Haynesplaining : lessons for litigators from the Banking Royal Commission
Michael Legg is Professor of Law at the University of New South Wales.
BY PROFESSOR MICHAEL LEGG *
M ost of 2018 was punctuated with revelations of miscon- duct by bankers and finan- cial advisers at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Royal Commission was presided over by Kenneth Hayne, for- mer justice of the High Court of Austra- lia. The final report from the Royal Com- mission was released on 4 February 2019. The Report spends many pages address- ing the misconduct revealed in the hear- ings and laying out recommendations for reform. Of interest here is Commissioner Hayne’s consideration of the Australian Securities and Investment Commission’s (' ASIC ') approach to enforcement and, in particular, its predisposition towards negotiated outcomes rather than litigation. In the interim report, Commissioner Hayne said that 'when deciding what to do in response to misconduct, ASIC’s start- ing point appears to have been: "How can this be resolved by agreement?"' More- over, it was also said that 'this cannot be
contravened by that conduct, and how the alleged conduct amounted to a contraven- tion. That is, at its most basic, the regulator: • must know what case it seeks to make; • must be able to prove the necessary facts; and then • must be able to show how what was done breached the law. Often, a regulator must choose how best to frame the case. Often the information available may reveal more than one, and often many, different contraventions of different provisions. What is the provi- sion that best captures the true nature and character of what was done in breach of the law? Confronted with a mass of material, often relating to events that have occurred over a long period, what are the critical facts? How will those facts be proved? Litigation takes time. It costs money and often great effort. There is always some uncertainty. What is to be made of time, cost and uncertainty? All three considerations will always be there. Why not avoid them? If a compromise can be
• In the final report from the Banking Royal Commission, Commissioner Hayne gives an instructive discussion about the role of ASIC and how litigation is to be used in relation to enforcement, including why settlement may not be a desirable outcome. However, much of what is said also applies more generally to civil litigation. • Effective litigation requires clarity as to what is sought to be achieved by the client, the facts that can be proved, and the ramifications in law of demonstrating those facts. • Effective dispute resolution, consistent with court and ethics rules, requires consideration of whether there are non-litigious avenues that could achieve a more effective and efficient outcome, i.e. an outcome that would better satisfy the client’s interests and reduce cost and delay.
the starting point for a conduct regulator’. ASIC responded to the interim report and accepted that, when considering enforce- ment measures, it should start with the question, ‘Why not lit- igate?’ It is the explanation of this position by Commissioner Hayne that provides useful guidance for litigation lawyers. ASIC litigation – the exercise of public power for a public purpose In the final report, Commissioner Hayne provides an instruc- tive discussion as to how litigation is to be used in relation to enforcement, including why settlement may not be a desirable outcome (pp 432-433). However, much of what is said also ap- plies more generally to civil litigation: ‘Litigation (of any sort) must never be undertaken without a clear understanding of what the initiating party seeks to achieve. For a regulator alleging contravention of law, that means identify- ing what conduct it alleges, what law it alleges the defendant has
reached without those risks, why not take it? The answer lies in recognising that litigation of the kind now under consideration is the exercise of public power for public purposes. It is litigation by a public authority to enforce the law. A private plaintiff can always choose not to pursue, to abandon or to compromise that plaintiff’s private rights. A private plain- tiff may take any of these steps for any reason or no reason. But altogether different considerations arise in connection with the public enforcement of the law. Breach of the law carries consequences. Parliament, not the reg- ulators, sets the law and the consequences. There are cases where there is good public reason not to seek those consequences. Pros- ecution policies have always recognised that there may be good public reasons not to pursue a particular case. But the starting point for consideration is, and must always be, that the law is to be obeyed and enforced. The rule of law requires no less.’