How to prepare for the royal commission

John Dalzell and Ben Allen
— 1 minute read

Financial institutions and individuals who suspect they could be called as witnesses by the banking royal commission must come up with a strategy, according to Dentons partners John Dalzell and Ben Allen.

With the banking royal commission set to begin on 12 February, Sydney law firm Dentons has some practical advice for those called as witnesses.

Below is an edited transcript of a speech Mr Dalzell and Mr Allen delivered to a forum of financial services professionals on 17 January in Sydney.

Develop a strategy

You will know, and only some of you may know, with a newer organisation, where the bodies are buried; that is, conduct that may have occurred in the past that fell short of community expectations.

What you do with that information is very important, because it will determine things like who you nominate as your witness.

Regarding setting a strategy, by that, I mean: will you confess and avoid? That is, confess, own up to, past shortcomings for example, if shortcomings have happened in your particular entity or institution. Make full and upfront disclosure for that fact, apologise and then move on and look to the future?

But a strategy in the banking royal commission may equally be admirable if you were simply to deny, reject and oppose any allegations that were put to your particular institution.

That's important, because it may inform and affect the witness that you nominate, and you will have an opportunity to negotiate with your witnesses.

Because if you want to deny something that happened in the past, you need somebody who has enough information, knowledge and experience of your business as it was at the time of the conduct who can actually defend that conduct, or to deny it.

However, if the strategy is to accept that any of those allegations put to you about conduct that fell short of community expectations and standards in your industry, and simply look to the future, you may wish to put forward a witness who only deals with and focuses on the future and in fact knows very little about what happened in the past in first-hand experience.

Whatever strategy you set, you must be flexible.

You must have in place, together with and informed by your overarching strategy, a media campaign before the commission, during your involvement in the commission and to deal with any aftermath as well.

Attend relevant hearings – in person

You must attend all of the hearings of the area that you're interested in – that is, the areas that you may be required to attend, be it superannuation, insurance, mortgage broking, banking, lending practices.

Whatever area that is germane to your industry that is the focus of the commission at that time, and it will be done by industries, you must attend.

It's not good enough to sit in your office in Sydney while the hearings happen in Melbourne, to look at the transcript online (because it will be published daily) and think you have a rough handle on where the commission is going.

You will miss nuances, you will miss hard questions that were put, and you will miss those areas that are of interest to the commissioner and to counsel assisting.

Other stakeholders will be there

You don't have to be the subject of the royal commission to get leave to appear in the royal commission.

That is, it isn't just going to be banks, mortgage companies, insurance companies, that turn up. There will be other stakeholders, if I can call it that: consumer groups, CHOICE, legal action groups, shareholder consumer groups and protection groups who may seek leave to be heard.

That's quite important, because in your particular area, for example insurance, you may get a number of third parties who will turn up and ask for leave to appear.

Once leave is granted for them to appear, they can cross-examine your witness. Not just counsel assisting, not just the commissioner, but anybody that has been granted leave to appear at your particular hearing can cross-examine your witness.

And the commission has complete discretion to close down and prevent questions, but Ken Hayne … he's not an interventionalist judge.

I think it’s unlikely he will intervene in any particular harsh way to close down questions.

Terms of reference: what’s not in it

What is probably more important [than what is in the terms of reference] is what isn't included, and there are a number of striking omissions or exclusions that have been carved out.

The terms of reference specifically limit the scope of the inquiry, and they include things such as saying the commission isn’t required to inquire into or make any recommendations in relation to macro-prudential policy.

That means any policy of regulation or government that is concerned with containing systemic risk which can have widespread implications for the financial system as a whole beyond simply the banking system, so a much larger form of macro-prudential policy.

But the commission has been asked specifically to look at banking policy and regulation.

The second thing that the commission has also been asked not to look at is any activity that might prejudice or compromise or duplicate any other inquiry or investigation or criminal or civil proceeding that has occurred or that is currently occurring.

And finally, and somewhat unhelpfully, the terms of reference also state that the commission may choose not to inquire into any other matters that the commissioner doesn’t want to inquire into. 

All of that gives a sense of the uncertainty of where we are in terms of what may be covered.

John Dalzell and Ben Allen are partners at the Sydney law firm Dentons (formerly Gadens).


How to prepare for the royal commission
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