Financial Misconduct and Regulatory Failure

The interim report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry - glossed by the media immediately after release as a tale of egregious greed - offers a damning view of regulatory failure rather than merely corporate/personal self interest.

The Commission comments

The Commission’s work, so far, has shown conduct by financial services entities that has brought public attention and condemnation. Some conduct was already known to regulators and the public generally; some was not. 

Why did it happen? What can be done to avoid it happening again? 

These are now the key questions. 

In this Interim Report these questions – ‘why’ and ‘what now’ – are asked with particular reference to banks, loan intermediaries and financial advice, with a view to provoking informed debate about both questions. 

Why did it happen? 

Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty. How else is charging continuing advice fees to the dead to be explained? But it is necessary then to go behind the particular events and ask how and why they came about. 

Banks, and all financial services entities recognised that they sold services and products. Selling became their focus of attention. Too often it became the sole focus of attention. Products and services multiplied. Banks searched for their ‘share of the customer’s wallet’. From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales. 

When misconduct was revealed, it either went unpunished or the consequences did not meet the seriousness of what had been done. The conduct regulator, ASIC, rarely went to court to seek public denunciation of and punishment for misconduct. The prudential regulator, APRA, never went to court. Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct. Infringement notices imposed penalties that were immaterial for the large banks. Enforceable undertakings might require a ‘community benefit payment’, but the amount was far less than the penalty that ASIC could properly have asked a court to impose. 

What can be done to prevent the conduct happening again? 

As the Commission’s work has gone on, entities and regulators have increasingly sought to anticipate what will come out, or respond to what has been revealed, with a range of announcements. These include announcements about new programs for refunds to and remediation for consumers affected by the entity’s conduct, about the abandonment of products or practices, about the sale of whole divisions of the business, about new and more intense regulatory focus on particular activities, and even about the institution of enforcement proceedings of a kind seldom previously brought. There have been changes in industry structure and industry remuneration. 

The law already requires entities to ‘do all things necessary to ensure’ that the services they are licensed to provide are provided ‘efficiently, honestly and fairly’. Much more often than not, the conduct now condemned was contrary to law. Passing some new law to say, again, ‘Do not do that’, would add an extra layer of legal complexity to an already complex regulatory regime. 

What would that gain? 

Should the existing law be administered or enforced differently? Is different enforcement what is needed to have entities apply basic standards of fairness and honesty: by obeying the law; not misleading or deceiving; acting fairly; providing services that are fit for purpose; delivering services with reasonable care and skill; and, when acting for another, acting in the best interests of that other? The basic ideas are very simple. Should the law be simplified to reflect those ideas better? 

This Interim Report seeks to identify, and gather together in Chapter 10, the questions that have come out of the Commission’s work so far. There will be a further round of public hearings to consider these and other questions that must be dealt with in the Commission’s Final Report.

 The interim report concludes -

The many questions that have been set out above can then be distilled and organised in three categories:

• Issues 

• Causes 

• Responses

8.1 Issues 

The issues can be divided into four groups. First, there are issues about access to banking services. Second, there is a group of issues about the roles and responsibilities of intermediaries – those who stand between the purchaser of a financial service and the provider of that service. Third there is a group of issues about responsible lending. And fourth, there is a group of issues about regulation and the regulators. The issues intersect and overlap in different ways. Putting the issues in groups should not be allowed to diminish the importance of identifying and responding to those intersections and overlaps. 

8.1.1 Access

Do all Australians have adequate and appropriate access to banking services? 

8.1.2 Intermediaries

• For whom do the different kinds of intermediary act? – mortgage brokers – mortgage aggregators – introducers – financial advisers – authorised representatives of Licensees – point of sale sellers of loans 

• For whom should each kind of intermediary act? 

• If intermediaries act for the consumer of a financial service – What duty do they now owe the consumer? – What duty should they owe? 

• Who is responsible for each kind of intermediary’s defaults? 

• Who should be responsible? 

• How should intermediaries be remunerated? 

• Are external dispute resolution mechanisms satisfactory?  

• Should there be a mechanism for compensation of last resort?

8.1.3 Responsible lending

• Consumers

• Should the test to be applied by the lender remain ‘not unsuitable’? 

• How should the lender assess suitability? 

• Should there be some different rule for some home loans? 

• Should the NCCP Act apply to any business lending? In particular, should any of its provisions apply to:

• SMEs? 

• agricultural businesses? 

• some guarantors of some business loans? 

• To what business lending should the Banking Code of Practice apply?

• Is the definition of ‘small business’ satisfactory? 

• Should lenders adopt different practices or procedures with respect to agricultural lending? 

• Are there classes of persons from whom lenders

• should not take guarantees; or 

• should not take guarantees unless the person is given particular information or meets certain conditions? 

• How should lenders manage exit from a loan – at the end of the loan’s term; – if the borrower is in default?

8.1.4 Regulation and the regulators

• Have entities responded sufficiently to the conduct identified and criticised in this report? 

• Has ASIC’s response to misconduct been appropriate?

• If not, why not? 

• How can recurrence of inappropriate responses be prevented? 

• Has APRA’s response to misconduct been appropriate?

• If not, why not? 

• How can recurrence of inappropriate responses be prevented?

8.2 Causes

• What were the causes of the conduct identified and criticised in this report? 

• Conflict of interest and duty? 

• Remuneration structures? 

• Culture and governance? 

• Regulatory response?

8.3 Responses

• What responses should be made to the conduct identified and criticised in this report? 

• Are changes in law necessary?

• Should the financial services law be simplified? 

• Should carve outs and exceptions be reduced or eliminated?

In particular, should   

• grandfathered commissions   

• point of sale exceptions to the NCCP Act   

• funeral insurance exceptions

be reduced or eliminated? 

• How should entities manage conduct and compliance risks? 

• How should – APRA – ASIC respond to conduct and compliance risk? 

• Should the regulatory architecture change?

• Are some tasks better detached from ASIC? 

• Are some tasks better detached from APRA? 

• What authority should take up any detached task? 

• Should either or both of ASIC and APRA be subject to external review? 

• What is the proper place for industry codes of conduct?

• Should industry codes of practice like the 2019 Banking Code of Practice be given legislative recognition and application?  

• Should an intermediary be permitted to

• recommend to a consumer 

• provide personal financial advice to a consumer about 

• sell to a consumer

any financial product manufactured by an entity (or a related party of the entity) of which the intermediary is an employee or authorised representative? 

• Is structural change in the industry necessary?

Soulless

No soul to be damned, no body to be kicked? 'Incapacitating Criminal Corporations' by William Robert Thomas in Vanderbilt Law Review (Forthcoming) comments

 If there is any consensus in the fractious debates over corporate punishment, it is this: a corporation cannot be imprisoned, incarcerated, jailed, or otherwise locked up. Whatever fiction the criminal law entertains about corporate personhood, having an actual “body to kick” — and, by extension, a body to throw into prison — is not one of them. The ambition of this project is not to reject this obvious point, but rather to challenge the less-obvious claim it has come to represent: incapacitation, despite long being a textbook justification for punishing individuals, does not bear on the criminal law of corporations. 

In this Article, I argue that incapacitation both can and should serve as a justification for punishing criminal corporations. Descriptively, I interrogate how rote appeals to the impossibility of corporate imprisonment obscure more pressing, challenging questions about whether and to what extent the criminal law can vindicate an account of incapacitation that extends to corporate persons. Excavating a richer conceptual framework for incapacitation from our practices of individual punishment, I demonstrate that sanctions we already impose in or just outside the criminal law can be better understood as efforts to incapacitate, rather than to deter or rehabilitate, a criminal corporation. Indeed, reevaluating our understanding of penal incapacitation provides reason to think that we have similar and perhaps stronger reasons for incapacitating corporate persons than we do individuals. 

Prescriptively, I leverage this comparative framework to argue that incapacitation should be recognized as a core justification for corporate punishment. Although rehabilitation has gained traction in past decades as a basis for punishing corporations, incapacitation stands as a more realistic, more administrable, alternative. This is because a principle of rehabilitation has led to a practice of imposing on corporations intricately designed, but dubiously effective, compliance and internal governance reforms. Incapacitation, by contrast, lends itself to clear, discrete prohibitions for which the criminal law is better situated to justify, impose, and monitor.

Trade, Training and Trade Practices

Having recently read Globalists: The End of Empire and the Birth of Neoliberalism (Harvard University Press, 2018) by Quinn Slobodian I was interested to see 'What Do Trade Agreements Really Do?' by Dani Rodrik in (2018) 32(2) Journal of Economic Perspectives 73-90.

Rodrik comments 

Economists have a tendency to associate "free trade agreements" all too closely with "free trade." They may be unaware of some of the new (and often problematic) beyond-the-border features of current trade agreements. As trade agreements have evolved and gone beyond import tariffs and quotas into regulatory rules and harmonization—intellectual property, health and safety rules, labor standards, investment measures, investor-state dispute settlement procedures, and others—they have become harder to fit into received economic theory. It is possible that rather than neutralizing the protectionists, trade agreements may empower a different set of rent-seeking interests and politically well-connected firms—international banks, pharmaceutical companies, and multinational firms. Trade agreements could still result in freer, mutually beneficial trade, through exchange of market access. They could result in the global upgrading of regulations and standards, for labor, say, or the environment. But they could also produce purely redistributive outcomes under the guise of "freer trade." As trade agreements become less about tariffs and nontariff barriers at the border and more about domestic rules and regulations, economists might do well to worry more about the latter possibility.

Last week the ACCC announced that the Federal Court found training college Cornerstone Investments Aust Pty Ltd, trading as Empower Institute (Empower), had in unconscionable and misleading or deceptive conduct, and made false or misleading representations when enrolling consumers into VET FEE-HELP Diploma courses that cost up to $15,000 per course.

Empower marketed and sold these courses to consumers in remote communities and low socio-economic areas (including Indigenous communities) using face-to-face marketing, including door-to-door sales.

Empower enrolled over 6,000 new students  in its courses March 2014 and October 2015.

Many of these students were vulnerable consumers and were signed up using incentives such as free laptops and cash, unaware they were incurring a significant debt. 

“Empower misled vulnerable and disadvantaged consumers into enrolling in courses they would likely be unable to complete. Many consumers it enrolled had poor literacy and numeracy skills. Some who enrolled in online courses could not even use a computer and did not have access to the internet,” ACCC Chair Rod Sims said. 

“Empower also failed to provide clear and accurate information about the price of the courses and the nature of the VET FEE-HELP loan.” ... 

 “Empower was paid more than $64 million by the Government under the VET FEE-HELP scheme for enrolling students using these appalling tactics, while the students were left with large debts."

 The ACCC is seeking remedies from Empower, including redress for affected consumers and pecuniary penalties.

The ACCC notes that it has taken action against a number of private colleges and can seek remedies from the court in those cases, but cannot itself, cancel the debts of affected consumers.

Fake Doctors

One aspect of my doctoral dissertation explored the certification of medical, legal and other practitioners ... and the associated impetus for some people to claim status to which they were not entitled by asserting unsubstantiated skills, forging documentation or otherwise engaging in identity crime. Instances of such crime include Zepinic, Milosevic and Sharobeem, noted elsewhere in this blog and in a forthcoming Health Law Bulletin article.

The Australian Health Practitioner Regulation Agency (AHPRA), with support by the Medical Board of Australia, recently noted it has successfully prosecuted fake doctor Raffaele Di Paolo - one of the more grisly providers of 'fertility' services for further offences under the National Health Practitioner Regulation Law. His  company, Artemedica Pty Ltd, was also prosecuted, with additional fines totaling $28,000.

AHPRA states that it started investigating Di Paolo after receiving a notification from the Health Services Commissioner in Victoria. This led to separate investigations in Victoria and Queensland. AHPRA filed charges against Di Paolo and Artemedica  in the Magistrates’ Court of Victoria and against Di Paolo in the Magistrates’ Court of Queensland at Southport.

In the Victorian proceedings AHPRA alleged that Di Paolo had:

•  knowingly or recklessly used words that could indicate he was a medical practitioner and/or a specialist health practitioner 
• claimed to be a specialist health practitioner by using the term ‘gynaecologist’ or the term ‘obstetrician’ in relation to himself, and 
• failed to state that he was not a medical practitioner, or that he was in fact a homeopath.

The prosecution by AHPRA took place alongside a criminal prosecution for indictable offences brought by the Victorian Director of Public Prosecutions (DPP) including

• procuring sexual penetration by fraud, 
• obtaining financial advantage by deception and 
• indecent assault. 

 In relation to the DPP charges, Di Paolo was the court sentenced to nine years and six months in prison, with a non parole period of six years and six months. He was also placed on the sex offender register for life.

He pleaded guilty to five of the AHPRA charges, incurring a $5,000 fine and AHPRA’s costs. On 13 August 2018 at the Magistrates Court in Melbourne, Artemedica pleaded guilty to three charges of knowingly or recklessly holding out another person as a registered health practitioner by using the initials “MD” in relation to Di Paolo on invoices sent by the Company. (Di Paolo was the sole director and shareholder of Artemedica; the court noted  it had no assets. Artemedica was fined $8,000, and ordered to pay AHPRA’s costs.

In Queensland last month Di Paolo did not contest the charges in Southport Magistrates’ Court. He had been charged with offences relating to using a specialist title and using words to indicate he was a registered medical practitioner at a medical conference in Queensland in September 2014 at which he was a guest speaker. He was convicted, fined $20,000 and ordered to pay AHPRA’s costs of $8,577.

Last month the Medical Board of Australia announced that Marek Jantos has been sentenced in the Adelaide Magistrates Court after being convicted of holding himself out as a registered psychologist and unlawfully using a specialist medical title. Conviction follow charges laid by AHPRA. 

 A company operated by Mr Jantos, Behavioural Medicine Institute of Australia, was also convicted of misleading and deceptive advertising. Mr Jantos and his company were fined a total of $16,000. Mr Jantos pleaded guilty to two charges which included unlawfully claiming to be a specialist in the field of ‘pain medicine’ and unlawfully claiming to be a registered psychologist. The Behavioural Medicine Institute of Australia pleaded guilty to a charge of false, misleading or deceptive advertising of a regulated health service. 

 

In 2007, Mr Jantos’ registration as a psychologist was cancelled by the then Psychology Board of South Australia. At the time the Board maintained the decision was necessary ‘in order to protect the public from similar behaviour.’ The behaviour considered by the Board included invasive physical therapy in the context of psychological treatment. AHPRA alleged that between 21 May 2014 and 30 June 2014, Mr Jantos displayed signage at his business premises stating he was a Member of the Australian Psychological Society (MAPS). Mr Jantos has not been a registered psychologist since 25 June 2007 and resigned his membership of MAPS on 6 May 2008. 

 

This and other examples of signage at his premises could have falsely led patients to believe he was a registered psychologist. In addition, AHPRA alleged that between 17 April 2014 and 30 June 2014 Mr Jantos used terminology that would lead patients to believe he was a medical specialist. An advertising placard displayed at the premises advertising pain medicine, indicated that Mr Jantos was qualified as a specialist medical practitioner in the field of pain medicine when he was not. Mr Jantos’ own website and other websites also misled the public by stating ‘his clinical specialty is Behavioural Medicine.’ AHPRA

Open Science and Intellectual Property

'Order without Intellectual Property Law: Open Science in Influenza' by Amy Kapczynski in (2018) 102(6) Cornell Law Review comments

Today, intellectual property (IP) scholars accept that IP as an approach to information production has serious limits. But what lies beyond IP? A new literature on “intellectual production without IP” (or “IP without IP”) has emerged to explore this question, but its examples and explanations have yet to convince skeptics. This Article reorients this new literature via a study of a hard case: a global influenza virus-sharing network that has for decades produced critically important information goods, at significant expense, and in a loose-knit group—all without recourse to IP. I analyze the Network as an example of “open science,” a mode of information production that differs strikingly from conventional IP, and yet that successfully produces important scientific goods in response to social need. The theory and example developed here refute the most powerful criticisms of the emerging “IP without IP” literature, and provide a stronger foundation for this important new field. Even where capital costs are high, creation without IP can be reasonably effective in social terms, if it can link sources of funding to reputational and evaluative feedback loops like those that characterize open science. It can also be sustained over time, even by loose-knit groups and where the stakes are high, because organizations and other forms of law can help to stabilize cooperation. I also show that contract law is well suited to modes of information production that rely upon a “supply side” rather than “demand side” model. In its most important instances, “order without IP” is not order without governance, nor order without law. Recognizing this can help to stabilize cooperation. I also show that contract law is well suited to modes of information production that rely upon a “supply side” rather than “demand side” model. In its most important instances, “order without IP” is not order without governance, no

Corporate Disclosure

'Hardening Soft Law: Are the emerging corporate social disclosure laws capable of generating substantive compliance with human rights' by Justine Nolan in (2018) Brazilian Journal of International Law comments 

The aim of this paper is to examine the potential effectiveness and limitations of the emerging corporate social disclosure laws that aim to increase transparency about human rights risks in global supply chains. Globalization has led to the emergence of low cost, efficient (but risky) supply chains that span multiple sourcing countries which exhibit a wide range of economic, political, social, labor and environmental standards. The five laws examined seek to provide mechanisms that aim to reduce the negative human rights impact of business in supply chains. They introduce varying demands on business to map, track and disclose how and where their products are being made. This paper first briefly highlights the preponderance of soft law that defines the business and human rights regulatory framework and guides corporate behavior. It then examines three mandated disclosure laws, the Dodd-Frank Act, the California Transparency in Supply Chains Act and the UK Modern Slavery Act and two due diligence focused laws, the Australian Illegal Logging Prohibition Act and the French Duty of Corporate Vigilance Law. After which, it proposes criteria to strengthen the development and implementation of these laws. It concludes by noting that while these laws are hardening the human rights expectations of business, for them to generate substantive (and not just procedural) human rights compliance they must include: detailed requirements on reporting and due diligence; collaboration with external stakeholders; and compliance mechanisms. Through analysis of these regulatory developments this paper seeks to provide greater understanding of how to shape regulatory responses to governance gaps in transnational supply chains.

VLRC Victims of Crime report

The Victorian Law Reform Commission in a 612 page report tabled last month features some 100 recommendations, including that that the Victims of Crime Assistance Act 1996 (Vic) should be repealed and "replaced with an Act that establishes a new scheme to better help victims recover from a criminal act".

In essence, that scheme would provide state-funded financial and practical assistance to victims of crime, including assistance to "pay for medical expenses, counselling, housing, immediate needs and other things required for their safety and wellbeing". It would be set up and run from the office of the Victims of Crime Commissioner. It would be separate from the court and tribunal system, and not involve perpetrators of crime. It would apply to anyone who has been a victim and suffered an injury as a result of a criminal act, including all sexual offences, some serious property offences and a range of family violence offences. The current Victims of Crime Assistance Tribunal would be abolished. Victims would be entitled to receive a recognition statement which acknowledges the impact of the criminal act on behalf of the state. The Commission recommends that the government should consider an automatic levy on all convicted offenders to help pay for the scheme, but does not say this should be introduced immediately.

The report's executive summary states

Introduction 

This report completes the Victorian Law Reform Commission’s review of the Victims of Crime Assistance Act 1996 (Vic) (VOCAA) as required in response to both the first and supplementary terms of reference provided by the Attorney-General on 22 December 2016, and 7 July 2017, respectively. 

The first terms of reference respond to Recommendation 106 of the Victorian Royal Commission into Family Violence. Fundamentally, the first terms of reference ask the Commission to consider what changes should be made to the VOCAA to better assist family violence victims rebuild their lives and recover. As part of this, the first terms of reference at matter three ask the Commission to consider the requirement to notify a perpetrator, especially where the act of violence has not been reported to police or no charges have been laid, or the prosecution is discontinued or the person is acquitted. 

The supplementary terms of reference ask the Commission to expand its review to consider the operation and effectiveness of the VOCAA and the Victims of Crime Assistance Tribunal (VOCAT) for all crime victims. This was a significant expansion of the scope of the first terms of reference. 

A number of outcomes and objectives for any state-funded financial assistance scheme are identified in the supplementary terms of reference (reference objectives). The supplementary terms of reference ask the Commission at matter eight to consider whether any processes, procedures or requirements under the VOCAA cause unnecessary delay to the provision of assistance to victims of crime. In considering this question, the supplementary terms of reference ask the Commission to consider whether there are other models that would more effectively deliver assistance, for example an administrative or quasi-administrative model. Plainly, consideration of whether delay is ‘unnecessary’ involves reference to the whole of the VOCAA to identify provisions or procedures which might bear upon or cause delay, and reference to legislation or processes in other jurisdictions in which the outcome is more timely. The supplementary terms of reference also expand the initial terms of reference by asking whether ‘it is appropriate in certain circumstances (as is currently the case) for alleged perpetrators of a crime to be notified of applications to VOCAT or to be called to give evidence’. 

The Commission published a consultation paper on the first terms of reference in June 2017. A supplementary consultation paper on the further terms of reference was published in August 2017. The consultation papers were based on preliminary consultation meetings with key stakeholders, as well as the Commission’s own analysis of the current law and research. In response to both consultation papers 60 written submissions were received. Between August and November 2017 consultation meetings were conducted in Melbourne and throughout regional Victoria with key stakeholders, interested organisations and individuals including: the judiciary; victim support and advocacy organisations (government and non-government); family violence support and advocacy organisations; government departments; legal services and key academics, to examine the issues raised in the consultation papers, seek views on the questions posed and to test options for reform. 

The views expressed by stakeholders in consultation meetings and the written submissions received, as well as the Commission’s own further research, have informed development of the recommendations and the preparation of this report. The Commission warmly acknowledges these contributions to law reform. 

This report and the Commission’s conclusions address both the technical issues in relation to the existing Act and scheme, including in relation to the role of alleged perpetrators, and also the broader question of the appropriate model. The Commission has adopted a holistic approach to reform proposals, with victims’ needs at the centre of the Commission’s process and recommendations.  

Research, and the Commission’s findings, demonstrate that a victim-centred justice process is one that takes into account victims’ needs—for emotional support, information, practical support, including safety and security, financial assistance, and to be treated with dignity and respect throughout the justice process. 

The Commission’s recommendations aim to fulfil each of these needs. 

The Commission recognises that for some victims of crime, financial assistance may represent more than monetary assistance—it can serve to recognise their victimisation and validate their experiences, including the significant ongoing impacts. 

The Commission’s recommendations aim to ensure that a victim-centred financial assistance scheme does more than simply provide financial assistance. 

The Commission also acknowledges that state-funded financial assistance is only one aspect of the broader victims’ support landscape in Victoria. In particular, the Commission acknowledges the review currently being undertaken by the Sentencing Advisory Council (SAC) on restitution and compensation orders for victims of crime. As also acknowledged by SAC in its issues and options paper Restitution and Compensation Orders released in March 2018, the government will need to consider this report and SAC’s recommendations together to ensure a complementary approach to victim assistance, including state-funded financial assistance and other avenues such as restitution and compensation. 

The Commission’s conclusions are summarised below and its 100 recommendations are listed at pages xxix–xlvii. 

State-funded financial assistance 

After setting the context for this review in Chapters 1 and 2, this report in Chapter 3 outlines the history and purpose of state-funded financial assistance and discusses contemporary state-funded financial assistance schemes. 

Chapter 4 describes Victoria’s existing scheme as provided for under the VOCAA, including the operation of VOCAT, noting that the VOCAA and VOCAT are one component of a broader victims’ rights and support framework in Victoria. Chapter 4 also summarises a number of reviews and inquiries, and research relevant to the operation of VOCAT. 

Chapter 5 discusses key issues with Victoria’s existing scheme as identified to the Commission by stakeholders. These issues include eligibility, assistance available, time limits for making an application, timeliness of awards, decision making under the VOCAA, VOCAT hearings and evidentiary processes, in particular perpetrator notification and the right to appear provisions, and awareness and accessibility of the existing scheme. These issues reflect the matters identified in both the first and supplementary terms of reference. This discussion of key issues with the existing scheme provides the basis for the Commission’s consideration of the need for a new model of state-funded financial assistance for crime victims. 

Chapter 6 considers the current law in relation to alleged perpetrator notification and appearance provisions under the VOCAA and the effects of such provisions on victim safety and wellbeing. It notes that the significant effects are unlikely to be ameliorated through legislative or procedural protections. The Commission also considers that alleged perpetrators do not have a legal interest in the matter of state-funded financial assistance for victims of crime that needs to be met by matters of procedural fairness. This is because such a decision has no bearing on other legal matters. The Commission considers that an alleged perpetrator’s interest can be categorised, in the context of state-funded financial assistance, as a reputational interest rather than a legal interest. Accordingly, the Commission proposes that perpetrator notification and appearance provisions be removed, and that this reflects a trauma-informed approach that prioritises victims’ safety and wellbeing. 

The need for a new model 

Chapter 7 assesses victims’ needs and outlines stakeholder views on models of assistance. Chapter 7 also considers whether the existing court-based model as established by the VOCAA and VOCAT, and with the ability for alleged perpetrators to be notified and involved, is meeting the reference objectives. Chapter 7 concludes that the existing scheme is not meeting the reference objectives. In particular, the Commission finds that the current model is not victim-centred or beneficial in its approach because of its prioritisation of procedural and evidentiary processes over victims’ needs and the delays experienced by victims in accessing financial assistance quickly. The Commission determines that there is a need for a new model to more effectively deliver assistance to crime victims. 

Chapter 8 provides an overview of possible models—a reformed judicial model as submitted by VOCAT, the Magistrates’ Court of Victoria and the Children’s Court of Victoria, and an administrative model. To guide discussion about possible models of assistance, Chapter 8 also outlines the importance of validation for victims of crime. 

Chapter 8 then assesses each possible model against the reference objectives having regard to stakeholder views and relevant research. The Commission acknowledges that VOCAT could be reformed and that a reformed VOCAT model as proposed by VOCAT, the Magistrates’ Court of Victoria and the Children’s Court of Victoria contains significant reforms and would likely result in improved assistance for victims, particularly if there were also technical reforms to the VOCAA. However, the Commission concludes that a reformed judicial model no longer represents a contemporary model that would most effectively deliver assistance to victims, especially in terms of timeliness, minimising trauma and reducing reliance on legal representation, and that it would also not be the most efficient or sustainable model for the state. 

In the Commission’s view, the most effective model to meet each of the reference objectives and to deliver Victoria’s state-funded financial assistance scheme is a new administrative model, focussed on assisting victims in their recovery from a criminal act, separate from Victoria’s criminal court system and any potential for involvement by the alleged perpetrator. Accordingly, the Commission recommends that a new state-funded financial assistance scheme be established, led by an independent and dedicated decision maker whose powers and functions are prescribed in legislation (proposed scheme), and that the VOCAA be repealed and replaced with a new Act (proposed Act) which establishes the proposed scheme and incorporates the legislative reforms recommended in this report. 

The Commission’s proposal for a new model of state-funded financial assistance represents a significant departure from the current model. In recommending this significant change, the Commission has strived to ensure victim needs are at the centre of its reform proposals. 

The proposed scheme places victims’ needs at the centre, providing for a beneficial approach that meets not only financial and practical needs, but prioritises victims’ safety and wellbeing and provides a forum for acknowledgment and recognition. Most significantly, the proposed scheme removes financial assistance from Victoria’s court system, thereby removing any need for victims to attend court, be called to give evidence and cross-examined, or be required to face an alleged perpetrator at a hearing. 

Chapter 9 outlines options for establishing an administrative scheme with an independent and dedicated decision maker. Having regard to Victoria’s existing victims’ support landscape, approaches in other Australian jurisdictions with administrative schemes, and stakeholder views on the essential characteristics of a scheme decision maker, the Commission recommends that the functions of Victoria’s Victims of Crime Commissioner be expanded to include the functions and powers necessary to administer the proposed Act and scheme. This approach will ensure that the proposed scheme does not create additional complexity by adding to the victims services and functions already available in Victoria. The Commission also recommends that the office of the Victims of Crime Commissioner be provided with appropriate funding and staffing and that the Victims of Crime Commissioner be supported by deputy decision makers and case managers, with the Victims of Crime Commissioner able to delegate some functions. 

Chapter 10 details key components of the proposed scheme. Having regard to Victoria’s existing scheme, approaches in other Australian jurisdictions with administrative schemes and stakeholder views, the Commission considers that the proposed scheme should also provide for non-pecuniary victim recognition. The Commission therefore recommends that the proposed Act should provide that all eligible victims are entitled to receive a recognition statement which, on behalf of the state, acknowledges the effect of the criminal act. The Commission also recommends that all eligible victims be entitled to request a victim conference with the scheme decision maker or deputy decision maker. Victim conferences would provide a respectful forum for victims to be acknowledged and heard. Victim conferences would not be for the purpose of determining any application or the amount of an award. As also discussed in Chapter 6, it is not recommended that the existing perpetrator notification and appearance provisions of the VOCAA be replicated in the proposed Act. Removing perpetrator notification reflects a trauma-informed approach that prioritises victims’ safety and wellbeing. 

Chapter 10 also discusses the need for case management and legal representation. Having regard to Victoria’s existing scheme, approaches in other Australian jurisdictions with administrative schemes and stakeholder views, the Commission considers that the proposed scheme should incorporate case management functions provided by scheme staff, and continue to enable victims to engage lawyers to assist with applications to the proposed scheme. The Commission considers that while case management should reduce reliance on lawyers, the proposed scheme should still enable victims to engage lawyers to ensure vulnerable victims or victims with complex needs are not disadvantaged. The Commission therefore recommends that case management be an essential component of the proposed scheme; that the scheme be able to award a lawyer the reasonable costs of a victim’s application for assistance; and that the proposed Act prevent lawyers from charging victims directly for costs in respect of a victim’s application for assistance. 

Chapter 10 also discusses whether restorative justice should form part of the proposed scheme and outlines the current restorative justice landscape in Victoria. Having regard to stakeholder views which highlighted concerns with integrating restorative justice within a state-funded financial assistance scheme, the Commission recommends that the proposed Act should provide that a scheme decision maker may, where requested by a victim, refer the victim to appropriate restorative justice initiatives. 

Chapter 10 also discusses specialisation, noting the current approach to specialisation within the existing scheme provided through the VOCAT Koori List. Having regard to stakeholder views on the existing approach to specialisation, the Commission considers that there is merit in a specialised approach in the proposed scheme and recommends that the proposed Act provide for the establishment of specialised case management and decision making. 

The proposed Act 

Chapter 11 discusses the purpose, objectives and principles of the proposed Act. The Commission considers stakeholder views on the current provisions of the VOCAA, along with the approaches taken in other jurisdictions. The Commission recommends that the purpose of the proposed Act should be to assist victims in their recovery from a criminal act. The Commission recommends that the proposed Act not include, as an objective, that only ‘certain victims’ be provided assistance as a symbolic expression by the state of the community’s sympathy. The Commission considers that such an objective can introduce subjective assessments of whether victims are ‘deserving’ victims. The Commission also considers that the VOCAA objective suggesting VOCAT be an option of last resort should not be included in the proposed Act. This is because such an objective may misrepresent state-funded financial assistance as an option of last resort, when for many victims it may be their only option; and additionally may lead to substantial delay in the provision of much-needed assistance should a victim be required to exhaust other options first. 

In summary, the Commission recommends that the proposed Act provide that the objectives of the Act are to recognise victims, assist victims in their recovery and complement other services provided to victims, and that the proposed Act include further guiding principles emphasising the importance of a beneficial approach that prioritises victims’ needs, safety and wellbeing. 

Chapters 12–16 discuss the technical and procedural issues with the VOCAA and VOCAT and how these issues are to be addressed under the proposed Act. 

Chapter 12 discusses the eligibility test and associated matters, including the definitions of victim, criminal act and injury, as well as proving injury and causation. In relation to the eligibility test, the Commission considers that victims should continue to be required to satisfy certain eligibility criteria. The Commission recommends that a person is eligible for financial assistance where the person is a victim of a criminal act and they suffer an injury as a result of that criminal act. However, the Commission also considers that the elements of the proposed eligibility test should be reformed to address stakeholder concerns. 

In relation to the definition of victim, the Commission notes stakeholder concerns that the victim categories create significant barriers for some victims. The Commission recommends that the existing victim categories be abolished and that the proposed Act include a single, comprehensive definition of victim, incorporating a range of victim experiences, to better recognise victim diversity and to not unfairly restrict certain victims from any amounts or types of assistance based on strict categories. The Commission further recommends a more inclusive definition of victim for those with a close personal relationship with a direct victim which better reflects contemporary community understandings of families and relationships. 

Chapter 12 also discusses the definition of criminal act and whether eligibility should be expanded to account for non-criminal acts, including non-criminal forms of family violence. 

While the Commission acknowledges the significant impact that non-criminal forms of violence may have on victims, the Commission nonetheless concludes that providing assistance to victims of non-criminal violence would be inconsistent with the purpose of state-funded financial assistance schemes for victims of crime, which aims to assist victims in their recovery from a criminal act. Accordingly, the Commission considers that a statefunded financial assistance scheme for victims of crime should reflect offences in the criminal law and that it is a matter for the Victorian Parliament to determine what type of conduct constitutes a criminal offence. 

However, to bring the proposed Act in line with changes to the law and community expectations, the Commission recommends that the range of criminal offences covered by the proposed scheme be expanded to include all sexual offences, certain serious property offences and a range of additional offences that occur in the context of family violence. The Commission also recommends that the proposed Act replace the term ‘act of violence’ with ‘criminal act’ to better reflect the range of offences recommended to be included in the proposed scheme. 

In relation to the definition of injury, the Commission notes stakeholder concerns that the definition of injury is too narrow and excludes some victims who have suffered a mental injury but are unable to establish a diagnosed mental illness or disorder. The Commission recommends that the definition of injury in the proposed Act not require a victim to demonstrate they have a mental illness or disorder. Under the proposed Act, injury would be defined as physical harm or psychological/psychiatric harm (or exacerbation of). Additionally, the Commission recommends that to address barriers in proving injury experienced by victims of sexual offences or family violence, and child victims who experience or are exposed to these forms of violence, such victims should not be required to prove injury under the proposed Act. The Commission also recommends that the causation requirement under the proposed Act be simplified to require that a victim has suffered an injury ‘as a result of’ a criminal act. Combined with the reforms to proof of injury, the Commission considers such reforms would make it easier for victims to access the proposed scheme. 

Chapter 13 discusses assistance available under the VOCAA and notes stakeholder concerns regarding both the existing structure and quantum of awards under the VOCAA. Having regard to stakeholder views and assistance available in other administrative schemes, the Commission recommends that the current categories of award be abolished and replaced with six ‘streams of assistance’—immediate needs, funeral expenses, counselling expenses, practical assistance, recovery payments and recovery plans and recognition. 

The Commission recommends immediate needs replace ‘interim awards’ to cover urgent needs such as urgent medical or safety expenses. To improve certainty for victims, these awards would not be required to be refunded, although victims would still need to meet the eligibility criteria of the proposed Act. The proposed Act would still provide for reasonable funeral expenses determined in line with guidelines. The Commission recommends that the proposed Act should provide for up to 20 counselling sessions and in exceptional circumstances, further counselling as determined by the proposed scheme decision maker according to publicly available guidelines. The Commission recommends that the ‘practical expenses’ stream include expenses such as medical, housing and safetyrelated expenses along with financial support. The Commission considers that this stream of assistance should address a victim’s basic needs which have been impacted by crime, and that all expenses must still meet a ‘reasonableness’ threshold. 

The Commission recommends the stream ‘recovery payments and plans’ replace the VOCAA awards of ‘recovery expenses’ and ‘special financial assistance’ to address stakeholder concerns that the existing categories exclude some victims. Under the proposed Act, the decision maker would determine the amount of a recovery payment according to a range of factors including whether the criminal act was directly perpetrated against the victim; the nature of the victim’s injury; the vulnerability of the victim and whether the alleged perpetrator was in a position of power, influence or trust; whether the criminal act occurred in the context of a pattern of abuse, such as family violence or child abuse; whether there were a series of related criminal acts, as well as the victim’s criminal behaviour where there is a nexus with the criminal act the subject of the application. Unlike under the VOCAA, these lump sum payments would no longer be provided as a symbolic expression of the state’s sympathy and condolence, but would be provided to further assist a victim in their recovery and provide victims with choice and control to direct some funds to certain expenses to aid their recovery which may not fall within other streams of assistance. 

As outlined above, the proposed Act would also include a range of recognition mechanisms, as provided for by the ‘recognition’ stream. The Commission recommends that the proposed Act provide that all eligible victims are entitled to receive a comprehensive statement of reasons for a decision and a recognition statement which, on behalf of the state, acknowledges the effect of the criminal act. The Commission also recommends that all eligible victims be entitled to request a victim conference with the scheme decision maker or deputy decision maker. Victim conferences would provide a respectful forum for victims to be acknowledged and heard.  

In response to stakeholder concerns that the current amounts of assistance are too low, the Commission recommends that the amounts of assistance be increased and subject to indexation and that there be no collective cap on assistance for multiple victims whose claims relate to the same criminal act. To promote scheme sustainability, the Commission recommends that the proposed Act require that expenses be reasonable and that where an applicant is the victim of ‘related criminal acts’ that these be treated as a single act for the purposes of making an award. While the Commission acknowledges that this may disproportionately disadvantage victims who experience multiple acts committed by a single offender, including victims of family violence, the Commission considers that other  aspects of the proposed scheme should mitigate the effects of this—for example, victims of related criminal acts would be eligible for a higher maximum recovery payment under the proposed Act. 

To address concerns with variation time limits and administration, the Commission recommends that victims be able to apply for additional financial assistance during a 10-year period from the date of their initial award and beyond the 10-year time limit for some additional health-related expenses according to guidelines. 

In Chapter 14, the Commission acknowledges stakeholder concerns about the current application form and recommends that all streams of assistance can be applied for using the same form and that the form accommodate varied victim experiences, including where there are multiple criminal acts or where the criminal act/s occurred in the context of a pattern of abuse. Having regard to stakeholder concerns that some victims may find it difficult to provide evidence of a criminal act, the Commission recommends that an applicant should be able to provide a broader range of documentary evidence to establish that they were the victim of a criminal act. The Commission also recommends that the evidentiary requirements for proof of injury should be broadened to enable a wider range of documentation to be submitted to prove injury. To further simplify the process for victims, the Commission recommends that the proposed scheme’s case managers should assist victims with the collection of documentary evidence. 

Chapter 14 also outlines the use of application materials in other proceedings and inspection and publication of application materials. Having regard to stakeholder concerns and approaches in other jurisdictions, the Commission recommends limits on the use of application materials in other proceedings and inspection of materials. Additionally, the Commission recommends restrictions on the publication of application materials. The Commission does not recommend restricting the publication of de-identified data or media or other public reports about the scheme which exclude information that is likely to lead to the identification of any individuals the subject of an application. 

Chapter 14 notes stakeholder concerns about the disadvantages experienced by some victim cohorts as a result of the two-year application time limit under the VOCAA. To address these concerns, the Commission recommends an increase of the time limit from two to three years for all victims, along with increasing the time limit further for some victims and abolishing the time limit entirely for others. Additionally, the proposed scheme decision maker would be able to consider applications made out-of-time, having regard to a range of expanded factors. 

In Chapter 15, the Commission discusses the current VOCAA factors resulting in refusal of awards, or the reduction of awards, including consideration of whether a victim has reported a matter to police, co-operated with police or prosecution and their broad character and behaviour ‘at any time’. The Commission concurs with stakeholder concerns that such factors result in subjective assessments of whether victims are innocent or deserving of assistance and recommends that the proposed Act not replicate the VOCAA provisions. The Commission recommends that the proposed decision maker limit consideration of an applicant’s behaviour to consideration of criminal behaviours with a nexus between the criminal act the subject of the application. The Commission also recommends that there be no mandatory requirement for a victim to make a report to police or to assist police or with prosecution. Instead, under the proposed Act, a police report may be used by an applicant to assist them to meet evidentiary requirements for scheme eligibility. 

In Chapter 15, the Commission also notes that while a transition to an administrative model would likely lead to improvements in overall timeliness of decision making, the Commission considers further safeguards should be incorporated into the proposed scheme’s design to ensure timely decision making. Accordingly, the Commission recommends that the scheme decision maker should be required to act expeditiously in the determination of applications and to support this, regulations should provide for time limits within which determinations for immediate assistance, funeral expenses, counselling and practical assistance should be made. Additionally, to address stakeholder concerns about a lack of transparency and consistency under the existing scheme, the Commission makes recommendations that the proposed Act require decision makers to provide written reasons for decisions, including decisions about accepting or rejecting applications, any factors taken into account in determining the amount of a recovery (lump sum) payment and reducing awards on the grounds that an applicant has received any other assistance from other sources. 

To improve accessibility of reviews of decisions, the Commission also recommends that the proposed Act first provide victims with an internal review option, followed by an external review to the Victorian Civil and Administrative Tribunal. The Commission also recommends the establishment of a separate complaints process. 

In Chapter 16, the Commission discusses the interaction of the proposed Act with other financial assistance schemes and the refund of awards. The Commission agrees with stakeholder views that there are issues of ambiguity and complexity in relation to VOCAA’s consideration of other assistance or payments. The Commission considers that under the proposed scheme, victims should be entitled to receive assistance from both the proposed scheme and other sources as long as they are not provided for the same purposes. This recognises the intersection with other schemes like the TAC and WorkSafe and that the legislative purpose of particular payments might differ. Having regard to certainty for victims, reducing complexity and encouraging timely decision making, the Commission recommends that the proposed Act require a decision maker to reduce the amount of assistance if a payment has been received through other means for the same purpose; or to reduce a payment on the basis that the victim will (on the balance of probabilities) receive a payment from another source for the same purpose. To support this, the Commission also recommends that the refund provisions in the proposed Act improve certainty and consistency for victims by only requiring that an award be refunded where the decision maker has considered the amount or type of the subsequent assistance received. The Commission notes that such consideration should provide the scheme decision maker with discretion, acknowledging that requiring victims to refund awards may cause financial hardship. 

Accessibility, sustainability and implementation 

Chapters 17–19 discuss issues of accessibility, sustainability and implementation. 

Chapter 17 discusses awareness and accessibility, including outlining the current estimate (approximately 9 per cent) of eligible victims who are accessing the existing scheme. The Commission considers that some issues of awareness and accessibility are likely to be addressed by the proposed model—an administrative scheme embedded within an independent agency whose mandate includes advocating for victims of crime. However, the Commission considers that a number of further initiatives are required to ensure improved awareness and accessibility of the proposed scheme, including community engagement and awareness raising and sector training and education. The Commission recommends that ongoing community engagement, public awareness and sector training and education activities regarding the proposed scheme be provided for by the proposed Act and that the proposed scheme be required to report annually on such activities. The Commission also recommends that the proposed scheme review and revise all forms and information so that they are in plain language and accessible formats. 

Chapter 18 discusses the potential costs and sustainability of the proposed scheme. It discusses demand and operating costs for the existing scheme, noting that demand for the proposed scheme is most likely to increase year on year, as it has for VOCAT. The Commission notes that it is difficult to project demand for the proposed scheme because of major justice reforms, the availability of other forms of financial assistance, fluctuations in awareness of the proposed scheme and any reduction in technical or legal barriers through legislative change to the VOCAA or through the introduction of the proposed Act. The Commission recommends that a comprehensive demand modelling project should be undertaken to assess current unmet demand under the existing scheme, and if relevant, anticipated demand under the proposed scheme. The Commission also notes that establishment and operating costs of the proposed scheme will require further consideration given the existing scheme’s salaries and operating expenditure are subsidised by the Magistrates’ Court of Victoria. 

Chapter 18 outlines factors and initiatives promoting sustainability of the proposed scheme, as considered throughout Parts Three and Four of the report. In addition, Chapter 18 discusses recovering money from convicted offenders. While acknowledging the current mechanisms for offender recovery under the VOCAA have not been used in practice, the Commission recommends the proposed Act enable a victim to assign their right to the state to recover monies. To support this provision and enhance its practical operation, the Commission recommends that the proposed scheme decision maker be required to advise victims of this right, and that the proposed scheme be provided funding and resourcing to pursue such recovery and enforce debts, so as not to divert resources from the provision of support to victims. 

Chapter 18 also discusses whether levies should be imposed on convicted offenders (‘victim levies’). The Commission discusses the operation of victim levies in other jurisdictions; the potential legal implications; the impact on impecunious offenders and enforcement costs. The Commission notes that the issue of victim levies has been a matter under consideration in Victoria since 2009. The Commission notes that while there may be some advantages to introducing victim levies, the matter of a victim levy should be addressed in its own right through a dedicated review, with regard to victims’ and stakeholder views, legal implications, operational experiences in other jurisdictions, cost benefit analysis and social implications. The Commission recommends that further consideration be given by government to the introduction of a victim levy. 

Chapter 19 discusses mechanisms for monitoring the operation of the proposed Act and scheme to ensure best practice. Noting stakeholder concerns about limited data collection and publication of data, the Commission recommends that the proposed Act require the scheme to publish and make publicly available data relating to all aspects of the scheme. The Commission also recommends that the proposed Act provide for a review of the operation and effectiveness of the Act and scheme not more than five years after its commencement. The Commission also recommends that transitional provisions be simpler and clearer for victims to understand and that all pending applications under the VOCAA be finalised under that Act and all new applications made on or after the commencement date of the proposed Act be determined under the proposed scheme.