The Financial Services Royal Commission recommended that the “hawking” of insurance products be prohibited. That has not yet been put in place and current indications are that it is still some way off. So, what should insurers and their representatives be doing in the meantime?
Treasury has set 30 June 2020 as the date for introducing legislation into Parliament to make the anti-hawking changes recommended by the Royal Commission1. Given that it might not pass until after that date, it is likely to be around a year before the changes commence. However, that should not be taken as a reason for inaction. We already know most of what we need in order to respond to the Royal Commission’s recommendations and to prepare for the changes when they come.
There already exists an outright prohibition on offering financial products for issue or sale during unsolicited meetings with retail clients. That will remain, unchanged.
A similar prohibition exists with respect to unsolicited telephone calls to retail clients, however that is currently subject to an exception that allows such calls where prescribed timing, disclosure and other requirements are met. The Royal Commission’s recommendation is that that exception be removed.
The Royal Commission also recommended that a formal definition of “unsolicited” be established, to improve the clarity of that important term. Commissioner Hayne’s view was that that definition “might usefully be based” on ASIC’s existing guidance2.
So, for those product providers which are not currently using the exception to make outbound telephone calls, it does not look like there will be very much change at all. Meetings and calls can be had provided they are not “unsolicited” and ASIC’s guidance, or something similar, will continue to apply in determining whether that is so.
However, I’d suggest there is value in delving a little deeper. There is a good deal that can be taken out of the Royal Commission’s findings and ASIC guidance to help determine whether the letter and intent of the anti-hawking requirements are being met today and to prepare well for the future.
As stated above, the Royal Commission referred favourably to ASIC’s guidance on the meaning of the word “unsolicited“. While that guidance has always been important, it now carries additional weight and will likely form part of the amended legislation when it comes. Let’s look carefully, then, at what it says.
ASIC states that a meeting or telephone call will be unsolicited unless it takes place in response to a “positive, clear and informed” request from the customer.
For a request to be “positive“, there must be a “conscious decision” and an “active step” by the customer. ASIC points out, quite naturally, that an opt-out approach will not normally achieve this. It also states that, where a request is sought through a document, that should be done in a way that clearly brings the request to the customer’s attention. A standalone request will be the safest approach to achieving this. It is also possible to obtain requests through a document or transaction which also deals with other matters – for instance, where the customer is asked whether they would like a meeting or call to discuss other products as part of an online transaction or application form – however those will need to be treated with particular care.
In relation to ASIC’s requirement that a request be “clear“, there needs to be some specificity about the products the customer wishes to discuss. ASIC’s guidance states that customers should be encouraged to identify the products they are interested in. Commissioner Hayne’s comments, that a meeting to discuss one type of product may not be used for the unsolicited offering of some other type of product, emphasise the point. Product providers should not, therefore, be inviting customers to make a general request to discuss all products. Instead, they need to approach the matter in a way which allows the customer to specify particular products or product classes they are interested in. This will be easier to do in some contexts than others.
The third part of ASIC’s test is that the request must be “informed“. For that to be the case, the customer needs to be given enough information to allow them to “carefully consider” whether to request the meeting. This might be relatively easy to achieve online, where summaries of cover and Product Disclosure Statements can be made available, but may be more challenging in other contexts.
Once a “positive, clear and informed” request has been made, the product provider will need to make sure that the meeting or call remains within the scope of the request. That scope will depend principally on the terms of the request made and, as ASIC states, what a reasonable person would expect to be discussed having regard to those terms.
ASIC goes on, however, to state that regard may also be given to “any previous dealings” between the product provider and the customer. It illustrates its point by providing examples of how that might work. Most relevantly, it states that the offer by a doctor of an insurance product during a medical examination would generally be “unsolicited“, however that the offer of travel insurance by a travel agent during a meeting to organise an overseas holiday would generally be acceptable. That conclusion is presumably based on the view that a reasonable person would expect travel insurance to be raised during such a meeting, despite it not having been specifically mentioned in the request.
While the surrounding circumstances of a meeting or call will be relevant to determining whether a meeting or call has been solicited, I think reliance on “previous dealings” should be treated with caution. If there is any doubt at all, it will be safer for the product provider to have a process in place to check with the customer before going ahead; to make sure that they have demonstrably received a “positive, clear and informed” request.
The anti-hawking prohibition exists to protect customers from the vulnerability that can arise in the case of unsolicited meetings and calls; or as Commissioner Hayne puts it, an “asymmetry or power and information“. In considering how to meet the requirement, therefore, there will be value in having regard to the concerns identified as underlying the need for the anti-hawking change. Responding to those concerns will also be relevant to meeting AFS licensee obligation to provide financial services “efficiently, honestly and fairly“.
Providing the customer with an opportunity to prepare for the meeting or call
The Royal Commission considered the root of the problem with unsolicited sales to be that a customer who is not expecting a call will be unprepared for it. They will not, for instance, have had an opportunity to consider the product beforehand, whether it is suitable for their own personal circumstances, or whether there are other products available which might be more suitable. They will not necessarily know what questions to ask and they may not be well placed to judge the merit of the offer or to verify the truth of what is being said.
In applying ASIC’s guidance, therefore, it will be valuable to consider whether the process being put in place allows the customer a real opportunity to consider the product concerned, their need for it and alternatives, before a sale is made.
Avoiding pressure selling
Another key concern raised in the Royal Commission was the high incidence of pressure selling found to have taken place in unsolicited calls. ASIC’s direct life insurance review3, for instance, found offers being made of promotional items, the creation of a sense of urgency, the use of “objection handling” techniques and the use of other tactics aimed at reducing informed decision making. While such sales practices should be avoided as a matter of course (at the very least to meet the fairness obligation), that they could be practised is likely to be a useful red flag that the intent of the anti-hawking prohibition has not been met. A customer that has made a “positive, clear and informed” request for a meeting or call should be less prone to such influence.
Considering product complexity
The Royal Commission observed that customers often received inadequate explanations of the product during unsolicited meetings and calls, particularly as to its exclusions. An appropriately “informed” customer attending a solicited meeting or call should be less exposed to that risk. Commissioner Hayne also expressed the view that some products are just too complicated to sell during a single meeting or telephone call. Product providers should therefore consider which of their products are appropriate for sales during meetings and telephone calls and, for those products, whether any precautions should be taken to help the customer understand the scope of cover provided. The requirements of the incoming Product Design and Distribution legislation4 will also be relevant to this area.
The application of these principles will obviously need to have regard to the circumstances of each provider, including their customer base, the products being sold, the nature of meetings and calls they wish to hold and the means available for seeking a compliant request. In each case, though, it will be prudent to review whether the provider’s meetings and calls comply, having regard to both today’s understanding of the word “unsolicited” and also to the other factors referred to above.
For more information on the hawking requirements as they apply to insurance products, please contact insurance advisory principal, Mathew Kaley.
1 Treasury “Restoring Trust in Australia’s Financial System, Financial Services Royal Commission Implementation Roadmap“, 19 August 2019
2 As set out in ASIC Regulatory Guide 38
3 ASIC Report 587, The sale of direct life insurance
4 Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019
In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph , Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph , Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph : "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.
The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane  NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.