The chief counsels’ contrasting styles have produced some jaw-dropping moments and claimed some major scalps

Forensic logic: how the royal commission lifted the lid on the finance industry

It took some time, but he got there.

Michael Hodge, QC, senior counsel assisting the banking royal commission, had finally had enough of the witness.

“Mr Hagger,” the Brisbane-based silk said angrily.

“It wasn’t out of your control. You could have told them the number in writing. And you didn’t do so. And that was because you were not being candid with Asic.”

“No, that’s not true,” argued the witness Andrew Hagger, a senior executive with National Australia Bank.

“That’s not true, Mr Hodge.”

The tense exchange happened last month, during a lengthy cross-examination at the royal commission.

And this week, less than five weeks later, Hagger was gone, resigned from NAB after ten years’ service; the stock exchange was informed of his departure on Monday, though NAB says the timing was coincidental.

Hagger had not performed well under Hodge’s gaze. And he wasn’t the only one.

Drawing to a close

The financial services royal commission wrapped up its sixth round of hearings last week with another collection of damning findings, this time against the insurance industry.

The commission feels like it is just warming up, but its work is quickly drawing to a close.

The commissioner, Kenneth Hayne, has been asked to produce an interim report on the hearings by 30 September, with the final report due by 1 February.

Economists and tax specialists are now trying to predict what impact the commission could have on the economy.

Hayne’s hand-picked team of counsel assisting – the Brisbane-based Hodge, Melbourne-based silk Rowena Orr, QC, and junior barristers Eloise Dias, Mark Costello, and Albert Dinelli – have each made an impact since the hearings began in March, drawing concessions from witnesses that have shocked the public.

Who can forget when AMP’s head of financial advice Anthony Regan, under questioning by Hodge, admitted in April that he’d lost count of the number of times AMP had lied to the regulator?

It was the moment when it dawned on the then-Turnbull government how bad things were, how appallingly Australia’s biggest financial institutions had been behaving for years, and how wrong it had been to oppose a royal commission for so long.

Even now, Australia’s new prime minister, Scott Morrison, is struggling to articulate why he was so opposed to the royal commission last year. Earlier this month, he told 3AW radio in Melbourne that where he think he failed, by opposing the royal commission, was in failing to understand “the real pain people had been feeling about being treated so badly.”

770,000 documents

The legal staff working on the royal commission, officially called the Office of the Royal Commission, have been working under extreme deadline pressure to get to this point.

The commission had been budgeted at $75m, and as of this week, the office had 54 personnel, including solicitors assisting and staff, and they have reviewed more than 770,000 documents, including documents produced in response to notices, and submissions from parties and members of the public.

Rowena Orr and Michael Hodge have been the chief interrogators, with very different styles.

Orr, who holds a masters of philosophy in criminology from the University of Cambridge, and degrees in law and economics from the University of Queensland, has a quiet, methodical, forensic style.

She exemplifies “the Melbourne way” of doing things, marshalling her facts patiently, leaving people in the witness box with nowhere to run from her logic, where they don’t know they’ve been filleted until they leave the room.

She has never lost her cool; the only sign she’s become exasperated with a witness is when she’s sighed, or looked at Commissioner Hayne.

Hodge’s style has been equally forensic, but more aggressive.

He has an edge which “is a bit more Sydney,” as some in the legal community put it (even though he hails from Brisbane).

But Hodge, who holds a bachelor of laws from the University of Queensland, a graduate diploma in competition law from the University of Melbourne, and a master of laws from the University of Melbourne, has generated more headlines.

With a flair for drama – he has co-written a musical, with his brother Paul, about Hillary and Bill Clinton – he did not mind using dramatic language to set the scene for the superannuation round of hearings.

“What happens when we leave these [superannuation] trustees alone in the dark with our money?” he asked the commission. “Can they be trusted to do the right thing?”

His phrasing generated immediate headlines.

He interrogated the former chair of Nulis, Nicole Smith, for days about NAB’s fee-for-no-service scandal, with the revelations becoming so bad that NAB’s chief executive, Andrew Thorburn, later issued a public apology.

‘Proportionate regulation’

Accounting and consultancy firms are now preparing the ground for changes in the Australia’s law and regulations.

The firm Grant Thornton warned last month it was inevitable that regulation would increase after the royal commission, most likely via increased reporting and compliance obligations.

It is already making the case for “proportionate regulation”, hoping governments will tailor any new requirements to the size of an entity.

JP Morgan predicted in May – only two months after the hearings began – that the royal commission could lead to tighter lending standards and slower credit growth, and significant job losses across the banking, mortgage broking, finance and real estate industries as banks simplified their business models, and a slow-down in consumer spending, given how badly things had gone for AMP.

But the bank’s economists also said there would be positives to come.

“First, household balance sheets should improve,” JP Morgan economist Sally M Auld wrote in a note to clients. “This should reduce the inherent vulnerability of the system to downturns.

“Second, average loan quality and loan-to-income characteristics will improve for the banks.

“Third, banks will be forced to transition away from mortgage lending towards more business lending. All else equal, this should be positive for the longer-term investment and productivity outlook.”