Federal Court of Australia|2023-08-29|Before: Ms J, Moshinsky J

THE COURT NOTES THAT: capitalised terms in these orders (including Schedule A) have the meanings given to them in the Court's reasons for judgment dated 5 July 2023.

Common questions

The common questions raised in this proceeding set out in Schedule A to these orders be answered in the terms set out in Schedule A.
Pursuant to s 33ZB of the Federal Court of Australia Act 1976 (Cth) (FCA Act), all persons who were group members in the proceeding as at the date of these orders (other than persons who had opted-out of the proceeding by that date) are bound by the answers to the common questions as specified in Schedule A to these orders.

WealthStone 4. Pursuant to s 237 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth), clause 5 of the WealthStone Buy-Back Agreement is declared void to the extent that it precludes the claims made by WealthStone in this proceeding. 5. Within 28 days from the date of this order, pursuant to s 33Z(1)(e) of the FCA Act, the respondent pay WealthStone: (a) subject to the provision of a valid tax invoice or adjustment note, $115,533.51 (inclusive of GST) by way of damages; and (b) interest pursuant to s 51A of the FCA Act: (i) on 50% of the sum in paragraph (a) above, calculated from 2 March 2020 to the date of these orders; and (ii) on 50% of the sum in paragraph (a) above, calculated from 16 March 2021 to the date of these orders, being in total the amount of $17,177.84. 6. Pursuant to s 33Z(2) of the FCA Act, the damages in paragraph 5 be paid by the respondent to WealthStone's solicitors, Corrs Chambers Westgarth, for distribution to WealthStone.

Other 7. In relation to costs: (a) by 4.00 pm on 19 September 2023, the applicant file and serve a written submission and any affidavit material; (b) by 4.00 pm on 10 October 2023, the respondent file and serve a written submission and any affidavit material; and (c) by 4.00 pm on 24 October 2023, the applicant file and serve any written submission in reply and any affidavit material in reply. 8. If and to the extent that leave to appeal is required (in order to appeal from the judgment and these orders), such leave is granted. 9. The proceeding be listed for case management on a date to be fixed, to discuss the further conduct of the matter. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. SCHEDULE A

Question Answer and reference to 5 July 2023 reasons for judgment (J) or 29 August 2023 reasons for judgment

Contract Claim

           Did AMPFP effectively amend the BOLR Policy to introduce the 8 August 2019 Changes as of 8 August 2019?                                                                                                                                                                                                                                                                                               No: J [602], [644]

1.a. Was there an economic change that rendered the BOLR Policy, or any part of it, inappropriate? No: J [582], [596] 1.a.i. Was there a sustained and quantifiable decrease in the market value of register rights linked to ongoing revenue during the period 1 January 2017 to 30 June 2019 (First Alternative Economic Change)? Yes: J [580] 1.a.ii. Was the First Alternative Economic Change an "economic change" within the meaning of the LEP Yes: J [581] Provision? 1.a.iii. Did the First Alternative Economic Change render the BOLR Policy, or any part of it, "inappropriate", within the meaning of the LEP Provision? No: J [582] 1.a.iv. Was there a material change in the supply of and demand for financial advice services and practices (Second Alternative Economic Change)? No finding made: J [594] 1.a.v. Was the Second Alternative Economic Change an "economic change" within the meaning of the LEP Assuming the Second Alternative Economic Change occurred (in respect of the supply of and demand for financial advice services), yes: J [595] Provision? 1.a.vi. Did the Second Alternative Economic Change render the BOLR Policy, or any part of it, "inappropriate", Assuming the Second Alternative Economic Change occurred (in respect of the supply of and demand for financial advice services), no: J [596] within the meaning of the LEP Provision? 1.b. Was there a legislation change that rendered the valuation multiple in the BOLR Policy inappropriate in respect of grandfathered commission revenue? No: J [600]-[601] 1.b.i. Were any, or any combination, of the following a "legislation change" within the meaning of the LEP Provision: No: J [600] (a) on 4 February 2019, the Commonwealth Government's response to the Financial Services Royal Commission's Final report; (b) on 22 February 2019, the release of the exposure draft of "A Bill for an Act to amend the Corporations Act 2001 in relation to grandfathered conflicted remuneration, and for related purposes"; (c) on 1 August 2019, the introduction into the House of Representatives and First Reading of the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 (Cth)? 1.c. On the proper construction of the BOLR Policy, did any proposed changes pursuant to the LEP Provision have to be: Neither. Any proposed changes to the BOLR Policy pursuant to the LEP Provision needed to be proportionate to the economic or legislation change that renders the policy (or any part of it) inappropriate: J [560] (a) reasonably necessary to make the BOLR Policy appropriate in light of the economic or legislation change that renders the policy or any part of it inappropriate; or (b) responsive to the economic or legislation change that renders the policy or any part of it inappropriate? 1.c.i. Were the 8 August 2019 Changes proportionate to the First Alternative Economic Change? No: J [583] 1.c.ii. Were the 8 August 2019 Changes proportionate to the Second Alternative Economic Change? Assuming the Second Alternative Economic Change occurred (in respect of the supply of and demand for financial advice services), no: J [597] 1.d. Was AMPFP required, as a matter of construction or as an implied term, to identify to practices and/or ampfpa the legislation or economic change in response to which the power to amend the BOLR Policy was being exercised? Subject to the requirements of consultation in cl 1.4 of the Master Terms, no: J [562] 1.e. Was consultation (within the meaning of cl 1.4 of the Master Terms) with ampfpa a pre-condition to the effective exercise of the power to amend pursuant to the LEP Provision? Yes: J [610], [615] 1.e.i. Did AMPFP consult with ampfpa in respect of the 8 August 2019 Changes, or any of them, within the meaning of cl 1.4 of the Master Terms? No: J [636], [638], [642] 2. Did AMPFP effectively amend the BOLR policy to introduce some or all of the 8 August 2019 Changes as of 8 September 2020? No: J [647] 3. Did AMPFP breach the authorised representative agreements of relevant group members within [35] or [37] of the statement of claim by offering to enter into a buyback agreement with a BOLR payment calculated pursuant to the 2019 BOLR Policy (and/or by failing to offer a register valuation, or to enter a buyback agreement, with a BOLR payment calculated pursuant to the 2017 BOLR Policy)? Yes: J [655], [678] 4. Was AMPFP entitled to discount or exclude grandfathered commission revenue from the calculation of the BOLR Benefit under the terms of the 2017 BOLR Policy? If so, from what date? Yes, from 1 January 2020: reasons for judgment dated 29 August 2023, [16] Release validity 5.a. In respect of WealthStone (and other group members who fall within [58] of the statement of claim) on the proper construction of those group members' buy-back agreements, has AMPFP, by paying a BOLR Benefit calculated based on the 8 August 2019 Changes, paid the "BOLR Benefit" within the meaning of the agreements so as to satisfy the condition precedent to the operation of the release? Yes in respect of WealthStone; not answered in respect of other group members: J [687] 5.b.i. In relation to the buy-back agreements of WealthStone (and other group members who fall within [58] of the statement of claim), were the buy-back agreements contracts for the supply of services within the meaning of s 23(4)(a) of the Australian Consumer Law? Yes: J [695(a)] 5.b.ii. In relation to the buy-back agreements of WealthStone (and other group members who fall within [58] of the statement of claim), was AMPFP's conduct in entering the buy-back agreements conduct in connection with the acquisition or possible acquisition of services within the meaning of s 21(1)(b) of the Australian Consumer Law? Yes: J [702] 5.b.iii. In relation to the buy-back agreements of WealthStone (and other group members who fall within [58] of the statement of claim), in the case of buy-back agreements providing for payment of the BOLR Benefit in the form of an initial payment and a deferred payment (however described), The upfront price was the BOLR Benefit: J [695(c)(i)] was the "upfront price" payable under those contracts, within the meaning of s 23(4)(c) of the Australian Consumer Law: 1. the initial payment; or 2. the BOLR Benefit? 5.b.iv. In relation to the buy-back agreements of WealthStone (and other group members who fall within [58] of the statement of claim), was the duration of the buy-back agreements longer than 12 months? Yes in respect of WealthStone; not answered in respect of other group members: J [695(c)(ii)] 5.b.v. Did AMPFP have a right, under the authorised representative agreements, to require a group member to enter into a buy-back agreement containing a release in order to receive a BOLR Benefit? No: J [714] 5.c. At the time of entering into the WealthStone Buy-Back Agreement, did AMPFP know, or ought AMPFP to have known, that practices were likely to challenge, or had challenged, the legal validity of the 8 August 2019 Changes? Yes: J [711]

Introduction 1 These reasons deal with the form of orders to be made following the publication of my reasons for judgment dated 5 July 2023 in respect of the initial trial of the proceeding: Equity Financial Planners Pty Ltd v AMP Financial Planning Pty Ltd [2023] FCA 741 (the 5 July 2023 reasons). These reasons should be read together with the 5 July 2023 reasons. I will adopt the definitions used in those reasons. 2 The parties filed written submissions in relation to the form of orders, and the matter was listed for a brief further hearing in relation to these matters on 25 August 2023. 3 I note the following: (a) In relation to the issue raised in [675] of the 5 July 2023 reasons (regarding the quantum of damages payable to Equity), it is common ground that the correct figure (based on my reasons) is $814,944.76 (being a figure that is exclusive of GST). (b) In relation to the issue raised in [719] of the 5 July 2023 reasons (regarding the quantum of damages payable to WealthStone), it is common ground that the correct figure (based on my reasons) is $115,533.51 (being a figure that is inclusive of GST). (c) In relation to the pre-judgment interest on the damages payable to WealthStone, it is common ground that this should be calculated as follows: (i) as to 50% of the damages amount, interest is to be calculated from 2 March 2020 to the date of the orders; and (ii) as to 50% of the damages amount, interest is to be calculated from 16 March 2021 to the date of the orders. (d) There is no issue between the parties as to the wording of the order declaring clause 5 of the WealthStone Buy-Back Agreement void (to the extent that it precludes the claims made by WealthStone in this proceeding) to give effect to [718] of the 5 July 2023 reasons. (e) There is no issue between the parties that I should grant the parties leave to appeal from the judgment and orders, if and to the extent that leave may be required. I consider it appropriate to make such an order, given the substantive nature of the matters decided by the judgment and orders, even if the proceeding is not yet at an end. 4 The issues to be dealt with in these reasons fall into three categories: (a) whether a declaration should be made regarding the ineffectiveness of the 8 August 2019 Changes; (b) whether pre-judgment interest on the damages awarded to Equity should run from the date of breach or the date of the trial; and (c) issues relating to the common questions and the answers to those questions. 5 I will consider each of these in turn.

Whether a declaration should be made 6 Equity contends that I should make a declaration as follows: The Respondent's actions on or around 8 August 2019 were ineffective to amend the Buyer of Last Resort Policy (forming part of the Authorised Representative Agreement between the Respondent and the Applicant and between the Respondent and each group member) insofar as those actions purported to change the buyer of last resort multiple applicable under the Buyer of Last Resort Policy. 7 While the text of the proposed declaration reflects the conclusion I reached in the 5 July 2023 reasons, I do not consider it necessary for that conclusion to be the subject of a declaration in circumstances where: (a) the conclusion is apparent from the 5 July 2023 reasons (eg, at [15]-[17]); (b) the orders to be made that AMPFP pay damages to Equity and that AMPFP pay damages to WealthStone give effect to the conclusion; and (c) the conclusion will be reflected in the answers to the common questions, to be set out in a schedule to the orders.

Pre-judgment interest 8 There is an issue between the parties as to the period over which pre-judgment interest (pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth)) should be calculated. Equity contends that interest should be calculated from the date of the breach of contract (19 November 2019) to the date on which the orders are made. AMPFP contends that interest should be calculated from the first day of the trial (10 October 2022) to the date on which orders are made. 9 Equity submits that where, as here, an applicant has succeeded in a claim for damages for breach of contract, it is orthodox to calculate interest from the date of the breach. 10 AMPFP submits that interest should be calculated from the date of trial, given that the damages were calculated based on the difference between the amount Equity would have received under the 2017 BOLR Policy and the current value (as at the date of trial) of its register rights: see the 5 July 2023 reasons at [671], [675]; cf Souter v Condor Developments Pty Ltd [2012] WASCA 227 at [21], [45]. AMPFP submits that Equity could not have obtained an award for that sum at the date of breach, and has therefore not been "kept out" of that money: see HK Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 at [6], citing Batchelor v Burke (1981) 148 CLR 448 at 455. AMPFP submits that, had Equity's damages been calculated at the date of breach, the quantum of damages would have been the materially lesser sum of $573,294 (the difference between the register valuation it was offered and the valuation it should have been offered - see the 5 July 2023 reasons at [659]) and pre-judgment interest on that amount would have been payable. 11 I accept that the applicable principle is as stated by AMPFP, namely that the purpose of pre-judgment interest is to compensate the successful claimant for being kept out of his, her or its damages: Batchelor v Burke at 455. However, contrary to AMPFP's submissions, I consider the proper application of that principle to the facts and circumstances of this case results in an award of interest for the period from the date of breach to the date of the orders. Equity has been kept out of its damages since the date of the breach (19 November 2019); the fact that, in calculating the amount of the damages, the current value of Equity's register rights was deducted (see the 5 July 2023 reasons at [671], [675]) does not detract from that analysis. It remains the case that Equity has been kept out of its money (the damages so calculated) since the date of the breach. A calculation of interest from the commencement of the trial (10 October 2022) would fail to compensate Equity for being kept out of its damages and thus fail to serve the purpose of s 51A.

The common questions and answers 12 In the 5 July 2023 reasons at [722], I requested the parties to re-cast the common questions to reflect the approach to the issues adopted in those reasons. The parties have done so, but there are some differences between the parties (see below). It is common ground that the questions and answers should be set out in a schedule to the orders that are to be made, and that the orders should include an order pursuant to s 33ZB of the Federal Court of Australia Act that all persons who were group members in the proceeding as at the date of the orders (other than persons who had opted-out of the proceeding by that date) are bound by the answers to the common questions as specified in the schedule to the orders. 13 One difference between the parties is that Equity has included in the list of common questions a number of questions that were not answered in the 5 July 2023 reasons. In respect of such questions, Equity proposes that "Not answered" appear in the column for the answers. AMPFP submits that it is unnecessary and potentially confusing to include such questions. On balance, I do not consider there to be any practical advantage or legal necessity to include such questions in the list of common questions. 14 There are a number of other minor wording differences between the schedules proposed by the parties. I have considered the parties' submissions and adopted the wording I consider preferable. In some cases, I consider it appropriate to express the question and/or answer in different terms to those proposed by either party. In advance of the hearing on 25 August 2023, my chambers distributed a draft schedule to the parties that indicated the areas where I was considering departing from the wording proposed by the parties. The parties had the opportunity to make submissions on those matters at the hearing on 25 August 2023. 15 One issue between the parties is whether there should be a question and answer relating to whether AMPFP was entitled to discount or exclude grandfathered commission revenue from the calculation of the BOLR Benefit under the terms of the 2017 BOLR Policy and, if so, from what date. Equity contends that this question, if it is to be included, should have the response "Not answered". AMPFP contends that this question should be included and answered "Yes, from 1 January 2020 [consent position]". While AMPFP acknowledges that I did not answer this question in the 5 July 2023 reasons, it submits that the answer to the question was common ground at trial and it is therefore practical and appropriate to include the question and the answer. 16 AMPFP is correct that it was common ground at trial that AMPFP was entitled to discount or exclude grandfathered commission revenue from the calculation of the BOLR Benefit under the terms of the 2017 BOLR Policy from 1 January 2020. This was reflected in the answers to the common questions handed up by both Equity and AMPFP near the conclusion of the trial: see Equity's short minutes of order handed up on day 20 of the trial, Schedule A, question 4; and AMPFP's answers to common questions handed up on day 21, question 4. Although I did not consider it necessary to refer to this issue in the 5 July 2023 reasons, I consider the common position of the parties to be correct. This is because: (a) the 2017 BOLR Policy contained an exclusion from ongoing revenue and register value "[w]here AMPFP considers the revenue to be temporary and is expected to cease within 12 months of the exercise date" (see the 5 July 2023 reasons at [83]); and (b) on 11 September 2019, the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 (Cth) passed the Senate, with the effect that grandfathered commission revenue would cease on 1 January 2021 (reasons, [149], [311], [313]). I therefore make a further finding that AMPFP was entitled to discount or exclude grandfathered commission revenue from the calculation of the BOLR Benefit under the terms of the 2017 BOLR Policy from 1 January 2020. I consider it appropriate and practical for this to be included in the common questions and answers. 17 Another issue between the parties concerns question 5.a., which is as follows: In respect of WealthStone (and other group members who fall within [58] of the statement of claim) on the proper construction of those group members' buy-back agreements, has AMPFP, by paying a BOLR Benefit calculated based on the 8 August 2019 Changes, paid the "BOLR Benefit" within the meaning of the agreements so as to satisfy the condition precedent to the operation of the release? 18 Equity contends that this should be answered "Yes in respect of WealthStone and not answered in respect of group members", referring to [687] of the 5 July 2023 reasons. AMPFP contends that this should be answered "Yes" without qualification, on the basis that the answer necessarily applies to all the group members described at [58] of the statement of claim. On balance, I consider Equity's proposed answer to be appropriate. The question concerns a matter of contractual construction. I have given an answer as regards the WealthStone Buy-Back Agreement; I have not considered the contracts of the other group members referred to in [58] of the statement of claim. It is possible that the answer may be different depending on the terms or context of the particular contract.

Conclusion 19 I will therefore make orders as indicated above. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.

Equity Financial Planners Pty Ltd v AMP Financial Planning Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (10 paragraphs)

Question Answer and reference to 5 July 2023 reasons for judgment (J) or 29 August 2023 reasons for judgment

Parties

Legislation Cited (2)

Cases Cited (4)