ASIC v Telstra Super: trustee accountable for internal dispute resolution

The Federal Court has found that Telstra Super contravened its obligations regarding its internal dispute resolution (‘IDR’) procedures.  However, ASIC was not able to convince the Court that the nature and extent of these failures was significant enough for Telstra Super to have breached its ‘efficiently, honestly and fairly’ obligations as an Australian Financial Services (‘AFS’) licensee.

Background

ASIC brought proceedings against the trustee of Telstra Super alleging it had committed 204 breaches of its IDR procedure across 125 complaints. It was alleged that Telstra Super failed to fulfil the following obligations:

• The Corporations Act 2001 requires AFS licensees to comply with their general obligations which includes having a dispute resolution system and procedures that comply with ASIC’s standards and requirements.
• Regulatory Guide (‘RG’) 271 is the ASIC standard for IDR and imposes enforceable obligations for, amongst other things, complaints to be responded to no later than the maximum timeframe.
• For superannuation trustees, except for complaints regarding the distribution of death benefits, the maximum timeframe is 45 days after the receipt of the complaint.

ASIC further alleged, amongst other things, that:

• for complaints made between 22 October 2021 and 13 January 2023, only one third were responded to in 45 days., and in about 30% of those complainants received a response more than 100 days after their complaint was made; and
• these instances indicate a systemic failure to handle complaints efficiently, honestly and fairly.

The Court’s decision highlighted the following key takeaways:

Five business day exception

RG 271 does not require a financial firm to provide an IDR response if the complaint is closed within five business days due to the complaint having been resolved to the complainant’s satisfaction or the complainant having received an explanation or apology when the firm can take no further action to reasonably address the complaint.

However, Telstra Super had not maintained accurate records in its compliance database of when complaints were closed, and attempted to retrospectively claim some of the complaints in the proceedings were in fact closed and should not be considered.

The Court rejected this attempt and stated that, to rely on the exception, the complaint must actually be closed and recorded as closed or as resolved under this exception.

Reasons for decision and notifying of delays

If a trustee fails to make a decision on a complaint within the required timeframe, they must inform the complainant of the reasons for the delay. The notification can be given in circumstances where there is no reasonable opportunity to provide the response in the maximum timeframe because:

1. the resolution of the complaint is particularly complex; or
2. circumstances outside the trustee’s control causing delays.

The Court was asked to consider whether the reasons Telstra Super had provided met the standard and level of detail required to satisfy this requirement.

The Court stated it is not sufficient to merely state ‘the investigation into your complaint is ongoing…’.  There must be sufficient detail to enable a complainant to understand the reasons for the delay.

Telstra Super admitted it would send a delay notification routinely when it could not meet the maximum timeframes, and admitted they had not considered if the conditions in RG 271 to send a complainant a notice of delay of a decision had been satisfied.  Inadequate internal resourcing to meet the required timeframes is not sufficient reason for failing to send a notice of delay.

Efficiently honestly and fairly

All AFS licensees are required to provide financial services efficiently, honestly and fairly.

ASIC alleged that the nature and extent of the breaches demonstrated that Telstra Super’s IDR process was not operating efficiently, honestly or fairly – and, therefore, in breach of its obligations.

The Court held that the obligation to act efficiently, honestly and fairly is forward-looking and concerned with taking steps to achieve compliance with the statutory norm. The Court was not satisfied that the contraventions against Telstra Super were sufficiently serious departures from reasonable standards of complaints management and that the consideration of efficiently, honestly and fairly includes an assessment of reasonable expectations and reasonable standards of performance.

TIP 1: Licensees should ensure they maintain accurate records of complaints progress through their IDR process, particularly complaints that are closed within five business days of receipt.

TIP 2: Licensees should ensure there are adequate resources dedicated to their complaints function and that any delays are only for reasons related to the complaint rather than internal resourcing issues.

TIP 3: The Courts have now held in several cases that compliance arrangements do not need to be perfect.  The legal requirement is that they are ‘adequate’ – which does not preclude the fact that some compliance failures might occur.

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Author: Merren Taylor (Senior Associate)