Commonwealth Financial Planning v Couper: An Insider’s view


For a man that successfully fought one of Australia’s largest banks over the poor advice it provided to his client, Martin Culleton, a Partner with regional law firm RMB lawyers, is cast against type. 

Commonwealth Financial Planning v Couper

Commonwealth Financial Planning v Couper

Most advisers have firm, fixed and often uncharitable views of financial services’ lawyers – particularly those that act for complainants; but Culleton defies stereotyping. He’s not a firebrand railing against vertical integration and commercial services, he’s not an Industry Funds’ mouthpiece nor is he anti-advice. Instead, he’s a reasoned and reasonable Londoner with a solid grasp of advice, a positive view of the advice profession and a dogged commitment to pursuing the legitimate interests of his clients. 

As the solicitor for Noel Stevens (and then the estate of Noel Stevens) Culleton took on Commonwealth Financial Planning over inappropriate advice, secured a decision in his client’s favour and successfully defended CFP’s appeal against the initial judgment. Despite his exposure to a number of advice and product failures, he’s also an advocate for the emerging advice profession. 

“There are lots of fantastic advisers and financial planners out there .. they welcome these cases”

In a previous post we examined CFP v Couper and the lessons advisers should take from that case. It is an important case for a number of reasons; although it doesn’t break new legal ground it highlights the sporadic maturity of the financial advice profession, raises questions of conflict and competence and highlights some specific challenges faced by advisers within vertically integrated businesses. 

Culleton generously took some time to discuss the case and the full interview is available on this site.


IDR, EDR and Litigation

Culleton is measured about the importance of CFP v Couper  and acknowledges that “It doesn’t make new law as such .. [but] it identifies the lack of practical steps that are taken [by advisers]… and sends a message that the Courts are willing to intervene” 

If they take little notice of the case itself, Licensees, and advisers, at least need to recognise that litigation (and the associated costs and delays) are no longer an effective disincentive for complainants.

As a consequence of Stevens' success in this case, more aggrieved clients may choose to skip the IDR/EDR process entirely in favour of a direct appeal to a body more inclined to consider the individual and the individual’s rights.

“One of the concerns [complainants might have with litigation is that it stacks a]… big financial institution with unlimited funds against a poor individual … and they may take the view that the system is designed so they cannot succeed. But in this case the Court took the view that the Individual’s rights were not properly considered and that accordingly they made the judgment in the way that they did” 

In reality, and despite their complaints about FOS, both advisers and Licensees have benefitted as much from the external dispute resolution ("EDR") scheme as they have from their historic investment in effective internal dispute resolution ("IDR"); the free and accessible service provided by FOS minimised legal costs for all parties and provided effective solutions for most advice issues.

Couper went counter this general trend by eschewing dispute resolution (both internal and external) in favour of litigation and an expedited hearing.

While acknowledging that alternatives were open to Mr Stevens, Culleton emphasised that his client’s specific needs meant that they “didn’t have time to go down any other road”. RMB lawyers were engaged by Mr Stevens after his claim had been refused and because of his failing health they commenced proceedings on an expedited basis. He acknowledges that it was not an ideal solution for any of the parties; Mr Stevens gave evidence “while he had nurses at home pumping morphine into him, [and] really didn’t have time” to try anything else except litigation. 

Traditionally, most consumers discount litigation in favour of traditional options such as IDR and EDR, but Couper shows that the Courts are attuned to these issues and inclined to “push things through quicker” and encourage settlement. In Culleton’s words, for an aggrieved client, “the Court is as good an avenue to go down as any other”. 

In fact, with FOFA, consumers might be more keen to litigate now than they were in the past. Accordingly, both Licensees and Advisers need to consider whether they have the processes and resources available to them to deal as effectively with litigation as with more traditional complaints mechanisms.

Reasonable basis v false and misleading statements 

Generally, actions against advisers are premised on the usual foundation of “reasonable basis” or, rather, an adviser’s failure to demonstrate or prove the reasonable basis of their recommendation given the client’s needs, objectives and circumstances. 

Interestingly, Couper succeeded not on this basis but on the basis of the false and misleading statements made by the adviser – in particular the replacement product recommendations and the consequences and implications of that decision.

While every case is judged on its facts, and while the complainant alleged the usual failures, Culleton felt that “those allegations [of false and misleading statements] were strong based on the Statement of Advice that was given.” 

The facts of the case were clear. Mr Stevens had an existing policy and the adviser “recommended immediately that that policy be cancelled” once new cover was arranged; and, critically, without making the enquiries necessary to verify that this was an appropriate and suitable strategy for his client.

Culleton considered that the “clearest course of action” was to rely on the clear and explicit statements contained in the SoA rather than on contestable grounds of reasonableness and quality. 

“The one thing that became clear in the case … a lot of adviser’s haven’t known what their obligations are [but because of cases like this] they are becoming aware of what they need to do” 

Compliance, competency, culture and conflicts

For a claim based on a significant failure of the advice process, Culleton surprisingly states that while “the adviser failed [he] didn’t detect from the adviser any lack of ability ..” 

This is a curious position given that Culleton emphasises that Noel Stevens was “an unsophisticated man who didn’t have much understanding of how the policies worked … he didn’t have lots of knowledge [and] .. he totally relied on what [advice] he was given.” 

This statement was not a disparagement of his client but rather a simple recognition that Mr Stevens relied on the skills and knowledge of the CFP adviser. While Culleton avoids presenting the ultimate failure as an issue of competence, the Court was not so reticent and highlighted the adviser’s lack of knowledge of the relevant law and the significant consequences of non-fraudulent non-disclosure.

While it may be tempting for Licensees to dismiss this adviser’s failures as unrepresentative of the broader industry, contemplating the alternative might be more useful.

The adviser’s obligations in this case were not new, but had been in place since 2003. So how did a trained and competent adviser otherwise fail to understand or satisfy his legal and professional obligations? Has formal training and standardised competencies failed to equip advisers with the practical and applied knowledge to provide reasonable advice? Are the expectations of advisers out of kilter with their capabilities? Do processes and structures undermine an adviser’s capability to provide quality advice?

These are important questions but Culleton resists simply explaining the advice failure in Couper as either the result of procedural or cultural failures. Prudently, Culleton suggests it was “a bit of both”; the adviser was working within a system that was devised to produce compliant advice documents but “the Court felt that the advice and the procedure was not reasonable for Noel Stevens” 

In fact, this is the heart of Culleton’s assessment of the failure’s root cause; while he avoids alleging systemic or cultural issues, by eliminating intent and incompetence as the causes of the failure, he leads one inevitably to recognise structural or cultural causes.  In fact, he seems to clearly focus on those processes and procedures implemented by the Licensee to maximise product sales. In such an environment, he suggests, advisers have less discretion than they actually need to humanise the application of the Licensee’s processes. 

While Culleton accepts that a Licensee can legitimately implement processes to manage their risks, operationalize common processes and maximise sales he believes that “sometimes the individual is not best served in that way.” 

"You need to be human enough to consider the individual’s circumstances….[The Bank’s procedures are designed] to sell products and make money but you can’t ignore your obligations under the legislation.”

Even unaligned advisers have commercial imperatives, but these pressures are greater for employed advisers in a vertically integrated model; the Institutional Licensee’s need for set procedures creates a profound conflict for the adviser  “between who [they] act for and trying to work in that environment”. 

Vertical integration and conflicts

While criticism of this Institutional advice model can be inferred from the judgment, the Court actually avoids offering an explicit commentary on vertical integration.

Despite the spectre of vertically integrated licensees dominating the judgment, the pressure and conflict caused by association is given less focus than the pressure and conflict caused by remuneration; but the former may seem to be a more reasonable explanation of the ultimate failure.

While the adviser was seen to recommend Group product so that the Group could benefit at the expense of a rival, the Court focused more attention on the remuneration to be paid to the adviser and the referrer.

In reality, the benefits that would have been paid to them both were nominal and the decision to promote Group products was more likely driven by other conflicts.

Culleton appreciates that this is a classic conflict position for an employed adviser. “Working in that environment where the employer is there to sell particular products and the adviser is there to sell those products [creates a] conflict with what is best for the individual who seeks their advice.”

It is also a conflict that, due to its fundamental nature, is more often formally, rather than effectively, managed. 

“I read between the lines in the judgment that the Court took into account the situation .. in that culture. The gist of the judgment is that it was a “selling type” culture and maybe an independent [adviser] may have had a better defence on the basis that they were not tied into the Commonwealth Bank. Ultimately, .. the Court would have determined on what was reasonable [but]… it didn’t hurt Noel Stevens case. [The adviser] was trained in that culture … but in some cases you can make mistakes”. 


Advice and Sales

Regrettably, Noel Stevens spent his final months pursuing his interests through the Courts. Although Culleton doggedly defended his clients’ rights he was, on a human level, disappointed that a terminally ill man needed to spend so much of his remaining time with lawyers rather than loved ones. (Professionally, he also commends the conduct of the Insurer and their representatives and the sensitivity they showed to Mr Stevens.)

While the action focused on the quality of the advice provided, it is worth noting that Culleton wasn’t interested in measuring the advice against an aspirational or future standard but was, instead, clearly focused on the practical application of the current law. 

While the action focused on the quality of the advice provided, it is worth noting that Culleton wasn’t interested in measuring the advice against an aspirational or future standard but was, instead, clearly focused on the practical application of the current law. 

“We are not talking about perfection because that’s impossible but what is reasonable in the circumstances”


Likewise, Culleton places less emphasis on the adviser’s competence than on the environment in which the adviser operated; depersonalised processes and restricted discretion created the conditions that led to his client’s loss.

To support the validity of his structural and cultural observations about CFP, Culleton points out that Mr Stevens did not approach the bank to obtain a quote or advice. Instead, “he was asked whether he wanted to discuss [financial products, options and strategies] when he went to the bank” about another issue. 

Culleton acknowledges that a “marketing type selling culture” is not specific to this Group; “we’ve probably all been approached by a Bank asking whether we want advice on other products”.

In fairness, the model itself was not identified as the problem.

Instead, Culleton suggests that the ultimate failure was caused by processes and procedures that spared the adviser from accepting that “..  the individual’s circumstances need to be the most important consideration” for the adviser. 

The Licensee’s focus on form over substance, and the adviser’s decision to comply with the Licensee’s requirements rather than his own critical judgment, delivered a sub-optimal outcome for the client.

While Culleton suggests that these processes may work in “99 cases out of 100”, in this case, they failed spectacularly and surprised an adviser who was reasonably following a “procedure … which he felt was reasonable but which the Court decided was not”

“It was also very clear that the Bank had devised a system that tried to streamline or make the process easy but in doing so perhaps ignored the individual’s responsibility to the customer”. There was no evidence of any intentional “lack of consideration, it’s just that [the adviser] followed a procedure” that placed insufficient weight on the customer’s interests and their relevant personal circumstances." 

Objectively, Culleton believes that Noel Stevens interests would have been best served had he been advised “to simply carry on with his existing policy”. Instead, he was advised to cancel his cover and this recommendation created a cause of action. 

It is worth acknowledging that the adviser was adamant that he had no capacity to recommend that Mr Stevens retain a product that was not on his Licensees Approved Product List. While ASIC recognise that an APL is a risk management device for Licensees they do not accept that compliance with the APL legitimises inappropriate or unsuitable recommendations.

Accordingly, Licensees should review their processes and procedures to inform advisers how, and in what circumstances, they can recommend products that are not on the Licensee’s APL.


Licensees and advisers can take one more learning from this case; perform a cost-benefit analysis before you commit yourself to a particular strategy. Defending and ultimately appealing the case would have cost significantly more – in purely financial terms – than settling Mr Stevens’ modest claim.

Where a legitimate claimant is open to a negotiated settlement, it is worth considering settlement unless, strategically, you cannot countenance that position. 

“Rightly or wrongly, because of the allegations the system was being challenged and they decided .. that they were not willing to compromise on the position that they had done nothing wrong”