recommendation may carry with it an implied opinion.

[19]    That said, the distinction made by the primary judge at [94]-[97] of the reasons between “opinion” and “fact” or “statement of opinion” and “statement of fact”, by reference to principles of evidence, is likely to complicate the enquiry without warrant. One could well imagine a communication that was in overall terms an implied recommendation or opinion being made up of statements of interconnected facts, designed by its and their structure, to appear as a recommendation for some conduct or view. The unnecessary complexity, with respect, can be seen in [98] and [99] of the reasons.

[20]    The task is to look at the communication or exchange, in its whole context, and assess whether some express or implied recommendation or statement of opinion is made. This is unlikely to be assisted by minute examination of parts of the text of a flowing, whole, engaged human conversation with all its implicit, as well as explicit, content. One can well understand that in some contexts mere statements of fact will not qualify as recommendations or statements of opinion. That is not, however, a conclusion that is to be drawn by an abstracted distinction between statements of fact and inference or by the deconstruction of text, but rather by looking at, or listening to, the whole of the communication or exchange, in its context.

[21]    Westpac also argued before the primary judge that the words “recommendation” and “statement of opinion” were to be understood by reference to “advice”. Thus, it was submitted that the word being defined may properly influence the interpretation of the definition: Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231 at [129] and the cases there cited. So, the recommendation or statement of opinion was to be seen as one which contained some element of estimation or judgment as opposed to a mere advertisement or “sales pitch”. This was reinforced, it was submitted, by the reference in s 766B(1) to a “report” of the advice. The complaint on the cross-appeal by Westpac is that the primary judge’s meaning would encompass all advertising and marketing, and such are not, and could not be, advice. Thus, it was submitted the meaning given by her Honour was too wide.

[22]    None of these provisions can be seen to be directed to what might be described or characterised as mere advertising. That, however, does not lead to the need for, or the appropriateness of, abstracted definition of categories of human behaviour or communication, outside the context of that actual behaviour or whole communication. The provisions are directed at the giving of advice that is contained in an express or implied recommendation or statement of opinion. That it may have some marketing or sales purpose is not the point. It is sterile to seek to draw a line between “advice” and “marketing” or “advertising”, or to engage in abstracted defining of those things. It is a question of characterisation in all the circumstances. Bearing in mind the view of the High Court as to the circularity that must be recognised in construing a definition by reference to the meaning of the term defined (Owners of Ship Shin Kobe Maru v Empire Shipping Company Inc (1994) 181 CLR 404 at 419 and however that case may now stand with the approach to construction laid down in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]-[71]) this submission of Westpac cannot be accepted in its terms: Esso Australia Resources Pty Ltd v Federal Commissioner of Taxation (2011) 199 FCR 226 at [100]-[107]. The question is whether, on its proper characterisation, the communication or exchange was a recommendation or statement of opinion given by someone to another for that other’s consideration in connection with making the decision in s 766B(1). I would accept that in some circumstances what might otherwise be seen to be a recommendation might only meaningfully and rationally be described or characterised as part of mere puffery in an advertisement and could not meaningfully and rationally be described or characterised as advice. That conclusion is likely, however, to be reached by an examination of the applicability of the Chapter as a whole. The proper process is to examine the communication and exchange in its whole context to ascertain whether it is a recommendation or statement of opinion to the person. One does not add to this process by considering some further limitation of advice and imbuing that limiting characteristic with some element of evaluation or degree of consideration, as Westpac’s submissions sought to do. There is certainly no bright line distinction to be made between “sales” and “advice”. The communication or exchange may have a heavy “sales” purpose. That will not mean that it does not contain a recommendation or opinion that was intended, or could reasonably be regarded as intended, to influence a person in making a relevant decision. How broad the definition may reach may be better tested in other circumstances. Here, the relational exchanges and the engagement in conversation designed to influence customers to make a financial decision constitute the very kind of context and circumstance to which the Chapter and the Division were intended to be directed.

59    Although this matter was before the High Court, the Full Court’s findings on this aspect were not in issue: Westpac Securities – High Court at [25].

60    A number of matters can be taken from those passages, and others in Westpac Securities – Full Court. A recommendation or statement of opinion necessarily involves something that is capable of influencing a person about a financial product or that reasonably could be regarded as having such an influence: Westpac Securities – Full Court at [216]. The terms ‘recommendation’ or ‘statement of opinion’ are not confined to formal advice but extend to any explicit or implicit encouragement: Westpac Securities – Full Court at [217], [240]. The terms have different meanings. A ‘recommendation’ commends or urges a particular course of action by favourable representation or presentation, and an ‘opinion’ is the expression of a belief, view, estimation or judgment. The two concepts are related, and often will be given together, although one can be given without the other: Westpac Securities – Full Court at [18], [335]-[336]; Westpac Securities – High Court at [49]. An implicit statement that the provider favours or commends a particular course of action without saying so in terms, or that the provider’s view is that the contemplated course of action is likely to be beneficial to the client, is capable of amounting to “financial product advice”: Westpac Securities – Full Court at [16], [217], and see Westpac Securities – High Court at [12]. It is not necessary for the communication to bear the character of “advice” or to be a recommendation “in the nature of advice” to constitute a recommendation: Westpac Securities – Full Court at [216]-[217]. Rather, the relevant communication in its whole context is to be considered, and an assessment of whether some express or implied recommendation or statement of opinion is to be made, rather than picking over de-contextualised parts of a whole conversation: Westpac Securities – Full Court at [12], [20], [217].

Consideration

61    ASIC’s submission must be accepted.

62    At the outset I observe that the Corporate Defendants’ position in closing submissions, that Retention Agents in any one call may be carrying out two services depending on the content of the call, was advanced without a reference to any individual call, nor what aspect of the call was said to be on behalf of Select, and what was not. That is, the Corporate Defendants did not contend or identify, by reference to any call, that the contravention has not been established because an aspect of the call said to found the contravention was part of the retention function as opposed to the provision of advice on the part of Select. Moreover, the acceptance in closing that encouraging a customer to keep a policy is the job of the Retention Agent undercuts the submission as to the nature of the role of the Retention Agent being administrative, which underpinned its submission as to the lack of attribution.

63    Given the Corporate Defendants’ reliance on the Administrative Agreement, it is necessary to consider the relevant contracts.

64    Select and BlueInc Services had separate contracts with the policy issuer, St Andrew’s.

65    From 23 April 2013, Select and St Andrew’s were parties to a Distribution Agreement, which was varied, restated and/or renewed in 2015, 2016, 2017 and 2018, and then ultimately terminated on 4 April 2018 (Distribution Agreements).

66    Under these Distribution Agreements, Select agreed to market and distribute an agreed suite of life risk insurance policies to “maintain and operate a call centre and website to provide advice” about the products and to maintain and operate an electronic or automatic underwriting system by which all discretionary underwriting cases were referred to St Andrew’s, and where clients were sent an email with a welcome letter, PDS, Financial Services Guide (FSG) and policy schedule on the issue of a policy. As a result, consumers who acquired the guaranteed acceptance policies (being products that were not discretionary) were not referred to St Andrew’s. The telephone scripts approved by Select reflect that for the guaranteed acceptance policies, such as Let’s Insure Funeral Cover, the acquisition of the policies occurred during telephone calls with Sales Agents. The Distribution Agreements then tasked Select with sending the consumer all of the relevant policy documents. As ASIC contended, essentially, by Select taking on the obligation for the system, there was no role for St Andrew’s to play in the process of issuing the policies for guaranteed acceptance products.

67    Select and St Andrew’s acknowledged that “any financial services” provided by Select in relation to the products would be on Select’s behalf and under its AFSL. In return, St Andrew’s agreed to pay a commission on all policies sold for as long as they remained in force subject to certain clawback rights. The initial agreement had a term of four years, with renewal options. By the 2015 renewal, Select and St Andrew’s included products marketed under the FlexiSure brand and clarified that the Call Centre was to provide “general advice”.

68    As ASIC contended, the following can be drawn from the Distribution Agreements: first, Select was obliged to operate the Call Centre; second, they contemplated that the Call Centre staff would provide financial product advice, as St Andrew’s required Select to hold an AFSL and Select expressly acknowledged that financial services were provided on behalf of Select and under its AFSL; third, no distinction is made between Sales Agents and Retention Agents, and as admitted by the Corporate Defendants, both Sales Agents and Retention Agents were ‘representatives’ of Select’s AFSL; and fourth, it was in Select’s financial interest to retain or ‘save’ policies, as it was entitled to a flow of commission under the Distribution Agreements “for so long as the Policies remain in force”. As such, the Retention Agents employed or contracted by either IMS or BlueInc Services were carrying out an essential role in the course and furtherance of Select’s business, namely the retention of its products by customers (which in turn fed into the commission paid to Select).

69    Turning to the Administrative Agreements between St Andrew’s and BlueInc Services. They entered into an Administrative Services Agreement dated 23 April 2013, which was varied and restated in 2015 and 2017. As explained above, the Corporate Defendants rely on this agreement to contend that BlueInc Services had the obligation to provide these services to St Andrew’s (not to Select) and, therefore, when employees or agents of BlueInc Services were performing Retention functions, they did so for and behalf of BlueInc Services.

70    However, the submission is premised on the basis that the Retention Agents were performing administrative tasks, a premise which, at least in part, is now accepted to be incorrect.

71    In any event, under the Administrative Agreement, BlueInc Services carries on the business of an administrator of life insurance policies. This agreement sets out the terms and conditions on which St Andrew’s appoints BlueInc Services to provide the Administrative Services. I note that there is no requirement that BlueInc Services hold a financial services licence (which it does not). Therefore, the agreement does not encompass the giving of financial product advice. Administrative services are defined. It is readily apparent considering the tasks listed that the service functions are purely administrative. For example, they include the issue of lapse notices or renewal notices or cancellations and set time frames in which the tasks are to be performed (for example, two days after the notification of the cancellation). The tasks do not include retention of a policy. That is, BlueInc Services has an administrative function of notifying cancellation and effecting that cancellation.

72    It follows that the conduct of the Retention Agents, whose role is to persuade the customer not to cancel their policy, is not administrative within the Administrative Agreement.

73    Contrary to the Corporate Defendants’ submission, that conclusion does not render the Administrative Agreement as having no content. Rather, such administrative tasks are no doubt undertaken, but that is not the role of a Retention Agent.

74    Other evidence also supports the conclusion that the conduct of the Retention Agents was on behalf of Select in such a way as to attribute liability to it.

75    Indeed, Select made admissions to ASIC in response to a question in an ASIC Notice of Direction under s 912C(1) of the Corporations Act (s 912C(1) Notice) dated 23 October 2018, that BlueInc Services was providing the customer retention services to Select and not to St Andrew’s, and that Select provided them to St Andrew’s. In the s 912C(1) Notice, Select was asked “to detail the services that were provided by each BlueInc Group entity in relation to the policy of each of the relevant customers during the relevant period”. In its response to ASIC, Select stated that “Select AFSL’s principal outsource agreements are with BlueInc Services Pty Limited (administration, information technology, customer retention…)”.

76    In so far as the Corporate Defendants contended that the concept of a Retention Agent was one, in effect, created by ASIC (and rather, that the tasks of such agents were administrative), that submission cannot be accepted.

77    The Retention Agent role was an established and recognised role within Select. So much is apparent from a response by Select to ASIC to a question in a s 912C(1) Notice which describes Select’s post-policy holder interaction, (including changes to Direct Life Insurance policies and enquiries by policy holders about their policy), as being done by either the customer service team or the retention team. It described the retention team as dealing mainly with inquiries relating to policy cancellations and premium dishonours. The Retention Agents were trained in dealing with complex inquiries and complaints. The team is managed by a Team Leader who reports directly to the Retention Manager. The organisational chart of BlueInc Group also treats ‘Retention’ as an established area, and separate from client services. Employment documents listed ‘Retention’ as a separate department.

78    Moreover, compliance reports for Select record, inter alia, “in accordance with the AFSL authorisations, all representatives including Retention staff are trained to follow general advice scripts, prepared and signed off by general advice accredited personnel”. It can readily be inferred this was necessary because the Retention Agents were providing financial advice to customers. The Retention Agents conduct was monitored by Select, as evidenced by the compliance reports. Such training and monitoring steps in that regard would not be required if the Retention Agents were performing administrative tasks under the Administrative Agreement.

79    The evidence also establishes that Retention Agents, like Sales Agents, were paid a commission for saving policies, and targets were set as to the percentage of policies to be saved.

80    Finally, as explained in more detail when considering the Consumer Contraventions, a consideration of the calls by the Retention Agents with the Consumers demonstrates that the Retention Agents were providing financial product advice. Indeed, the calls commenced with the Retention Agent telling the Consumer, as he or she was required to do by the script provided by Select, that “I am only able to provide general advice”. This reflects the nature of the call that followed. Indeed, it appears that so much is now conceded.

81    The ordinary common law principles of agency as reflected in s 12GH(2)(a) of the ASIC Act and s 769B(1)(a) of the Corporations Act are established in respect to the Retention Agents. I also accept ASIC’s submission that, even if that were not so, the evidence establishes extended statutory agency given that control over the agents was ultimately exercised by Mr Howden in his capacity as the sole director of Select, within s 12GH(2)(b) of the ASIC Act and s 769B(1)(b) of the Corporations Act.

82    I am satisfied that the conduct of the Sales and Retention Agents is attributable to Select. In particular, I am satisfied that the conduct of each of the Sales and Retention Agents who made telephone calls to Consumers the subject of the Consumer Contraventions is attributable to Select.

83    In relation to the Consumer Contraventions, BlueInc Services is also liable for the same contraventions as alleged against Select due to the conduct of its employees, as is IMS for contraventions due to the conduct of persons it engaged through hire labour agencies. The relevant Agents are identified when addressing the Consumer Contraventions.

Evidence

84    Some facts were agreed between ASIC and the Corporate Defendants in these proceedings as reflected in the ASOAF, as mentioned above. It is to be recalled, however, that those facts are not agreed as between ASIC and Mr Howden.

ASIC’s evidence

85    ASIC tendered a significant amount of documentary evidence.

86    In addition, an affidavit was read from each Consumer, subject to rulings on objections to aspects of the evidence.

87    The Consumers were not required for cross-examination. I accept their evidence. I will consider this evidence when addressing the Consumer Contraventions.

88    ASIC also relied on the following further affidavits:

(1)    Affidavit of Deborah Lilian Armstrong affirmed on 7 May 2019. Ms Armstrong is a financial counsellor in Maningrida, Northern Territory;

(2)    Affidavit of Nicole Rose Casley affirmed on 12 September 2019. Ms Casley is a Policy Advisor in the Indigenous Outreach Program at ASIC;

(3)    Affidavit of Nadyezhda Pozzana affirmed on 1 November 2019. Ms Pozzana is a Certified Interpreter with the Aboriginal Interpreter Service, which is a part of the Northern Territory Department of Local Government, Housing and Community Development;

(4)    Affidavit of Cameron Luke Villarosa affirmed on 6 February 2020. Mr Villarosa is a lawyer in the Financial Services Enforcement team at ASIC; and

(5)    Two affidavits of Dr Diane Eades affirmed on 12 August 2020, annexing an expert report and associated briefing material.

89    ASIC also relied on s 79 notices, containing transcripts from a number of examinations conducted pursuant to s 19 of the ASIC Act, which were admitted subject to objections. The Defendants did not require any of the s 19 examinees for cross-examination.

Patrick Hoey’s evidence

90    ASIC also read an affidavit of Patrick Hoey affirmed on 10 July 2020 (subject to the rulings as to the limited objections). Mr Hoey had been an employee of BlueInc Services from about January 2013 to June 2017. He was initially hired as a Sales Consultant and reported to Renni Atwal, Head of Sales, who oversaw the sales floor. Later in July 2013, Mr Hoey commenced as Business Development Manager, reporting to both Mr Atwal and Mr Howden. From this time until January 2016, Mr Hoey was a senior member of the sales team reporting to Mr Atwal. Between February and June 2016, Mr Hoey left BlueInc Services to return to Ireland for personal reasons. In about June 2016 he came back to Australia, and returned to work at BlueInc Services in the role of Sales Coach where he reported to Adit Shah, who had taken over the role of Head of Sales. He was subject to cross-examination. I accept his evidence.

91    It is appropriate to first summarise briefly his evidence by affidavit.

92    The sales culture at BlueInc Services was very competitive.

93    Mr Hoey’s evidence was that all Sales Agents had a ‘dashboard’ on their computer screen and could see the amount of sales they and everybody else working on the sales floor had made. There was a leader board displayed on the dashboard and on televisions in the office that would be regularly updated throughout the day. During the course of a day when sales were low, the Head of Sales would send an email to the whole floor including Mr Howden setting out the number of sales made by each Sales Agent, and if a Sales Agent had made no sales, their name would be highlighted in yellow.

94    Various practices encouraged or rewarded sales, in which Mr Hoey participated. A bell attached to the wall in the middle of the sales floor was rung each time a person made a sale. If a Sales Agent had not made a sale before lunch, on more than one occasion they were told by Mr Atwal to buy the whole team doughnuts, given the number zero on the leader board resembled a doughnut. At least in 2016 and 2017, a similar practice existed whereby agents who had made zero sales were required to wear an inflatable doughnut until they made a sale. Around 2014, the top five sales agents, including Mr Hoey, also attended a ‘Wolf of Railway Street’ seminar to meet and hear from Jordan Belfort, the ‘Wolf of Wall Street’. Sales culture practices (such as Mr Atwal asking the Sales Agents to jump up, raise their hands and yell “sales, sales, sales”) inspired by this seminar were witnessed by Mr Howden in the years following that seminar.

95    Three more practices for motivating Sales Agents referred to in Mr Hoey’s evidence are notable: the ‘Million Dollar Club’, the ‘Top Dog Chair’ and ‘Super Sales Days’. If a Sales Agent reached a million dollars in premiums, they joined the Million Dollar Club (which Mr Hoey did on more than one occasion). The agent’s name was placed on a plaque, they won a $1,000 Flight Centre voucher and they received a glass trophy. The Top Dog Chair was a particular chair (at one time a big leather chair and at another a big race car chair) given to the top Sales Agent to sit in for the month until they were knocked off as ‘Top Dog’ by another Sales Agent. Mr Howden was present at various presentations of the Top Dog Chair. Super Sales Days were longer days usually held on the last day of the month, where Sales Agents collected prizes allocated to numbered balloons in the office. The prizes included coffee vouchers, Coles Myer gift cards, prepaid VISA cards of up to $100 in value, and an iPad.

96    During Mr Hoey’s employment, a number of sales incentives were offered. These included team incentives, as well as individual incentives such as the Cruise Incentive, Vespa Incentive and Las Vegas Incentive. Mr Hoey’s evidence was that these incentives motivated him to sell more. He went on the cruise offered by the Cruise Incentive and his evidence was that it was a “leisure trip” which did not involve any work or training. Mr Hoey also won the Vespa offered by the Vespa Incentive and was presented with the keys by Mr Howden in front of everyone in the office. Rebecca Dudbridge received the second place prize, which was a $2,000 cash prize. Mr Hoey agreed to sell the Vespa to one of his colleagues for $4,000. After Mr Hoey’s colleague changed his mind, the colleague then offered to sell the Vespa on Mr Hoey’s behalf and did so online. BlueInc Services paid the sale proceeds to Mr Hoey through his salary as commission, which was taxed. The Vespa remained in the office until it was sold. The relevance of this to the question of whether the Vespa was a monetary or non-monetary benefit is discussed below.

97    Mr Hoey was aware that the Las Vegas Incentive was launched in 2016, but he was in Ireland at the time this Incentive was running.

98    Mr Hoey also gave evidence about the circumstances surrounding the termination of his employment with BlueInc Services, which are summarised below.

99    Mr Hoey was purportedly given a “2nd formal warning” dated 31 July 2015 in relation to an “unethical sale where it was unclear the customer was aware of what they had purchased”, which was signed by Mr Shah. However. Mr Hoey did not recall ever receiving or signing that document at the time or attending any meeting with Mr Shah.

100    Around late 2015, Mr Hoey recalled having a conversation with Mr Atwal and Mr Howden where concerns were raised about a number of sales in certain Indigenous areas and the use of the Refer a Friend program. I note that this spike in sales to Indigenous customers is examined in closer detail below when considering the QA system and in relation to the Refer a Friend program and the alleged s 912A contraventions. Mr Hoey’s evidence was that he was not given any formal warning at that meeting.

101    In February 2017, Mr Hoey said that he signed a Final Formal Warning, which was also signed by Mr Shah, in respect to “excessive use” of the Refer a Friend program (despite the fact that the document was dated 5 October 2015). Mr Hoey recalled that Ms Dudbridge was also asked to sign a Formal Warning, bearing the same date (5 October 2015). Copies of the warnings were tendered. Mr Hoey’s evidence was that Mr Shah gave him this letter in February 2017. He recalled that Mr Shah was not his manager in October 2015, as he reported to Mr Atwal at that time.

102    It suffices to note at this point that ASIC claims that the formal warnings given to Mr Hoey and Ms Dudbridge dated 5 October 2015 were not created contemporaneously bur rather were backdated and in fact created in February 2017. It will be necessary to return to that issue below.

103    In or around June 2017, Mr Hoey decided to leave BlueInc Services. He recalled having a conversation with Mr Howden where he told Mr Howden about his plans to move to England and that he would be resigning from the company. Shortly thereafter, Mr Hoey said that he was “sacked” in a meeting with Mr Howden and Mila Gmitrovic, Head of Human Resources. He was told that the reason his employment was being terminated was due to the calls he made in 2015 “based on the Refer a Friend program and a spike in sales to Indigenous areas”. Mr Hoey understands that Ms Dudbridge was “sacked” on the same day.

104    Mr Hoey gave evidence on the events that followed the 2015 spike in sales to Indigenous customers, which the Corporate Defendants and Mr Howden attribute to Mr Hoey’s conduct and the conduct of Ms Dudbridge, and for which Mr Hoey’s employment with BlueInc Services was apparently terminated.

105    Mr Hoey was cross-examined, including on the following topics.

106    In relation to the sales culture in which the various incentives were offered, Mr Hoey maintained that “[i]t was a hard push sales culture which was a uniform approach across the whole floor” and that it was “enforced from the top down”.

107    Mr Hoey was cross-examined on having received and given training to other Sales Agents that included training to avoid unconscionably and coercively selling policies, making misleading representations or harassing consumers. The Corporate Defendants also put to Mr Hoey that he knew what constituted misleading, unconscionable and coercive conduct, and did not need somebody to tell him not to engage in that conduct. Mr Hoey accepted that proposition, although he on occasions responded that he knew not to engage in such conduct, “generally speaking”. For some of Mr Hoey’s answers, particularly in relation to harassment, there was some hesitation because it depended on the meaning of the term. In relation to the question about unconscionable conduct, Mr Hoey’s response included that “obviously sometimes other factors play a part when it comes to the incentives and so forth.” Mr Hoey was also cross-examined on being paid a salary and commission, and the effect of a non-compliant sale on that. He was also asked about non-complaint sales in respect to the Incentives. Mr Hoey’s evidence on those topics referred to the sales culture.

108    Mr Hoey was cross-examined on winning the Vespa in the Vespa Incentive and the circumstances of its sale and receipt of its proceeds.

109    Mr Hoey gave evidence in cross-examination that he considered himself motivated to sell more insurance policies by participating in the Cruise Incentive and the Vespa Incentive.

Dr Diana Eades’ evidence

110    ASIC also read the affidavits of Dr Diana Eades affirmed on 12 August 2020. Dr Eades is a sociolinguist specialising in communication with Aboriginal people who speak varieties of English, including the use of gratuitous concurrence by Aboriginal people. The Defendants did not object to any part of her evidence. However, she was required for cross-examination. I accept her evidence.

111    Dr Eades’ doctorate is in linguistic anthropology and sociolinguistics and she has almost 40 years’ experience in research, teaching and the practical application of her training and research. Dr Eades is a Fellow of the Australian Academy of the Humanities, was the head of its linguistics section between 2012 and 2015, and is presently an Adjunct Professor at the University of New England. It was not in contest that Dr Eades has specialised knowledge in the use of gratuitous concurrence by Aboriginal people, and that that knowledge is based on her training in linguistic anthropology and sociolinguistics, and her almost 40 years of study and experience. The Corporate Defendants accepted that her training and experience is “undoubtedly extensive”.

112    In her report, Dr Eades described gratuitous concurrence as:

…the sociolinguistic term for a conversational pattern which has been recognised by some observers since the first half of the 20lh century, and which appears to often impact Aboriginal communication with non-Aboriginal Australians, especially in institutional settings. As I have previously described (e.g. Eades 2013), it can be explained as:

saying "yes" (or "yeah" or "mm' or nodding their head) in answer to a question, (or "no", "nuh" or shaking their head to a negative question), regardless of whether or not the person agrees with what they are being asked, and sometimes regardless of whether they even understand the question

The expectation in Anglo conversations is that an unqualified answer such as "yes", "yeah", "mm" or "Okay" to a question is a definite agreement (in contrast to answers such as "maybe", 'I’m not sure", "yes, I think so"). Thus any subsequent answer that is not consistent with this unqualified yes type answer is seen by Anglo speakers as a contradiction or inconsistency. In contrast, speakers who use answers of gratuitous concurrence sometimes intend to communicate politeness, cooperation, compliance or even submissiveness. Sometimes such answers may communicate superficial, temporary or contingent agreement.

When an Aboriginal person uses gratuitous concurrence but their answers are interpreted according to non-Aboriginal expectations, this necessarily entails a degree of miscommunication, because there is a divergence in what the two parties think has been communicated. This divergence can often remain undetected, affecting the basis for communication later on in the conversation.

113    Dr Eades’ expert opinion contained in her report is that each of David Mirrawana, Jennifer Yalumul, Georgina Gaykamangu, Geraldine Campbell, Edmund Nundhirribala, Cynthia Mirniyowan and Derek Wurrawilya, to varying degrees, used gratuitous concurrence in their calls with agents. The primary focus of the analysis was the main sales calls, as they were the longest or, in some cases, the only calls available. In the cases of Mr Mirrawana, Ms Yalumul, Ms Gaykamangu, Ms Campbell and Mr Nundhirribala, the main sales calls provided sufficient material to enable the opinion to be formed. In the case of Ms Mirniyowan and Mr Wurrawilya, recourse was had to other calls available. Dr Eades’ evidence is that gratuitous concurrence was more prominent in some of the calls than in others (for example, there was only one example for Mr Wurrawilya and it is also present to a lesser extent for Ms Mirniyowan).

114    In forming that opinion Dr Eades undertook a close linguistic analysis of what each of the Consumers actually said and did not say in answer to particular questions in the recorded calls. She looked for “patterns” and drew on direct, indirect, and wider evidence about the linguistic, educational and social circumstances of the relevant Consumers. She concluded that the nature of the sales calls and the use of legal language provided certain common features which increased the probability that a consumer’s reply used gratuitous concurrence. This is particularly so in respect of the question posed towards the end of calls as to whether the consumer had understood everything discussed in the call, as well as asking a consumer whether an answer was “a clear yes”.

115    Take the following example in respect to Mr Hoey’s sales call on 23 March 2015 with Mr Mirrawana, who Dr Eades concludes more probably than not used gratuitous concurrence:

1.    PATRICK: (03:40) Okay, (ah) cool. So, David, you'll receive your policy documents by post, together your policy documentation, ah, I 'm sure you will, just keep that x safe it's for your future reference. And David lastly, just wanna confirm, you're happy and understood evering we discussed today? (fast, unclear}

2.    MR MIRRAWANA: Sorry?

3.    PATRICK : Yep, oh sorry David just looking here so, David I just need to confirm, that postal, x so if I post that there to Private Mail Bag 102, Winnellie, 0822, you'll receive that okay, is that correct?

4.    MR MIRRAWANA: Yep, yep.

5.    PATRICK: (04:09) Beautiful so David, congratulat- you've got yourself covered again just want to confirm, you're happy and understood evering we discussed today is that correct?

6.    MR MI RRAWANA: No worries.

7.    PATRICK: No worries. Is that a clear yes?

8.    MR MIRRAWANA: All clear.

9.    PATRICK: All clear beautiful okay. [Um

10.    MR MIRRAWANA: [I got] all the key, yeah.

116    In respect to this exchange, Dr Eades observes:

This confusion indicates it is unlikely that Mr Mirrawana understood the intended meaning of the question "Is that a clear yes", and he was probably trying to answer in a way that matched the question, rather than actually communicating whether he consented.

Thus Mr Mirrawana's "all clear" answer in line 8 is probably gratuitous concurrence because the answer "I got all the key, yeah" indicates his mishearing and misunderstanding of the question about "a clear yes" in line 7. As explained above, this is typical of partial speakers using echo answers to scaffolded questions (Section 4.7.1.4). The answer produced, which "echoes" part of the question, would seem appropriate and thus keeps the conversation moving, by using words the speaker has heard rather than really understanding what the question means and trying to express what the speaker thinks about it.

117    This particular call is discussed in more detail below in respect to the Consumer Contraventions.

118    Dr Eades was cross-examined on the following topics.

119    She was questioned about the complexity of the analysis she used, and the length of time it took her to develop her analysis and reach her conclusions. However, Dr Eades gave evidence that if she were called upon to make a less formal and detailed view, it would have been a much less laborious process, which “wouldn’t take a huge amount of time”. Dr Eades also noted that her opinions were not just based on her expertise and knowledge in the area of gratuitous concurrence, but on “the many, many red flags that appear in those conversations”.

120    Dr Eades was further cross-examined about the meaning of Aboriginality generally. It was put to Dr Eades that Aboriginal people are “not a homogenous group”, Aboriginal people can live in urban areas, and whether a person is “Aboriginal” depends partly on their ancestry, and whether they have been accepted by their group, mob or tribe as being an Aboriginal person.

Defendants’ evidence

121    The Defendants did not call any evidence, but the Corporate Defendants tendered some documentary evidence.

122    The documents included:

(1)    Documents relating to St Andrews’ application to use the Westpac direct entry system and the authorisation of account access for accounts held with Westpac;

(2)    Offers of employment from BlueInc Services for various Sales and Retention Agents;

(3)    Emails between staff of St Andrew’s and BlueInc Services attaching feedback on scripts for policies and programs;

(4)    Documents relating to employee visa applications;

(5)    Various curricula vitae;

(6)    Information packs and fact sheets on policies sent to Consumers;

(7)    Scripts for selling insurance products;

(8)    Tax invoice for the Cruise Incentive;

(9)    Tax invoices for services provided by contractors;

(10)    PAYG payment summaries;

(11)    National Police Check application forms;

(12)    Final formal warning to Mr Hoey dated 5 October 2015;

(13)    Documents relating to the sale and purchase of the Vespa;

(14)    Documents relating to the Las Vegas Incentive;

(15)    Employment personal detail forms and related documents;

(16)    Product Disclosure Statements and Policy Booklets;

(17)    Select Portfolio & Claims Analysis;

(18)    Letters between ASIC and Bird & Bird; and

(19)    Summaries and extracts relating to outbound sales and employee remuneration during incentive schemes.

Jones v Dunkel

123    The unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party’s case: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 (Jones v Dunkel); and see Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 at [63]-[64]. The trier of fact may also draw an inference unfavourable to that party with greater confidence.

124    ASIC submitted that the Court can and should draw Jones v Dunkel inferences in respect to the Defendants failing to call certain persons as witnesses.

125    Most attention in this regard was focussed on Mr Howden who it was contended was uniquely placed to give evidence across all issues in these proceedings. As mentioned above, he is the sole director of all three Corporate Defendants, the Managing Director of the BlueInc Group, and was a Responsible Manager under Select’s AFSL during the relevant period.

126    ASIC identified three topics in particular on which such evidence could have been given. First, the Incentives, including Mr Howden’s involvement in their creation, approval and running, their purpose, the impact they had on agents’ behaviour and performance while they were operating and the selection of the recipients. Second, the Refer a Friend program, including the creation, approval and running of the program, the quality of the leads generated through the Refer a Friend program, the way in which Sales Agents utilised the leads generated through the Refer a Friend program, the point in time at which he and the Corporate Defendants became aware that the Refer a Friend program had resulted in the spike in sales in postcodes with a high proportion of Indigenous residents, and the extent to which blame should properly be placed on Mr Hoey and Ms Dudbridge. Third, the steps, if any, that he took as director to inform himself of the Corporate Defendants’ obligations under the conflicted remuneration provisions of the Corporations Act and to prevent the provision of the Incentives. ASIC expanded upon why it said Mr Howden could give evidence on each topic that would assist with the issues to be decided.

127    The Defendants submitted that the issues turn on the documentary evidence and the legal characterisation that should be given to the evidence. It was submitted that there is no unexplained failure to give evidence on an issue. It was submitted that it should be borne in mind that ASIC bears the onus of making out its allegations to the Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 (Briginshaw) standard. It was also submitted that no inference should be drawn in respect to the Corporate Defendants’ failure to call Mr Howden, as he invoked his penalty privilege, and that in Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 510 Levine J recognised that refusal to waive privilege may be an acceptable explanation for why a witness was not called.

128    I will address this issue during my consideration of the claims. Suffice to say at this stage, I do not accept the Defendants’ submission that Mr Howden could not have given evidence relevant to the issues. The topics identified by ASIC referred to above are relevant.

129    It is also appropriate at this stage to address the Defendants’ submission about the claim of penalty privilege.

130    In Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1 at [460], Austin J said:

The matter was addressed by the Court of Appeal in Adler v Australian Securities and Investments Commission (2003) 179 FLR 1 at [652]-[661] per Giles JA, with whom Mason P and Beazley JA agreed. That was a case in which, inter alia, pecuniary penalty orders were made, and so the defendants were protected by the penalty privilege, even before the High Court held in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 that the penalty privilege extended to civil penalty proceedings seeking disqualification orders. Giles JA considered whether the availability of the penalty privilege, which he recognised to be an extension of the privilege against self-incrimination, is inconsistent with the application of the Jones v Dunkel principle. He concluded (at [661]):

In the end the argument must be that it would not be consistent with this stance against self-incrimination for an inference adverse to the person from whom a civil penalty is claimed to be drawn because of the failure of the person to give evidence. That reasoning did not find favour in RPS v R [(2000) 199 CLR 620; [2004] HCA 3], in which the “right to silence” was not thought to be a useful basis for reasoning: at [22]. To say that a person cannot be forced to give evidence against himself, by providing discovery or answering interrogatories or, in a criminal context, making a statement to the police, says little when it comes to the giving of evidence in the person’s own case. In ordinary civil proceedings the defendant cannot be forced to give evidence in his own case. Civil penalty proceedings are no different in that respect. In my opinion it was open for Jones v Dunkel inferences to be drawn against Mr Adler, Adler Corporation and Mr Williams in these proceedings.

131    In Construction, Forestry, Mining and Energy Union v Australian Building and Construction Commissioner [2017] FCAFC 77; (2017) 251 FCR 528, the Full Court observed at [54]:

Nor did the Appellants put in issue the fact that Jones v Dunkel could be invoked in proceedings of the present kind, being proceedings of a quasi-criminal nature and where civil penalties may be imposed: Australian Securities and Investments Commission v Rich [2009] NSWSC 1229 at [459] to [463], (2009) 236 FLR 1 at 98 to 100 per Austin J (“Rich”). In subsequently applying this decision, Gilmour J in Australian Securities and Investments Commission v Fortescue Metals Group Ltd (No 5) [2009] FCA 1586, (2009) 264 ALR 201 at 225 observed:

[100]    Finally, in Rich, Austin J concluded at [458] that, having considered the reasoning in [Dyers v The Queen [2002] HCA 45, (2002) 210 CLR 285] and [Adler v Australian Securities and Investments Commission [2003] NSWCA 131, (2003) 179 FLR 1], the principle in [Jones v Dunkel] is applicable against either party to civil penalty proceedings.

[101]    ASIC seeks to draw [Jones v Dunkel] inferences against FMG by reason of the failure of Forrest and the other executives to give evidence. ASIC does not seek to draw the inferences against Forrest himself. Forrest has relied on the privilege against self-incrimination and the privilege against exposure to penalty, privileges which are not available to corporations … However, even if ASIC had sought to draw inferences against Forrest as well as the corporate entity, on my review of the authorities it would not have been precluded from doing so. There is no reason therefore, in these circumstances, why the inferences cannot, as a matter of law, be drawn against FMG in the present proceedings. The question which then arises is whether I should draw such an inference in the manner urged by ASIC.

[102]    The authorities state that two inferences are involved in the rule in [Jones v Dunkel]. First, a court might infer that the evidence of the absent witness would not have assisted the party that failed to call that witness; second, a court might draw, with greater confidence, any inference unfavourable to the party that failed to call that witness, if that witness appears to be in a position to cast light on whether the inference should be drawn …

132    And see Adams v Director of the Fair Work Building Industry Inspectorate [2017] FCAFC 228; (2017) 258 FCR 257 at [146]-[147]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466 at [76].

133    There is no reason as a matter of law why inferences cannot be drawn in this case.

134    There are a number of other witnesses in respect to whom ASIC contends inferences ought also to be drawn. It is submitted that they are in the Defendants’ “camp”, have not been called and are witnesses whose evidence might be expected to have elucidated particular matters.

135    They are Daryl Banks and Eugeniu Jalba who are both on the Executive Team of Momentum Life Ltd, which is wholly owned by BlueInc Group and as such controlled by Mr Howden. Mr Banks was the Sales Agent who sold insurance to Irshad Hussain. He was also one of the recipients of the Cruise, the Las Vegas Trip and the Hawaii Trip. His evidence would have, inter alia, elucidated the circumstances of the call with Irshad Hussain (including his state of knowledge), the impact of the Incentives on his behaviour and his observations regarding that of other Sales Agents. Evidence could also have been given of the Refer a Friend program. Mr Jalba was the Head of Finance and Operations for the BlueInc Group. He was the Responsible Manager on Select’s AFSL from about July 2015. He managed the customer service team of BlueInc Services, supervised the retention team and had the compliance team sitting under him. He attended the monthly compliance meetings. His evidence would have elucidated, inter alia, what if any role compliance played in the Incentives, and the adequacy or otherwise of the compliance system to identify and address the breaches occurring on calls to customers by reason of the Refer a Friend program. I accept ASIC’s submission that such evidence would be relevant, and in the circumstances they are witnesses that might be expected to have been called.

136    A submission was also made about five Retention Agents who made calls to the Consumers the subject of the Consumer Contraventions who are still employed by BlueInc Services, or were employed by BlueInc Services at the time the proceedings were commenced. It suffices to say that their roles varied in respect to their involvement with the Consumers, with some being very limited (and relating to only three Consumers). It is only in the retention context. That said, their knowledge of the Consumers’ circumstances was a live issue, with the Defendants contending generally that the Agents could not have known the features alleged by ASIC, and their evidence would have elucidated this topic. However, for the purpose of my conclusions I have not drawn any inferences from the absence of their evidence.

137    It is timely to recall at this stage, that it must be borne in mind that ASIC bears the onus of making out its allegations: s 140 of the Evidence Act, and given the allegations, there is no issue taken with the Defendants’ submission that it is to the Briginshaw standard.

Preliminary observations

138    Before addressing ASIC’s claims, it is appropriate to address two of the Defendants’ submissions at the outset.

The number of claims

139    The Corporate Defendants complain of the number of claims made in relation to this conduct. The purpose of this complaint is unclear, for although the claims are denied, the Corporate Defendants do not suggest there was anything preventing ASIC from bringing the allegations. It was not suggested there was any impediment to the matter proceeding to hearing.

140    Nonetheless, although one might properly question the number of claims made (in particular, in relation to some of the Consumer Contraventions, with numerous claims pursued for one individual call), such questioning does not detract from the underlying conduct. The focus on the number of complaints does not assist in resolving the claims, and ought not to distract from the issues being determined. As a general proposition it may be accepted that some conduct may amount to a contravention of more than one provision. That said, the efficacy of alleging multiple contraventions for the same conduct must be questioned, particularly if doing so does not substantially affect any penalty to be imposed, yet it may impact on the duration or complexity of the hearing. Whether that is so will depend on the given case.

The pleadings

141    The Defendants’ submission was also replete with assertions that certain matters were not pleaded by ASIC, or that its pleading was deficient. The Defendants repeatedly asserted that they were holding ASIC to their pleadings. ASIC challenges those assertions.

142    In that context, although some individual submissions will be addressed later in these reasons it is appropriate to make a number of general observations.

143    First, notably, the Defendants do not suggest that they did not know the case alleged against them.

144    Second, the pleading is to be assessed against the purpose it is to serve. It is important in that context to remember, as Dawson J said in Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 293, “[p]leadings are but a means to an end and not an end in themselves”.

145    In Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15 at [13], the Court observed that:

It is well-established that the main purposes of pleadings are to give notice to the other party of the case it has to meet, to avoid surprise to that party, to define the issues at trial, to thereby allow only relevant evidence to be admitted at trial and for the trial to be conducted efficiently within permissible bounds: see, eg Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 (at 664–665). However, it is also well-established that pleadings are not an end in themselves, instead they are a means to the ultimate attainment of justice between the parties to litigation: see Banque Commerciale S.A. (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 (at 293) per Dawson J who cites Isaacs and Rich JJ in Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq) [1916] HCA 81; (1916) 22 CLR 490 (at 517). For these reasons, the courts do not, at least in the current era, take an unduly technical or restrictive approach to pleadings such that, among other things, a party is strictly bound to the literal meaning of the case it has pleaded. The introduction of case management has, in part, been responsible for this change in approach: see the observations of Martin CJ in Barclay Mowlem Construction Limited v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 (at [4]–[8]). Even before the widespread use of case management, the High Court reflected this approach in decisions such as Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 (at 668–669) per Stephen, Mason and Jacobs JJ and Water Board v Maustakas [1988] HCA 12; (1988) 180 CLR 491 (at 497) per Mason CJ and Wilson, Brennan and Dawson JJ.

146    This was recently cited with approval in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2021] FCAFC 121; (2021) 396 ALR 27 at [152].

147    Third, the pleading is to be read as a whole and in context. It does not advance the Defendants’ case to consider matters pleaded in isolation. For example, in respect to vulnerability or the personal circumstances of the Consumers, it is not appropriate to consider each characteristic in isolation and separately from the others pleaded. Some submissions as to the pleadings are artificial, very technical, and not borne out by a proper reading of the Further Amended Statement of Claim (FASOC). To take only two examples at this stage. First, it was submitted that although ASIC characterised or described particular calls as the Consumers being railroaded, that allegation is not pleaded. However, in respect to each Consumer it was pleaded that certain conduct constituted, inter alia, undue pressure. In the context in which it appears, that is a synonym for what was submitted. Second, it was submitted that cold-calling was not an integer of unconscionability as it was not pleaded, and the anti-hawking provisions were not alleged. However, in respect to the Consumers, it is pleaded in respect to coercion that they were telephoned without prior notice. The pleading in relation to unconscionability, refers to the matters pleaded in respect to coercion and encompasses that conduct. Of course, those examples also further illustrate that a pleading must be read in its context and not in isolation.

Conflicted Remuneration Contraventions

148    This category of claims relates to four incentive schemes offered by Select to its Agents: the Cruise Incentive, the Vespa Incentive, the Las Vegas Incentive and the Hawaii Incentive.

149    In summary, it is contended that: Select contravened s 963E when the relevant Sales Agents accepted the Incentives because Select’s representatives accepted conflicted remuneration and it was the responsible licensee in relation to the contravention; and that Select contravened 963F of the Corporations Act in respect to each of the relevant Sales Agents accepting the Incentives. Further, ASIC contends that BlueInc Services contravened s 963J by giving the relevant Sales Agents the Incentives. It is also alleged that Mr Howden aided, abetted, counselled or procured, or alternatively, induced and was knowingly concerned in and party to, each of Select and BlueInc Services’ contraventions pursuant to s 79 (FASOC [30]-[81]).

150    The Incentives were planned and promoted by staff including Mr Howden, who ultimately approved all of the Incentives and their budgets. The Incentives were heavily promoted, including by email, posters on the office walls, and displays such as the Vespa being displayed in the Call Centre.

151    It is necessary to describe at the outset how the scheme operated.

The Incentives

Gold Coast Cruise

152    In the period of February 2015 to June 2015 (Cruise Incentive qualifying period), Sales Agents who sold Let’s Insure Funeral Cover or Let’s Insure Life Cover were able to participate in a sales incentive program named the “Let’s Insure Sailors’ Sales Incentive” (Cruise Incentive).

153    The benefit offered was a four night cruise package including accommodation, meals, a drinks package and two days annual leave (the Cruise). It was agreed that the Cruise Incentive was a non-monetary benefit.

154    The Cruise Incentive operated as follows: every sale of a Let’s Insure Funeral Cover or Let’s Insure Life Cover product during the period February 2015 to June 2015 earned one point and two points were deducted for any sale where commission was clawed back due to QA breaches. The ten Sales Agents with the most points at the completion of the qualifying period won the Cruise and three Wild Cards and two Sales Team Leader spots were also available.

155    There was an issue between the parties as to the types of QA breaches which resulted in a two point deduction. ASIC contended that point deductions resulted from five breaches relating to: call recording; general advice warning; omission of any exclusion; failure to obtain clear “Yes” to start the policy; and failure to obtain Direct Debit Authority. This contention was said to be based on the detailed presentation given to Sales Agents in 2015 at the commencement of the Cruise Incentive. The presentation listed these five breaches, and is said by ASIC to be the most reliable evidence of the terms of the Cruise Incentive.

156    The Corporate Defendants contended that the circumstances for QA breaches were broader and encompassed any breach of compliance or QA standards in calls with potential customers. They gave three reasons for this. First, it is consistent with the responses given by employees and former employees of the Corporate Defendants in their s 19 examinations. Mr Atwal, former Head of Sales for Select, said that there were compliance factors for all of the incentives and Sales Agents lost points for breaches of QA standards, including “missing certain parts of the script [that were] mandatory”. Mr Banks, who was a Sales Agent, Sales Manager and Team Leader for Select, said that under the incentives there were penalties for uncompliant sales. Simon Hudson, former Sales Agent for Select, believed there was a two-point deduction for QA fails, which was when a Sales Agent received below 90% on the QA sheet. Mr Howden said there was a rule under the incentives that for every failed sale Sales Agents lost two points. Second, it is consistent with the contemporaneous PowerPoint presentation used to promote the Cruise Incentive which advised in bold, underlined letters: “[y]ou will be deducted 2 points for every incident”. Although the PowerPoint presentation gave specific examples of breaches which would result in the loss of points (such as the “omission of any exclusion”), there is nothing to indicate that the loss of points was limited to those breaches. Third, it is consistent with Select’s response to a s 912C(1) Notice dated 15 March 2019, where Select responded to ASIC’s query about the manner in which qualification points were earned for the Cruise Incentive with: “[e]very failed call resulted in a deduction of 2 points”.

157    I accept ASIC’s submission as to the scope of the breaches. The PowerPoint presentation, which was for the purpose of explaining the scheme, did not, when referring to breaches, refer to all breaches. Nor did it suggest that the breaches referred to were merely examples of breaches. Although, as the Corporate Defendants submitted, the presentation advised in bold, underlined letters, “[y]ou will be deducted 2 points for every incident”, there is a larger context in which that statement appeared. On the same slide, immediately above that bold and underlined statement, is the question: “What can hinder my chances?” That question is followed by the answer: “[a]ny sale in which a commission is clawed back, due to any of the following breaches” (emphasis added), then it lists in dot points the five breaches to which ASIC referred. Plainly, the types of breaches are so confined. If the claw back was for all breaches, the presentation could easily have said so. It did not. The PowerPoint presentation is the only contemporaneous record.

158    The following individuals qualified for and went on the Cruise: Mr Shah; Amy Gibbons; Clare McParland; Clare Sadler; David Liu; Gregory Chadwick; Lee Marshall; Matthew Canning; Mr Hoey; Ms Dudbridge; Mr Hudson; Sinead Keane; George Flegg; Hugo Thompson; and Mr Banks. Each of the Sales Agents (except for Mr Banks) was an employee of BlueInc Services; and a representative of Select within the meaning of Ch 7 of the Corporations Act. I note that ASIC does not make a claim that BlueInc Services contravened s 963J in respect to Mr Banks (FASOC [34] and [41]).

159    The Corporate Defendants submitted that the five individuals who went on the Cruise as a result of receiving a Wild Card or by virtue of being the chosen Sales Team Leaders did not receive the benefit of the Cruise as a result of the number of Let’s Insure Funeral Cover or Let’s Insure Life Cover products they sold. These five individuals qualified, the Corporate Defendants submitted, for reasons unconnected with the points-based sales criteria.

160    ASIC’s case is that the benefit given to all 14 individuals constituted conflicted remuneration. The last sentence in [154] above was an agreed fact between both ASIC and the Corporate Defendants. The PowerPoint presentation states that to qualify for a Wild Card, Sales Agents must: “[h]ave an exceptional work ethic”, “[d]rive & motivate team members”, and participate in the “[o]ngoing promotion of the incentive”. The two Sales Team Leaders also sold policies during the Cruise Incentive qualifying period – they acted as Sales Agents and provided financial product advice. One of the Sales Team Leaders sold the policy to Ms Shadforth; the other, to Mr Mtawale (both the subject of the Consumer Contraventions). The two Sales Team Leaders, Mr Shah and Mr Thompson, in the Cruise Incentive qualifying period sold at least 79 and 112 policies respectively. These persons were participating in the volume based Incentive. All 14 individuals were acting as Sales Agents in participating in the Incentive during the qualifying period. As such, they were providing financial product advice in the course of the calls during the qualifying period. That they might have ultimately qualified, for example, as a Wild Card, does not alter that.

161    The Cruise departed on 16 July 2015 and returned on 20 July 2015. It was a leisure trip: it did not involve training, nor anything work related.

Vespa Scooter

162    In the period 9 February 2015 to 30 June 2015 (Vespa Incentive qualifying period), Sales Agents who sold Let’s Insure Funeral Cover or Let’s Insure Life Cover were able to participate in a sales incentive program named the “Vespa Sales Battle” (Vespa Incentive).

163    The benefit offered was a “brand new Vespa”, promoted as having a value of $6,000. The Vespa Incentive operated as follows. A Sales Agent earned one point in the period 9 February 2015 to 29 May 2015 for every sale of a relevant Let’s Insure product (First Round). The ten Sales Agents with the most points at the end of the First Round qualified to participate in a second round from 1 to 30 June 2015 (Second Round) and the ten Sales Agents in the Second Round had their points balance reset to zero and earned one point in the Second Round for every sale of a relevant Let’s Insure product. The Sales Agent with the most points at the completion of the Second Round won the Vespa.

164    The promotional material for the Vespa Incentive does not contain any reference to points being deducted in any circumstances. ASIC submitted that there is no basis to find there was any such practice. The Corporate Defendants submitted that Sales Agents lost two points for any breaches of QA or compliance standards on calls with potential customers, which was what they contended in relation to the Cruise Incentive. The Corporate Defendants relied on three points to establish this submission. First, they relied on the s 19 examination responses referred to at [156] above. Second, they pointed to the Vespa Incentive running at the same time as the Cruise Incentive, from February 2015 to June 2015. The obvious inference is that the incentives had the same qualifying criteria. It was said to be inconceivable that Sales Agents would lose points for a QA fail in one incentive but not the other, such that the same call could result in an agent earning one point in the Vespa Incentive but losing two points in the Cruise Incentive. Third, they submitted the qualifying criteria is consistent with Select’s response to a s 912C(1) Notice dated 15 March 2019, where Select responded to ASIC’s query about the manner in which qualification points were earned for the Vespa Incentive with: “[e]very failed call resulted in a deduction of 2 points”.

165    The Vespa Incentive appears to have been marketed and promoted differently to the Cruise Incentive. The Vespa Incentive was referred to as a “sales battle” setting up a two-stage competition between the Sales Agents. The Vespa was physically present on the sales floor throughout the Vespa Incentive. There is some logic in the Corporate Defendants’ submission that it would be rather unusual to have deductions for QA and compliance breaches for one incentive and not another that is running at the same time. That said, in relation to the Cruise Incentive, I find that not all breaches of QA led to a clawback of points. Although I am inclined to accept there was clawback for some breaches, the number would not have been any greater than that which occurred for the Cruise Incentive.

166    The Vespa Incentive was won by Mr Hoey.

167    The Corporate Defendants challenged the alleged fact that Mr Hoey actually received the Vespa; their case was that Mr Hoey was awarded $4,000 cash instead. Whether Mr Hoey received a monetary or non-monetary benefit was said to be relevant to whether the Corporate Defendants can rely on the exemptions in s 963B.

168    Mr Hoey’s evidence was that he was presented with the keys to the Vespa by Mr Howden in front of the other staff. At that time, Mr Hoey could not drive, and a co-worker offered to buy the Vespa from him. Mr Hoey and the co-worker agreed on a purchase price of $4,000. Sometime later, the co-worker changed his mind about the Vespa, and sought to sell it online. Mr Hoey did not deal with the actual sale process. The Corporate Defendants’ submission that the Vespa was sold “without [Mr Hoey’s] involvement and with little knowledge on his part” is inconsistent with the unchallenged evidence. There is also no basis to the Corporate Defendants’ assertion that Mr Hoey never owned the Vespa. When Mr Hoey won the Vespa and was handed the keys, the Vespa became Mr Hoey’s to sell, and he did precisely that.