The Commission’s tasks

In the Interim Report I pointed out that the first paragraph of the Terms of Reference obliged me to inquire into whether conduct might have amounted to misconduct (as defined) and that the second paragraph required me to consider whether any conduct, practices, behaviour or business activities by financial services entities fell below community standards and expectations.

Although it repeats what has already been said in the Interim Report, it is important to set out, again, my understanding of my tasks.

The term ‘misconduct’ is defined in the Letters Patent as including four classes of conduct:

  • conduct that constitutes an offence against certain laws;
  • conduct that is misleading, deceptive, or both;
  • conduct that is a breach of trust, breach of duty or unconscionable conduct; and
  • conduct that breaches a professional standard or a recognised and widely adopted benchmark for conduct.

Consistent with the essential character of a Royal Commission (as a nonjudicial task) the Letters Patent require me to inquire into whether any conduct might have amounted to misconduct. I am not asked to decide whether conduct did constitute an offence, or other contravention of law. If conduct might have amounted to misconduct, I am required and authorised to decide whether the question of criminal or other legal proceedings should be referred to the relevant Commonwealth, state or territory agency. Any decision about bringing proceedings is a matter for the relevant agency, not for me.

This report sets out conclusions I have reached in relation to the matters explored in public hearings. I set out my conclusions about what happened, what was done or not done, and what legal characterisations might attach to or be associated with those factual conclusions.

The conclusions I reach about whether conduct might have amounted to misconduct are, and must be, based on the information that has been assembled during the course of the Commission’s inquiries. Much, but not all, of that information was provided by evidence given in the course of public hearings; some was gathered in other ways, including, for example, from submissions made to the Commission by financial services entities and others.

The conclusions that I reach have no binding or enforceable effect, whether against those who are said to have engaged in relevant conduct, against others who have appeared in the course of public hearings or in any other way. I cannot, and do not, decide whether evidence given in hearings conducted by the Commission would support a finding of contravention of law, if this evidence could be, and later was, adduced in properly constituted criminal or civil proceedings.

In their submissions, persons given leave to appear have often emphasised that a conclusion that there might have been misconduct should not be reached lightly. Unsurprisingly, the submissions have been framed in the language of the courtroom, with references to standards and burdens of proof. And references of that kind (especially to notions of burden of proof) originate in the essentially adversarial common law system of judicial trial, in accordance with rules of evidence.

The processes of a Royal Commission, and hence of the inquiry I have conducted, are radically different from those of a court conducting a trial. The Commission is an inquiry instituted by the Executive. It is not bound by the rules of evidence. The notion of a burden of proof has no application. But the essential point made – that a conclusion that there might have been misconduct should not be reached lightly – is undeniably true.

I cannot form a conclusion about what has happened or what has been done or not done without my being persuaded of the relevant fact. And as Dixon J pointed out in 1938, ‘[t]he seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal’.[1]

The conclusions that I express in my reports (interim and final) may have grave consequences. Allegations of misconduct are serious.

Members of society ordinarily do not engage in conduct that is dishonest. Most members of society try to act within legal rules and regulations.

All of these are matters that I have striven to bear at the forefront of consideration when forming the conclusions I express. Most especially has that been so in respect of two kinds of conclusion – first, a conclusion that conduct by a financial services entity (or by directors, officers or employees of an entity or by someone acting on behalf of the entity) might have amounted to misconduct, and second, the related but distinct conclusion about whether the question of criminal or other legal proceedings should be referred to the relevant Commonwealth, state or territory agency.

It will be seen that there are some cases in which I say that particular conduct amounted to misconduct rather than that the conduct might be of that character. I have thought it right to go so far in cases where the entity concerned acknowledged in its submissions to the Commission that what had happened amounted to misconduct. Apart from those cases, however, I have sought to express no larger conclusion than that conduct might have amounted to misconduct of a particular kind.

It will also be seen that I have referred aspects of the conduct described in the following case studies to the Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA) or, in some cases, both. Those references are in addition to the steps I took, in November 2018, under Section 6P of the Royal Commissions Act 1902 (Cth), to communicate certain information to ASIC that I considered related, or may relate, to contraventions of the Corporations Act 2001 (Cth), in particular Section 1041G of that Act (engaging in dishonest conduct, in the course of carrying on a financial services business in this jurisdiction, in relation to a financial product or financial service).

[1] Briginshaw v Briginshaw (1938) 60 CLR 336 at 3612.