Australian Securities and Investments Commission v ACBF Funeral Plans Pty Ltd [2023] FCA 1041

Introduction

This case, heard in the Federal Court of Australia, concerned regulatory action taken by the Australian Securities and Investments Commission (ASIC) against a private funeral insurance company, ACBF Funeral Plans Pty Ltd (ACBF) for contraventions of the misleading and deceptive conduct provisions of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).

On 5 September 2023, the Court handed down its decision in which it held that ACBF had misrepresented the sale and promotion of funeral expense insurance to Aboriginal people and ordered a $1.2 million penalty against ACBF. However, the Court did not accept ASIC’s case in relation to other alleged false representations. In response, on 3 October 2023, ASIC filed a Notice of Appeal, in which it is appealing part of the Court’s decision.

The Court’s decision is an important reminder of ASIC’s hard stance against businesses misleading consumers, especially where the misconduct is targeted at Aboriginal and Torres Strait Islander peoples.

Facts

ACBF (now in liquidation) was a private insurance company that sold a funeral insurance policy named the “Aboriginal Community Funeral Plan” (the ACF Plan). ACBF also actively offered and promoted the ACF Plan.

Under the ACF Plan, policy holders paid fortnightly premiums for their nominees to be covered for funeral related expenses up to the selected benefit amount (ranging from $4,000 to $15,000). The regular payments were made to keep the insurance cover on foot.

In marketing material and point of sale documentation, ACBF made the following statements in relation to the ACF Plan:

1. the ACBF group of companies had been providing funeral cover for Aboriginal persons around Australia for 20 or more years;
2. it was Australia’s only funeral plan that was dedicated to the Aboriginal community;
3. it offered “fast payouts ranging from $4,000 to $15,000”;
4. “the whole payout must be used for the sole purpose of paying funeral and related expenses”;
5. “…the benefit amount is the amount you want the insurer to pay after that person passes away for their funeral and related expenses”; and
6. “we will pay the chosen [benefit] amount following the death of [a] nominee”;

However, in reality, the policy holders were only reimbursed for funeral-related expenses up to the benefit amount upon production of proof that those expenses had been incurred.

The marketing material and point of sale documentation also included logos that were culturally associated with Aboriginal persons and field representatives who were deployed to promote the ACF Plan to areas with a majority Aboriginal population, wore clothing, issued business cards and drove vehicles all branded with the Aboriginal logos.

In 2018, Youpla Group (then ACBF Group Holdings Pty Ltd which was the parent company of ACBF) was the subject of a case study in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. At the Commission, it was found that the Youpla Group had engaged in conduct below community standards in a number of aspects, including that it relied on the cultural significance of funeral to Indigenous people to advertise its policies.

ASIC Allegations

In October 2020, ASIC took regulatory action against ACBF, alleging that the company had falsely represented that:

1. it was owned or managed by an Aboriginal person(s) (the Aboriginal Ownership/Management Representation);
2. the ACF Plan had approval from the Aboriginal community (the Aboriginal Approval Representation);
3. the ACF Plan was more beneficial to Aboriginal consumers than other funeral insurance products (the Aboriginal Benefit Representation); and/or
4. an ACF Plan holder would receive a lump sum payment upon the death of a nominated person (the Payout Representation).

Applicable Principles

ASIC relied on two provisions of the ASIC Act in its case against ACBF, those being:

• Section 12DA which states that a person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.
• Section 12DB which states that a person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of the financial services, make a false or misleading representation about the services or make a false or misleading representation that the services have a certain characteristic or sponsorship, approval or affiliation.

Explanatory note: subscribers will be aware that equivalent provisions are found in the Australian Consumer Law in relation to the supply of goods or services in trade or commerce.

Findings

The Court was satisfied that:

• as ACBF’s representations (to the extent they were made) were made in the course of offering, promoting and selling the ACF Plan, they were made in trade or commerce;
• ACBF was providing a financial service on the basis that the ASIC Act states that a person provides a financial service if they deal in a financial product and that the ACF Plan met the definition of a financial product in the Act;
• that ACBF made each of the allegations, except of the Aboriginal Benefit Representation;
• that in making the Payout Representation, ACBF contravened sections 12DA and 12DB of the ASIC Act.

The Court’s reasons for the decisions are outlined below.

The Aboriginal Ownership/Management Representation

ASIC’s position was that ACBF, in the course of promoting, marketing and selling the ACF Plan, conveyed an implied representation that ACBF was owned or managed by an Aboriginal person or persons. ASIC further submitted that, contrary to ACBF’s representations, no director of the company was an Aboriginal person, no shares in ACBF were owned by an Aboriginal person or an Aboriginal organisation and that ACBF was not managed by any Aboriginal person. Accordingly, ACBF’s conduct amounted to a contravention of sections 12DA or 12DB of the ASIC Act.

While the Court accepted that the representation had been made, it was not prepared to accept ASIC’s case that the representation contravened the ASIC Act. This was because the evidence did not prove that ACBF was not an Aboriginal organisation nor that the managers were not Aboriginal persons. In other words, the Court was not satisfied on the evidence that those representations were actually false.

Explanatory Note: This is the part of the Court’s decision that ASIC is appealing. In a media release, ASIC Deputy Chair Sarah Court said:

ASIC has appealed this decision because we are concerned that representations were made to First Nations people that ACBF and its funeral plan had Aboriginal ownership and management which, in ASIC’s view, had the effect of deceiving many Aboriginal consumers into buying the plan.

The Aboriginal Approval Representation

ASIC relied upon the same conduct as for the Aboriginal/Ownership Management Representation and tendered evidence supporting its position that there was a complete absence of material that would support the proposition that the ACF Plan had Aboriginal community approval.

After considering the evidence, the Court reached the same conclusion as above; that while the representation had been made, none of the evidence actually established that the ACF Plan did not have the approval of the Aboriginal community. On that basis, the Court determined that ASIC’s case had not be made out in respect to the Aboriginal Approval Representation.

The Aboriginal Benefit Representation

ASIC’s position was that ACBF impliedly represented to potential consumers that the ACF Plan was more beneficial to Aboriginal persons than other funeral insurance products generally available at that time.

Turning to consider this representation, the Court stated that:

it is clear that an implied representation was made that the ACF Plan was promoted by an Aboriginal owned and managed organisation. I also accept that the message conveyed that the ACF Plan was targeted at, and tailored to, Aboriginal persons. Further, there was an implied representation that the ACF Plan would be beneficial to those who became Plan Holders, in the sense that their position would be better with the ACF Plan than without it.

However, when determining whether the representation amounted to a contravention of the ASIC Act, the Court held that:

it does not follow that there was an implied representation that the ACF Plan was more beneficial to Aboriginal persons than other funeral insurance products generally available at that time. In particular, no implied representation was made in the nature of a comparison between the ACF Plan and other generally available funeral insurance products.

Accordingly, the Court was not persuaded that the Aboriginal Benefit Representation was made.

The Payout Representation

The Court was satisfied that the representation was made, commenting that:

That such a representation was made is readily apparent from the admissions concerning the marketing material, the point of sale documentation and certificates described…and is confirmed by the documents tendered by ASIC.

ASIC contended that the Payout Representation was misleading or deceptive or likely to misled or deceive because it was false; and that it was false because ACBF paid only funeral and related expenses that had in fact been incurred.

After considering the evidence, the Court concluded that it was satisfied that the Payout Representation was misleading for the purposes of the ASIC Act because:

It was a representation as to a future matter, namely that the Chosen Benefit Amount would be paid upon the death of the Nominee. The effect of section 12BB of the ASIC Act is that absent evidence of ACBF having had reasonable grounds for making the Payout Representation, the Payout Representation is taken to be misleading. No evidence of reasonable grounds for making the Payout Representation [was] before the Court. Moreover, it [was] difficult to envisage what reasonable grounds ACBF could have had in making the Payout Representation was clause 10.6 of the ACF Plan Rules was directly inconsistent with that representation. Further, there [was] some evidence before the Court (in the form of a spread sheet) that during the relevant period, a number of claims were paid in sums less than the chosen benefit amount.

Explanatory note: clause 10.6 of the ACF Plan Rules provided “ACBF will only pay a Payout by reason of the death of a Nominee and for the sole purpose of meeting the whole or part of the expenses of and incidental to that Nominee’s funeral and burial or cremation”.

Penalty

The Court ordered that ACBF pay to the Commonwealth of Australia a pecuniary penalty in the sum of $1.2 million, noting that “the fact that ACBF is in liquidation is not of itself an impediment to the making” of such an order. The Court went on to conclude that:

The present is a case in which it is appropriate to impose a penalty, notwithstanding that it will likely not be paid as ACBF is in liquidation, for the purpose of deterring others minded to engage in similar contravention.

Compliance Impact

This case serves as an important warning for organisations that they must not make any representations about their goods or services (including financial services) that are incorrect or are likely to create a false impression, in order to avoid large and costly penalties, especially when those representations are being made to First Nations people.