JUSTICE MUST BE SEEN TO BE DONE
In July 2016, just two weeks after Malcolm Turnbull was re-elected prime minister of Australia, the nation’s biggest fund managers, wealth companies, superannuation giants and life insurers gathered in Melbourne for the annual Financial Services Council summit.
Having just survived a Labor election campaign driven by a pledge to establish a royal commission into the financial sector, the wealth industry wanted to tell politicians they had had enough. They were sick of the constant reviews.
You could forgive them for thinking so. Since the end of the GFC, almost every aspect of financial sector regulation had been looked at. A 2009 parliamentary joint committee review of the financial sector led by Labor MP Bernie Ripoll changed the face of financial advice in Australia. There was a wide-ranging 2010 review of the super sector, led by former ASIC deputy chairman Jeremy Cooper. Former Commonwealth Bank boss David Murray was commissioned for the 2014 root-and-branch Financial System Inquiry. Former APRA member John Trowbridge in 2015 pulled apart the commissions and kickbacks strewn through the life insurance sector in a major review.
All in all, the various arms of the financial sector had been subjected to more than a dozen major reviews, the industry complained. There was an obvious sickness at the heart of the financial sector, but the chief lobbyist for the wealth management industry believed that all symptoms had been diagnosed and were quickly being treated.
‘The financial services industry has been under intense scrutiny for the better part of a decade—with fourteen different reviews and inquiries examining financial advice, superannuation and life insurance,’ FSC chief executive Sally Loane told the powwow. ‘Many of these reviews have been subject to further follow-up inquiries. The current and ongoing PC review into superannuation is a review into the recommendation of an inquiry that stemmed from a previous PC review. A time-consuming and costly royal commission into the financial system would undoubtedly delay important consumer-focused reforms. It should not be considered. It is a last-resort measure.’
Just on the numbers, Loane had it wrong. There had actually been fifty-one substantial reviews, investigations and inquiries since the financial crisis, of which twelve were ongoing at the time the royal commission was later announced. But just the fact that there had already been an avalanche of inquiries was an oft-repeated argument, mainly sprouting from the financial sector itself, that a royal commission was unnecessary. What more could there possibly be to inquire into, they begged. They were already snowed in.
In some ways, they were right. Countless hours had been spent trying to plug the holes in the battered financial-sector ship.
The Murray inquiry report had been a landmark document, forcing regulators to ensure that the banking system was ‘unquestionably strong’ with financial buffers large enough ostensibly to withstand the worst economic crises. It had also made the financial sector pick up the tab for ASIC’s funding, reviewed the capabilities of financial watchdogs, and looked at the state of the current regulatory architecture to ensure rent-seeking firms weren’t gouging customers.
The Cooper review had reformed the nation’s retirement nest-egg system and chopped down to size rampantly high fees that were being charged to customers who had no idea they were paying them.
The Ripoll review had sparked the Future of Financial Advice (FOFA) reforms, from then on making advisers act in customers’ best interests, while clamping down on lucrative kickbacks across the sector.
But for all the work, the broader public hadn’t been placated. There was review after review, committee on top of committee, penalty upon penalty, enforceable undertaking on enforceable undertaking, slapped wrist after slapped wrist, but the banking sector was still Australia’s biggest producer of scandals by a country mile. Whatever the reviews had done, they hadn’t gone to the heart of the misconduct.
The average Australian didn’t care what David Murray had recommended as the adequate level of regulatory capital banks needed to have to weather downturns. Moreover, most of the reviews had been carried out in back rooms without the interest or scrutiny of the mainstream media to amplify the process and explain it to the broader public. Once recommendations were handed to the government, a Treasury consultation process would begin in which the industry could simply lobby to water down any prospective reforms. Then, as implementation was handed back to governments, recommendations were quietly shelved indefinitely or weakened. Strong proposals were victims of ideological governments.
Following the Cooper review, the Gillard Labor government was privately incensed when Treasury modelling revealed how much superannuation tax breaks were costing the federal budget. Superannuation is the jewel in the crown of the Labor Party’s reform legacy, but Treasury’s modelling showed how the world-leading retirement system was failing in its basic task of taking pressure off the federal budget. The government was still spending much more on tax breaks for superannuants than it was saving on the age pension bill, and it would be doing so until about 2070.
The party’s close relationship to the super industry meant Labor was rarely able to gather the steam to properly reform the super sector. What the Australian public needed was an inquiry with teeth.
Just over a year after the FSC leadership summit, when the chairmen and the chief executives of the big four banks made their collective decision to write to the treasurer and ask that a ‘properly constituted inquiry into the financial services sector’ be established, they did so with the purpose that it would ‘put an end to the uncertainty and restore trust, respect and confidence’ in the industry.
To restore the public’s trust, the public had to be able to trust the review itself. A royal commission was the only way to ensure this. For justice to be done, justice also had to be seen to be done.
Such had been the determination of Lord Chief Justice Gordon Hewart in 1924 when he created the influential legal precedent that even the mere appearance of bias would be sufficient to overturn a judicial decision. It came after a motorcyclist known as McCarthy was prosecuted for dangerous driving after he was involved in a crash. As it turned out, a clerk working for the justices deciding on McCarthy’s case was also a member of the prosecutor’s firm that was chasing McCarthy over a separate civil claim stemming from the same accident.
When McCarthy appealed his case, even though the justices had sworn affidavits that they had made their decision to convict him without consulting the clerk, Justice Hewart overruled the decision because of the paramount interest of maintaining faith in the courts. ‘A long line of cases shows that it is not merely of some importance, but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done,’ Hewart said.
It was an acknowledgement that there were two conversations going on: one inside the courtroom to persuade the judge, and the other outside the courtroom to persuade the public. As the Turnbull Government drew up the terms of reference for the banking royal commission, it would have two conversations in mind: one, that it would need to properly inquire into misconduct in the financial system, and two, that it would need to be seen to be doing this.
And so began the best corporate blood sport in Australian history.
Looks can be deceiving.
While royal commissions look like, sound like and are even referred to as judicial inquiries, they are not at all proper courtroom proceedings. Although witnesses are asked to take oaths or affirmations, and the proceedings take place in courtrooms across the nation, royal commissions are arms of the executive government. As such, they are used to serve government purposes.
In some cases, those purposes are political.
Before it launched the banking royal commission, the Coalition government had set up inquiries into former prime minister Kevin Rudd’s home insulation scheme, known as the ‘pink batts’ scheme, and into misconduct in the trade union movement. The latter attempted to skewer Labor leaders Gillard and Shorten over historical conduct.
In other cases, royal commissions are used to allow the public to release pent-up angst. The government is able to be seen to be pursuing something, which lets the public know that things are being taken care of. A few heads on spikes, so to say. After the first royal commission into the banking sector was established in the 1930s, one of the commissioners, Professor R.C. Mills, told a Sydney bank manager that ‘the commission was superfluous except for giving some people a chance to blow off steam’.
While governments can give off the impression that they are tackling important issues with a royal commission, recommendations that come from the commission’s final report can also be ignored.
The Royal Commission into Aboriginal Deaths in Custody, which ran for four years from 1987 to 1991 and took the work of five commissioners, ended up making 339 recommendations. Some thirty years later, only two-thirds of its recommendations had been fully implemented, over which period the rate of Indigenous incarceration had doubled.
Pointing to the successes achieved by any royal commission can be a mug’s game, but most of the inquiries do attract public confidence as impartial, non-political and independent. The appointment of judges, ex-judges and senior lawyers to run the show helps with the veneer of credibility, even though the lawyers are not essential to the process. They are chosen because they are experienced in assessing evidence and understand the impact investigations can have on people and organisations.
High-ranking judges are also aware of the unique and unbridled power royal commissions have at their disposal. In all states and territories, royal commissions have powers greater than those given to police and prosecutors, especially the power to force witnesses to give evidence and to subpoena documents. The power of royal commissions to demand answers from witnesses exceeds that given to regular police.
However, where royal commissions fall short is in the ability to make formal findings of guilt or innocence. What they are allowed to do is recommend findings against individuals and companies, which can then be passed to prosecutors to properly stack up in a court of law if there is enough pressure to do so.
While royal commissions are given a wide degree of freedom, the temptation is still there for governments to attempt to constrain the process should they think an inquiry will backfire on them, their supporters or their electoral chances. The government controls the selection of the commissioners and their staff, the scope of the terms of reference, and the level of funding attached to the inquiry.
When Turnbull and Morrison announced the banking royal commission on the morning of 30 November 2017, they were instantly hit with criticism from opponents who believed the terms of reference would leave the inquiry hamstrung. Labor accused the government of failing to consult with victims of rogue financial outfits before designing the terms, and said the inquiry had been constructed on the banks’ own terms. Greens leader Richard Di Natale and Greens treasury spokesman Peter Whish-Wilson wrote to Morrison lobbying for broader terms out of concern the commission would miss some of the main systemic problems within the sector.
Morrison had earmarked $75 million to spend on the commission, which would have twelve months to investigate the banks, wealth managers and superannuation funds before reporting back to the governor-general. It would be led by one commissioner, who would also not be given the power to recommend any compensation be paid to victims.
Concerns about the commission soon fell away after the government announced the inquiry’s commissioner: former High Court justice Kenneth Hayne.
In some suburbs at least, Hayne became a household name. Hyped as a black-letter lawyer who would do things by the book, the generally media-shy judge was thrust into the spotlight. ‘He is renowned for his brilliant mind, his forensic skill and his deep sense of justice,’ Turnbull said when making the announcement.
Along with his talent, Hayne was also well known for his tireless work ethic. After leaving the High Court in 2015 at the age of seventy—the mandatory retirement age for the nation’s most powerful justices—he had continued practising law. He served on the High Court for seventeen years, and when he left the bench his wife, Michelle Gordon, took his place. He kept a low profile on the High Court, often siding with the majority vote of the seven-member bench. He participated in more than 400 judgements during his time, including a contentious ruling against the government in 2014 when 157 Tamil asylum seekers were held at sea by the Australian Navy; Hayne had recommended that the refugees be able to sue for damages. It was one of his more controversial decisions.
Banking executives attempting to read the tea-leaves for what Hayne would be like as a royal commissioner could look to prior decisions he had made. Some of these suggested the financial sector needed to hold itself to higher standards. For instance, Hayne had been one of three High Court judges who refused to allow Westpac off the hook over a blunder involving the dishonouring of thirty rent cheques sent by a western Sydney–based real estate agent. In that case, Westpac had to stump up $50,000 for libel in a 2010 judgement that overruled lower-court decisions that had said the bank was covered by the defence of qualified privilege.
‘To hold banks responsible to their customers not only in contract, but also for damage to reputation, is conducive to maintaining a high degree of accuracy in the decisions that banks must make about paying cheques,’ said Hayne along with his colleagues Chief Justice Robert French and former judge Bill Gummow. An accurate and efficient banking system was part of ‘the common convenience and welfare of society’, the judges said.
In a prescient decision, Hayne had also contributed to a landmark ruling allowing third parties to fund class actions in Australia. By the time he handed his royal commission report to the government, a dozen class actions would have been launched against Australia’s biggest banks and wealth managers. In one instance he sided with Andrew ‘Twiggy’ Forrest’s Fortescue Metals against the corporate regulator in 2012, while in another he forced a new vote after the bungled 2013 West Australian Senate election.
Hayne was born in Gympie in Queensland and schooled at the prestigious Scotch College in Melbourne. The bleak city became his home after he had a stint as a Rhodes Scholar at Oxford.
The justice soon developed a reputation for embarrassing barristers with his sharp intellect and his obvious impatience with long and protracted waffling. He was known to shame counsels by asking them to ‘help me to understand better than I do now the submission you have just put’. Other times, he would warn dithering lawyers that it would be ‘unwise to go back into the lion’s den to recover one’s hat’. In a 2013 case, he told a lawyer: ‘If you sit on the fence too long, Mr Solicitor, it becomes deeply uncomfortable.’
Appointed to the High Court by Prime Minister John Howard in 1997, Hayne was often pigeonholed as a conservative for his rather strict interpretation of the law. Indeed, he had been appointed by Howard in a bid to settle what was increasingly seen to be an activist court, following a string of high-profile controversial decisions. But while he played with a straight bat, Hayne was not afraid to go against the establishment.
His relationship with his wife was also out of the ordinary for an establishment judge. Hayne met Gordon, his second wife, when he was acting for the Bank of Melbourne during a 1990 case about the botched sale of a life insurance business. Three years after the case Hayne divorced his first wife, with whom he had four children, married Gordon and had another son.
Hayne was seventy-two years of age when he was appointed to the banking royal commission, and his formidable work ethic would be put to use in his new role. With the government giving him just twelve months to trawl through a decade’s worth of misconduct in the country’s largest industry, he would not be able to dawdle.
Hayne once attempted to schedule proceedings, unknowingly, on a Saturday. When this was brought to his attention, he quipped: ‘I am all in favour of the legal profession running a seven-day week, but others may have a different view.’
Multi-tasking was a necessity. Witnesses dragged onto the stand would sometimes wonder if Hayne was paying attention to the proceedings. He would be viewing various screens and scrolling on his iPad, or sitting back in his chair and looking at the roof, only to interject about an apparent inconsistency in testimony that had been missed by all the other lawyers in the room. ‘I am not using this to play Angry Birds,’ he told them.
However, the former High Court judge had made some mistakes. In 1995, after he had just been appointed to the newly created Victorian Court of Appeal, he decided to give reprieve to a young offender who had been sentenced for trafficking the drug ice, seeing good prospects of rehabilitation for the young offender. That man, Carl Williams, eventually became one of the kingpins of the gangster underworld in Melbourne and would have spent thirty-five years in jail for three murders if a fellow inmate had not beaten him to death three years into Williams’ sentence. ‘I am not altogether certain that these events completely fulfilled the excellent prospects for rehabilitation which we had so confidently predicted twelve years earlier,’ Hayne told a gathering of lawyers in 2014. ‘The lesson? None of us is infallible.’
No one was infallible. Especially not the treasurer who had long opposed the royal commission.
Despite voting against a banking royal commission twenty-six times by Labor’s count, Scott Morrison was soon shocked by what the inquiry turned up. Just days into the commission’s second round of public hearings, Morrison was forced to call a press conference to regain control of the narrative, which had been quickly escaping the government. To be fair to Morrison, few others had seen it coming either.
AMP, the Sydney-based wealth manager, had never been lumped in with the scandal-prone four major banks. The so-called fifth pillar of Australia’s major financial conglomerates, AMP had been a perennial underperformer for shareholders but was otherwise known to the public as a reliable financial advice provider with a respectable brand. A demutualised mutual friendly society with a history stretching back 169 years and a headquarters fronting onto Sydney’s harbour gateway at Circular Quay, it had long been paraded as a bastion of sound financial management.
But by the end of the second round of hearings in April 2018, that reputation was in tatters. AMP was revealed to have charged millions of dollars in fees to customers without providing any service in return. Then the company’s board, which was dotted with darling veterans of the Australian corporate scene, had gone on to mislead ASIC at least twenty times over the heist when the regulator started asking questions.
The scandal triggered a wholesale clean-out of the upper ranks of the company and cost it close to $1 billion in refunds for wrongly charged fees. The AMP share price was smashed to smithereens, falling more than 50 per cent and in the process wiping out $7 billion in market capitalisation.
In a series of rolling crises, the AMP disease spread to nearly every facet of the organisation. Its financial advice arm was sordid, its superannuation business a disaster, and its life insurance unit rotten. Chief executive Craig Meller was quickly pushed out of the company and chairman Catherine Brenner, a high-profile member of the Sydney corporate establishment, soon followed. Half the board vanished, and a raft of other executives and managers had to leave the group.
The extent of the scandal took pretty much everyone by surprise—including the treasurer. ‘What has occurred here and what has been admitted to in the royal commission by AMP is deeply disturbing,’ Morrison told reporters outside his Bligh Street office in a hastily organised press conference. ‘This type of behaviour can attract penalties which include jail time—that’s how serious these things are.’
The threat of jail time for executives, until that point, had not been seriously considered. For years Australians had been told there was no point in even holding a royal commission, and yet after just a few weeks of public hearings, prison sentences were being discussed.
After the treasurer’s comments, other members of the government that had blocked the royal commission were flushed out with admissions they had been wrong to oppose it. ‘In the past I argued against a royal commission into banking,’ said former deputy prime minister Barnaby Joyce. ‘I was wrong. What I have heard so far is beyond disturbing.’ A few days later, Turnbull reluctantly conceded that the government shouldn’t have resisted the commission: ‘All of the commentators are right when they say we would have been right to establish one earlier.’
Turnbull’s admission was a few days late for the rest of his Cabinet members, who had not been given the go-ahead to offer messages of regret to victims of financial malfeasance. They were still under the impression that a government could not be seen to be fallible. In a bizarre exchange with the ABC’s Barrie Cassidy, Financial Services Minister Kelly O’Dwyer had refused to make the concession just days earlier on national television. Cassidy had wanted to know whether the Coalition thought it had made an error in resisting the inquiry, but O’Dwyer wouldn’t engage with the idea.
O’Dwyer: I’ve answered your question.
Cassidy: No you haven’t.
O’Dwyer: I have answered your question.
Cassidy: You haven’t said whether you were wrong or right to delay it.
O’Dwyer: I’ve said we’ve established it. We have in fact established it. Cassidy: You have established it, but it took a long time coming. Were you wrong?
O’Dwyer: Well let me put it to you this way. We would not have done all those other things that we would otherwise have done to address these actions.
Humiliated for a week after the exchange, O’Dwyer had to clear the air. ‘With the benefit of hindsight we should have called it earlier. I am sorry we didn’t, and I regret not saying this when asked earlier this week,’ she said.
For Morrison it would take a few more months, a few more rounds of hearings and one more leadership spill until he made the same concession as Turnbull had. It would also take one of the most galling examples of misconduct to extract the apology, like a sore tooth, from Morrison’s mouth.
This was as the commission revealed how the boiler-room insurer Freedom Insurance had repeatedly refused to cancel a funeral insurance policy sold through a cold call to a man with Down syndrome. The man was audibly disabled and had been pressured into buying something he did not understand. Despite his father, Baptist pastor Grant Stewart, repeatedly requesting the company to stop deducting money from his son’s bank account, the call centre workers had refused to end the policy, and Stewart had then been mocked by Freedom Insurance employees as a ‘bloody whinger’ for attempting to cancel the useless and expensive insurance policy.
Morrison, who had for so long resisted the commission and then resisted admitting it had been wrong in hindsight to block the inquiry, could no longer resist. ‘Of all the problems I was seeking to address in the banking and financial industry, the real hurt being felt by Australians also needed to be addressed,’ he said under assault during parliament’s question time. ‘I regret we didn’t do it earlier.’
The inquiry was so powerful that under the glare of the spotlight, the big four banks were also forced to acknowledge their regret. After years of pushing back against such an inquiry, the landslide of wrongdoing was proving too great a weight to hold back. ‘I was wrong,’ said ANZ chief executive Shayne Elliott. NAB boss Andrew Thorburn said, ‘It is now clear to me that the royal commission is necessary and justified.’ Westpac chief Brian Hartzer and Commonwealth Bank boss Matt Comyn agreed.
They were forced to admit their contrition not just because of the clarity and weight of the evidence of misconduct: they were also helpless in the face of a deeply talented team of counsels chosen to assist the royal commission, who drove the show. Along with the support of twenty solicitors on secondment from the Australian Government Solicitor, Hayne had handpicked a handful of key counsel to spearhead the inquiry. With the top ranks of the Australian corporate world glued to the royal commission, the solicitors would go on to become lauded figures in their own right.
Rowena Orr, QC, was one of these solicitors. Her time at the royal commission and her careful cross-examination of befuddled banking executives would earn her fans across the nation, and the Financial Review would later name her ‘Australia’s favourite barrister’.
Described as a reluctant rock star, the closest Orr came to having a catchphrase was ‘Can I show you a document?’ This was delivered multiple times to witnesses when, unbeknown to them, they were about to be shown proof they had been lying for the past hour. The tactic quickly earned her the nickname ‘Shock and Orr’.
Before being catapulted to fame at the royal commission, Orr had already had a stellar career. A previous commission was even under her belt: she had acted as a senior counsel assisting in the Victorian inquiry into family violence.
Born in Sydney in 1973, Orr trained in Queensland in law and economics before working for High Court judge Michael McHugh, where she popped onto Hayne’s radar. She then worked as a solicitor for the Commonwealth Director of Public Prosecutions and went on to study criminology at Cambridge University.
While she has more recently made her name tackling well-heeled executives, her case history prior to the royal commission was markedly different. It included an inquiry into the death of one-year-old Jaidyn Leskie, who was abducted and murdered in 1997. The toddler’s babysitter, Greg Domaszewicz, was charged with murder but subsequently found not guilty in 1998. The murder goes unpunished to this day.
Another case, the most recent before her stint at the Hayne inquiry, was representing an Iranian-born woman who was resisting extradition to the US on charges of skirting around sanctions. She lost.
Other cases she won. One was the defence of Paul Yore, a young artist who was fighting child pornography charges over an exhibition of collages where children’s faces were pasted onto adult bodies. Another was for the ACCC over a dodgy vacuum cleaner company that was preying on elderly women with high-pressure door-to-door sales.
Orr was already known in the legal community for her ability to be across a brief and show intimate knowledge of the evidence at her disposal. Executives were powerless to obfuscate and bloviate under her calm and methodical examination, not for want of their lacklustre attempts to outsmart her. Before the royal commission wrapped up, legal eagles around Melbourne were whispering that she would go on to become a judge.
Whereas Orr was a powerful examiner, her colleague Michael Hodge, QC, showed a profound grasp of how the spider-web of financial system laws and regulations drove banking misconduct. Hodge earned the nickname ‘Babyface’ due to pundits’ inability to place his age—he had been a silk for barely a year before he was called up to the royal commission.
The young silk had a penchant for drama. A barrister by day, he was also the co-author of an off-Broadway hit, Clinton: The Musical, with his brother Paul. The play, which won plaudits from the New York Times, followed the colourful administration of the former US president.
When not penning stage plays, Hodge had worked on major cases such as the Grantham floods inquiry and the Queensland Rail Strachan inquiry.
Whereas Orr earned her stripes in the first round of hearings, taking apart the banks over loose lending standards, Hodge made headlines after demolishing AMP’s head of financial advice, Jack Regan, in the second round of hearings on wealth management. In a wry exchange between Regan and Hodge, the executive had to be walked through just how many times AMP had misled ASIC over its fees-for-no-service debacle. The bumbling Regan lost count of the number of transgressions as he was plied with more and more evidence. It made for excellent nightly news grabs for the commercial TV stations.
‘By my count this was the fourteenth false or misleading statement by AMP to ASIC?’ Hodge asked Regan, who was by this point unable to give a response. ‘You’re losing count?’ Hodge said, to laughter in the Melbourne Federal Court hearing room.
‘I’m in your hands in that regard’ was the best Regan could muster.
From there, the count of documents showing AMP misleading ASIC kept rising. ‘I think that takes us to seventeen false or misleading statements by my count,’ Hodge said at one point.
‘Were you counting that as one or two?’ asked Regan.
‘I only counted that as one—do you think I should count it as two?’
‘I think in fairness, Mr Hodge, you should.’
‘OK. The eighteenth false or misleading statement by AMP to ASIC.’
While show business was a certifiable skill for the QC, Hodge also grappled with some of the more complex aspects of financial services laws during the commission. These included the notoriously abstruse arrangements between superannuation funds, their trustees and the related parties owned by the corporations. The complexity was used as a tool to siphon as much cash out of unsuspecting customers as possible. Behind the scenes, Hodge would spend hours working with the PC to get his head around the current regulations that allowed this discreet heist to occur, and to understand what changes were needed to prevent it from happening again.
Then there was Mark Costello, a barrister with the Victorian Bar. He played a smaller role in the public hearings than his colleagues Orr and Hodge, but hit the headlines after putting a witness in hospital with his examination.
Costello had previously acted for the Commonwealth in the high-profile dual-citizen fiasco cases considering the eligibility of MPs to hold office, including Barnaby Joyce, Malcolm Roberts and Nick Xenophon. But it is the examination of Dover Financial boss Terry McMaster that may come to be Costello’s most fondly recalled career highlight.
McMaster was the sole owner of Dover Financial, an advice shop maligned within the corporate regulator as the ‘licensee of last resort’ for its habit of hiring dodgy planners who had been booted out of slightly less maligned institutions. During a gruelling interrogation that stretched for hours, Costello told the commission that McMaster was the head of the only company that had refused to respond to the inquiry’s initial request for information on misconduct.
‘The word “decline” is strong,’ McMaster said. ‘A better word is “didn’t respond”.’ It was clear to Costello that McMaster wouldn’t go down easily.
However, when it came to discussing Dover’s cutely named ‘Client Protection Policy’, McMaster was left speechless, and then unconscious. Under the policy, clients were made to agree that Dover would not be held responsible if a financial adviser failed to do a long list of things that customers of any other organisation would expect to be routine. These included considering a customer’s circumstances before giving them advice, and undertaking adequate research about a product before selling it to them.
Customers also agreed to hold any investment for at least a decade without complaining, no matter how bad the product was. Dover told its customers: ‘You are responsible for ensuring our advice to you is implemented on a timely basis notwithstanding you may have engaged us to implement it for you.’
Costello put it to McMaster that it was ‘Orwellian’ to describe the policy document, which sought to insulate the company from any liability, as providing protection to a client.
Here, Hayne interrupted to ensure the witness knew the seriousness of providing a misleading document to his customers. ‘I should perhaps say that if it were misleading or deceptive, that might draw attention to relevant provisions of the ASIC Act about making misleading or deceptive statements,’ he said.
McMaster, who had fixed one eye firmly on the wall-mounted clock as the day’s hearing entered its twilight hours, began to fret. He soon turned sickly pale and began breathing heavily, and then, without so much as a whimper, he collapsed in the stand.
Hayne stood up out of his chair and demanded that triple-0 be called before ordering the public out of the courtroom. Then, for the full glory of the evening’s news bulletins, McMaster was stretchered out of the Federal Court and wheeled into the back of an ambulance. An absent look, tinged with relief, was all that was sketched on his face as he was trundled off to hospital.
Thus, the moniker Mark ‘Heart Attack’ Costello was born. It was showbusiness. It caught the attention of the public. And Canberra wanted a piece of it.
While some of Australia’s best reporters were given the job of following the royal commission’s every move, a few politicians decided to go and experience the show for themselves.
Labor MP Tim Watts, whose electorate was just a stone’s throw away from the Federal Court in Melbourne, was the first to sit in on the proceedings. He relayed the action by live-tweeting the event and it was such a hit that Labor leader Bill Shorten shared the tweets with his own followers.
About a month later, One Nation’s Pauline Hanson called a press conference outside the courtroom to proclaim her involvement in setting up the inquiry. She applauded the work of the commission but, sniffing opportunity in the political winds, tried to extract maximum capital from the show. ‘I hope that at the end of this there is justice,’ she said. ‘For the people here, and I’ve spoken to these people here today, there is a fear that there has not been justice, and there is a feeling that justice will not prevail at this royal commission. There have been over 5500 submissions and a lot of them will not get their chance on the floor of the Federal Court to have their case heard. And that will be a shame.’
Despite the commission eventually handling more than 10,000 submissions from the public detailing all sorts of misconduct and tales of woe, the commission chose to publicly examine only twenty-seven ‘case studies’. These came from a carefully curated set of witnesses who were called up to give evidence on the stand before the commission questioned the executives responsible for the misdeeds.
The solicitors knew how to choose them. From the cast of thousands, the royal commission found the witnesses who could convey the most impact, could relay the most harrowing tales of misfortune, and had circumstances that were the most able to illustrate where the problems lay and, from there, the avenues of possible resolution. To allow all 10,000 complainants to give evidence on the stand would have proved too unwieldy, even if each of them had genuine input, but the curation provided enough of a gap for some politicians to claim the royal commission hadn’t gone far enough.
Like flies to the carcasses of Australia’s corporate heroes, Opposition and crossbench MPs buzzed in from across the country to the royal commission. Renegade MP Bob Katter flew into Brisbane to attend the hearings there, but whereas other MPs complied with the dignity of the proceedings, the member for Kennedy first fell asleep, snoring in the corner, and then, cap-in-hand, made demands to the bench as the hearing was in motion.
Just before the commissioners took a break for lunch, Katter interrupted proceedings to demand why Hayne had not yet delivered proposals to clean up the finance sector. ‘Could I just ask—are we going to address why these things happen and what we can do to improve it in the future?’ he said. The inquiry had only been going for three months at this point.
It was the second interjection from the independent MP, after he had earlier yelled out ‘Can’t hear ya’, as Orr began to interrogate ANZ executive Benjamin Steinberg.
Hayne shot down the unruly MP, saying, ‘All I will say to you is that we are looking at these things at the moment through the lens of particular case studies and there is a deal of work that goes on behind the scenes before, during and after. Ultimately the fruits of that work are going to have to appear in my report and that’s the way that I will have to deal with that. You’re not the only one who is concerned, Mr Katter—a lot of people are concerned.’
Hayne’s message fell on deaf ears with members of other political parties. Not long after the Katter episode, Greens leader Di Natale and his treasury spokesman, Whish-Wilson, assembled out the front of the Melbourne Federal Court as it returned for its investigation into bank-owned superannuation funds. Di Natale used the setting to launch the party’s banking policy, designed to fix the ‘cancer at the heart’ of the banking and financial services sector.
Launching the policy to break up the banks just moments after Hayne had raised the prospect that NAB may have committed a crime by taking money from superannuation customers to which it was not entitled, Whish-Wilson said current regulations had failed: ‘At what point is too much profit too much? That’s what’s at the heart of the royal commission. Malcolm Turnbull said this is not capitalism on trial. Well, in a sense it actually is.’
Labor’s financial services spokesman, Clare O’Neil, also joined the show. In late September, she sat quietly in the public gallery as the commission examined the nation’s biggest insurance companies. She must have liked what she saw, because two weeks later she would announce, with the backing of Shorten, that Labor would be holding its own version of the royal commission. The so-called community banking roundtables would take place in cities and towns not visited by the royal commission, ostensibly to hear stories from victims who had not been given the opportunity to share their complaints in public on the stand at the real banking inquiry.
‘Australians across the country deserve their chance to be heard. Unlike the Liberals, Labor will listen to victims,’ Shorten said.
It was a chance for Labor to show voters it was the only party that genuinely cared about banking victims. Local MPs from Geelong to Adelaide were told to head along to the roundtables held in their electorates. More than a dozen were held across the country. It was brazen politics. At the same time as Labor was campaigning for the royal commission to be extended, it was running its own second-rate concurrent inquiry into banking misconduct.
It looked exactly like the political stunt it was designed to be. Each time Labor called for the royal commission to be extended, the government responded that it would indeed grant Hayne extra time if he asked for it. But still Labor continued to demand the extension, despite Hayne making a note of his disinterest in an extended timetable in his interim report. ‘The banking system is a central artery in the body of the economy,’ he wrote. ‘Defects and obstructions in the artery can have very large effects. Likewise, prolonged injections of doubt and uncertainty can affect performance. Therefore, I must execute my tasks promptly.’
Shorten, O’Neil and Labor had either not read his report or did not care for what the commissioner had to say. For a party that had campaigned for the royal commission for so long, Labor seemed uninterested in working with the commission on Hayne’s terms. In its submission in response to the interim report, the party chose not to answer the more than 100 policy questions put forward. Instead, it sent the royal commission a glossy booklet outlining the lessons it had taken from its own community roundtables.
The eighteen-page Labor report was not designed to be read by the commissioner or his counsel assisting. Rather, it was a public document for potential voters, mostly useless to the solicitors who had painstakingly trawled through the 10,000 submissions made to the commission. In it, Labor retold stories from people who had attended the fifteen roundtables held across Australia. It seemed to fly in the face of the instructions outlined by Hayne, who called for responses ‘on policy issues identified in the interim report’ and specifically said he was ‘not seeking information relating to individual disputes or instances of misconduct’.
On both counts, Labor had ignored the requests.
But what could one expect? Royal commissions are political beasts, set up by the government for political purposes. It is only natural then for the Opposition to want to use them for its own political purposes. The banking royal commission and its counsels and solicitors, and the witnesses who had built up the courage to tell their stories, were just collateral damage in the carnage of the Corporate Colosseum.