In Australian Securities and Investments Commission v Commonwealth Bank of Australia [2022] FCA 1422 the Federal Court of Australia dismissed ASIC’s allegations that CBA contravened sections 12DA and 12DB(1)(e), (g) and (i) of the Australian Securities and Investments Commission Act 2001 (Cth) (misleading conduct) and section 912A(1)(a) and (c) of the Corporations Act 2001 (Cth) (not acting fairly and efficiently). Background.

ASIC claimed that each time CBA notified a customer in a customer account statement that a Monthly Account Fee (MAF) had been charged, CBA impliedly represented to the customer that it had a contractual entitlement to charge the MAF when it did not.

ASIC also claimed CBA contravened section 912A(1)(a) Corporations Act by CBA’s conduct in each of (i) charging MAFs to customers who were eligible for a MAF waiver, (ii) continuing and maintaining systems and processes that were “not capable of ensuring compliance with obligations to customers”, and (iii) failing to undertake “an appropriate review of the multiple systemic issues that contributed to the ongoing failures of CBA’s systems to apply MAF Waivers”.

CBA accepted that there were MAFs charging that should not have occurred. CBA received around $48 million (not including interest) during the relevant period for MAFs that were incorrectly charged. As at 13 September 2021, approximately $64,426,019 had been remediated to customers or paid to charity (where CBA was unable to make payments to customers).

With respect to the purpose of bank statements Justice Downes observed

“the ordinary and reasonable customer would not view a customer account statement as an invoice, but as a record of transactions that have occurred on the account. The ordinary and reasonable customer understands that a customer account statement is sent to customers so that they may acquaint themselves with those transactions and satisfy themselves that no disputed transactions have occurred, either by error of the bank, or mistake or malfeasance by third parties.”

Importantly, Justice Downes commented on the standards expected of licensees:

“the obligation imposed by s 912A(1)(a) must accommodate the possibility of error; were the position otherwise, then s 912A(1)(a) would set a standard that demanded absolute perfection, rather than a reasonable standard of performance… A requirement to establish and maintain systems and processes in which an error will never occur was not something that was necessary for CBA to do to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly within the meaning of s 912A(1)(a) Corporations Act. If the legislature had required perfection from licensees, the legislation would have stated this.”

ASIC did not provide expert evidence on bank systems and processes.

Justice Downes concluded:

“ASIC failed to establish that CBA, on each occasion during the relevant period that it entered into a contract with a customer, by the customer’s acceptance of the Terms and Conditions, and when it sent a customer an updated version of the Terms and Conditions following the customer’s entry into a contract with CBA, conveyed an implied representation that it had, and that it would have, adequate systems and processes in place to ensure that it could provide the MAF waivers where a customer satisfied the criteria specific to a relevant account contained in the Terms and Conditions.

Further, if such a representation was conveyed, it was not misleading or deceptive or likely to mislead or deceive because it would not have a sufficient tendency to induce error, having regard to the characteristics of the persons who comprise the relevant class of persons to whom the conduct is directed and the likely effect of the conduct on ordinary and reasonable members of that class.

ASIC therefore failed to establish that CBA contravened any of ss 12DA, 12DB(1)(e) or 12DB(1)(g) ASIC Act or that it breached its general obligation to comply with financial services laws in contravention of s 912A(1)(c) Corporations Act…

Although there were at least seven million occasions on which a MAF was erroneously charged during the relevant period when it ought to have been waived, CBA applied a MAF waiver to relevant accounts on approximately 610 million occasions during the same period. The occasions on which CBA wrongly charged a MAF therefore represented a very small percentage of the total number of occasions on which CBA was contractually required to waive MAFs during the relevant period (that is, about 1%). CBA’s systems and processes for providing specific MAF waivers were not infallible – no systems are – but they operated as intended almost all of the time. As a consequence, ASIC did not establish that CBA’s systems and processes failed to achieve a reasonable standard of performance. This tells against a conclusion that s 912A(1)(a) has been contravened.”

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Author: David Jacobson
Principal, Bright Corporate Law
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The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.