Equity Financial Planners Pty Ltd v AMP Financial Planning Pty Ltd

Equity Financial Planners Pty Ltd v AMP Financial Planning Pty Ltd - [2023] FCA 741 - FCA 2023 case summary — Zoe

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Within 21 days, the applicant file a minute of proposed orders to give effect to the Court's reasons, together with a short outline of submissions (of not more than five pages) in support of those orders.
Within a further 14 days, the respondent file a minute of proposed orders to give effect to the Court's reasons, together with a short outline of submissions (of not more than five pages) in support of those orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. TABLE OF CONTENTS INTRODUCTION [1] PLEADINGS [23] THE HEARING AND EVIDENCE [27] FACTUAL FINDINGS [48] AMPFP and the AMPFP network [48] ampfpa [53] Some key concepts - institutional ownership and register rights [62] The key contractual documents [66] Authorised representative agreements [66] Master Terms [70] BOLR Policy [78] The period before May 2017 [101] The period May 2017 to August 2018 [102] The period September 2018 to January 2019 [127] The period 1 February to mid-March 2019 [135] The period mid-March to 25 July 2019 [161] The meeting on 25 July 2019 between AMPFP and RemCo [206] The period 25 July to 8 August 2019 [236] 25 and 26 July 2019 [236] The "Formal Consultation materials" provided on 26 July 2019 [237] 27 July 2019 to 7 August 2019 [252] AMPFP Board papers and meeting (7 August 2019) [269] Further communication on 7 August 2019 [292] Announcement of the 8 August 2019 Changes [293] Evidence as to whether RemCo was appropriate body for consultation [297] Evidence as to whether reasonable notice was given of the proposed changes [300] The period after 8 August 2019 [309] Facts relating to Equity [315] The period before May 2019 [315] The period from May 2019 to August 2020 [327] The period after August 2020 [364] Counterfactual evidence [378] Facts relating to WealthStone [386] The period before December 2018 [386] The period from December 2018 onwards [401] The WealthStone Buy-Back Agreement [429] The period after February 2020 [437] EXPERT AND TRANSACTION DATA EVIDENCE [440] Mr Scott's evidence [441] Multiples for P2P transactions in the AMPFP network [450] Average multiple for on-sell and lease transactions [455] Average multiple for P2P transactions and on-sell transactions [460] Mr Siolis's evidence [464] Mr Neill's evidence [475] Ms Wright's evidence [495] Professor Brimble's evidence [496] Professor Frino's evidence [519] Part 1 of the report [528] Part 2 of the report [537] Mr Tappe's evidence [546] WHETHER THE 8 AUGUST 2019 CHANGES WERE EFFECTIVE (WITH IMMEDIATE EFFECT) [547] Onus of proof [549] Construction issues [553] The economic change issue [563] AMPFP's first alternative "economic change" contention [567] AMPFP's second alternative "economic change" contention [585] The legislation change issue [598] The consultation issue [603] The effect of any failure to consult [607] Whether AMPFP breached the obligation to consult [616] The good faith issue [643] Conclusion [644] WHETHER THE 8 AUGUST 2019 CHANGES WERE EFFECTIVE 13 MONTHS LATER [645] UNCONSCIONABLE CONDUCT [648] MISLEADING OR DECEPTIVE CONDUCT [649] EQUITY'S CLAIM [654] Whether Equity failed to mitigate its loss [664] The amount of Equity's loss or damage [671] WEALTHSTONE'S CLAIM [676] Whether the condition precedent to the operation of the release has been satisfied [683] Whether the release is void under s 23 of the Australian Consumer Law [689] Whether AMPFP's conduct in procuring the release was unconscionable [701] Conclusion [719] OTHER MATTERS [720] CONCLUSION [721]

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INTRODUCTION 1 The applicant, Equity Financial Planners Pty Ltd (Equity), is and was at all relevant times a financial planning practice in the network of financial planning practices established by the respondent, AMP Financial Planning Pty Ltd (AMPFP). 2 Equity brings this proceeding, which is a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth), on its own behalf and on behalf of all persons who, as at 8 August 2019: (a) were a party to an authorised representative agreement with AMPFP and were named as the Practice in that authorised representative agreement; and (b) had not received a confirmed exercise date (for the purpose of AMPFP's Buyer of Last Resort Policy (BOLR Policy)) of 8 August 2019 or earlier, (group members). 3 The proceeding relates to changes made (or purportedly made) by AMPFP to the valuation methodology under its BOLR Policy on 8 August 2019. The BOLR Policy formed part of the contractual relationship between AMPFP and each financial planning practice in its network. As at August 2019, there were approximately 542 practices in the AMPFP network (described below). The BOLR Policy gave practices in the AMPFP network that wanted to exit the network the ability to sell back their register rights (defined below, but broadly the contractual relationships with customers including the right to commissions) to AMPFP on 12 months' notice (or less in some cases). Under the BOLR Policy as it stood before the 8 August 2019 changes, subject to certain exceptions and qualifications, the register rights were to be valued on the basis of a multiple of 4x ongoing revenue (i.e. ongoing revenue received by the practice in the prior 12 months) and the practice would be paid that amount by AMPFP. 4 On 8 August 2019, AMPFP amended (or purported to amend) the valuation methodology under the BOLR Policy (the 8 August 2019 Changes) with immediate effect. The changes were broadly as follows: (a) changing the multiple for the purposes of the BOLR Policy from 4x to 2.5x in respect of ongoing revenue other than grandfathered commission revenue; and (b) changing the multiple for grandfathered commission revenue: (i) initially, from 4x to 1.42x; and (ii) then, reducing by 0.8333 per month (referred to as a "glide path") from 1 September 2019, such that the multiple would be zero by 1 January 2021. 5 The changes to the multiples were applied by AMPFP not only to practices that submitted a BOLR application after 8 August 2019, but also to practices that had submitted a BOLR application before 8 August 2019 with an exercise date after 8 August 2019. Under the terms of the BOLR Policy, those practices could not withdraw their application once it had been submitted unless AMPFP consented. 6 The central issue in this proceeding is whether the 8 August 2019 Changes were effective. The BOLR Policy had been in place for many years, and had been revised from time to time. The latest version of the policy as at 8 August 2019 was the version of the policy that commenced on 1 June 2017 (the 2017 BOLR Policy). That version of the policy contained a term relating to amendments that had been agreed between AMPFP and the AMP Financial Planners Association Ltd (ampfpa), which was an organisation representing financial planning practices in the AMPFP network (described below). The amendment term (on page 5 of the policy) was as follows: Changes to this policy The AMP Financial Planners Association Ltd Board (ampfpa) and AMPFP have agreed in writing to the terms of this policy effective 1 June 2017. - Unless a shorter period of notice is agreed to by the ampfpa, AMPFP will give 13 months' notice of a change to the valuation methodology for registers and to any other change having a materially adverse financial or other significant effect on a practice. - Subject to the above, AMPFP may make any other changes to this policy following consultation with the ampfpa. - AMPFP has the right to make any change to this policy should legislation, economic or product changes render any part of this policy inappropriate following consultation with the ampfpa. In particular, where AMPFP believes that any provision contained in this policy will, or may, cause it to breach or be subject to a penalty under any laws. - The Buyer of last resort terms that apply are those terms in force on the Buyer of last resort exercise date or the date the practice surrenders its AR [Authorised Representative] Agreement, whichever is the later. (Emphasis added.) 7 I will refer to the third indented paragraph, which refers to "legislation, economic or product" changes, as the LEP Provision. (The paragraph was referred to as the "LEP Exception" in Equity's submissions and as the "LEP Provision" in AMPFP's submissions. Whether the paragraph constitutes an exception forms part of an issue in the proceeding, namely the issue of onus. I will therefore adopt the neutral expression, "LEP Provision".) 8 Equity contends that the 8 August 2019 Changes were not authorised by the LEP Provision (or otherwise authorised by the amendment term). In summary, Equity contends that: (a) AMPFP did not consult with ampfpa in relation to the changes as required by the LEP Provision and the Master Terms (referred to below); (b) AMPFP did not identify the economic or legislation changes it was relying on in making the changes, and did not state how these rendered the policy inappropriate; (c) there was no "economic change" or "legislation change" within the meaning of the LEP Provision; (d) if (contrary to the above) there was an economic or legislation change, it did not render any part of the policy "inappropriate" within the meaning of the LEP Provision; and (e) if (contrary to the above) there was an economic or legislation change that rendered a part of the policy inappropriate, the changes to the multiples were not reasonably necessary to address that circumstance (Equity contends that this is a requirement of the LEP Provision, properly interpreted). 9 Accordingly, Equity contends that the 8 August 2019 Changes were ineffective and that AMPFP acted in breach of contract in putting forward BOLR valuations based on those changes. Equity seeks a declaration that the changes were ineffective and claims damages for loss and damage. In the alternative, Equity claims that AMPFP acted in breach of a contractual obligation of good faith in relation to the changes. In the further alternative, Equity contends that AMPFP engaged in unconscionable conduct within the meaning of s 21 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law), in relation to the changes. Further, Equity contends that AMPFP engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in connection with the changes in contravention of s 18 of the Australian Consumer Law. 10 In response, AMPFP contends that the 8 August 2019 Changes were authorised by the LEP Provision (and were effective immediately). In summary, AMPFP contends that: (a) while there was a contractual obligation upon AMPFP to consult (within the meaning of cl 1.4 of the Master Terms) with ampfpa, the obligation was not "jurisdictional"; that is, a breach of the obligation does not have the effect that the changes are ineffective; the breach merely sounds in damages for the loss of opportunity to consult, but this results in an award of only nominal damages; (b) in any event, on the facts, AMPFP did consult (within the meaning of cl 1.4 of the Master Terms) with ampfpa in relation to the changes; (c) it is not a requirement of the LEP Provision that AMPFP identify the economic or legislation change that it relies on; nor is it a requirement that it state how these render the policy inappropriate; (d) there was an "economic change" that rendered the policy inappropriate, namely either: (i) a sustained and quantifiable decrease in the market value of register rights linked to ongoing revenue; or (ii) a material change in the supply of and demand for financial advice services and practices; (e) further, in relation to the changes to grandfathered commission revenue, there was a "legislation change" that rendered the policy inappropriate; and (f) the changes that were made were responsive to the economic and/or legislation changes (this being the relevant requirement, on AMPFP's interpretation of the LEP Provision). 11 In the alternative, AMPFP contends that the 8 August 2019 Changes were effective 13 months later, that is, on 8 September 2020. 12 The hearing of this proceeding in October and November 2022 involved the trial of Equity's claim against AMPFP on all issues of liability and the amount of any damages. Equity did not enter into a buy-back agreement with AMPFP and still holds its register rights. 13 The hearing also involved the trial of the claim of one sample group member, WealthStone Pty Ltd (WealthStone), on all issues of liability and the amount of any damages. Unlike Equity, WealthStone did enter into a buy-back agreement with AMPFP. That agreement contained a release in favour of AMPFP. AMPFP contends that the release defeats WealthStone's claim against it. In response, the applicant contends that: (a) the condition precedent to the operation of the release - the payment of the BOLR benefit (properly calculated) - has not been satisfied; (b) the release is void under s 23 of the Australian Consumer Law, which applies to unfair terms of small business contracts; and (c) AMPFP's conduct in procuring the release was, in all the circumstances, unconscionable within the meaning of s 21 of the Australian Consumer Law. 14 I was informed by AMPFP that approximately 135 group members have signed buy-back agreements with AMPFP. About 120 of those agreements contain releases, but they are not all in the same form. 15 In summary, for the reasons that follow, I have concluded as follows: (a) the 8 August 2019 Changes were not authorised by the LEP Provision on the basis of AMPFP's first alternative economic change contention; (b) the 8 August 2019 Changes were not authorised by the LEP Provision on the basis of AMPFP's second alternative economic change contention; (c) the changes to the multiple for grandfathered commission revenue (which were part of the 8 August 2019 Changes) cannot be supported on the basis of a "legislation change"; (d) the requirement to consult (within the meaning of cl 1.4 of the Master Terms) is a precondition to the effectiveness of the change; (e) AMPFP failed to consult within the meaning of cl 1.4 of the Master Terms in relation to the proposed changes; and (f) it is unnecessary to determine whether AMPFP breached a contractual obligation of good faith. 16 It follows from the above that the 8 August 2019 Changes (with immediate effect) were not authorised by the LEP Provision and were ineffective. 17 Insofar as AMPFP contends, in the alternative, that the 8 August 2019 Changes were effective 13 months later (on 8 September 2020), I reject that contention. 18 In light of the above conclusions, it is unnecessary to determine whether AMPFP engaged in unconscionable conduct in relation to the 8 August 2019 Changes. 19 It is not necessary to resolve the misleading or deceptive conduct claim to determine the individual claims of Equity or WealthStone, and I therefore prefer not to do so at this stage. 20 In relation to Equity's claim, I am satisfied that Equity has suffered loss and damage as a result of AMPFP's breach of contract, and is entitled to damages in the sum of $813,560 (subject to the possible need to adjust this figure as discussed in [675] below). 21 In relation to WealthStone's claim, I have concluded in summary that: (a) the condition precedent to the operation of the release has been satisfied; (b) the release is not void under s 23 of the Australian Consumer Law; and (c) AMPFP's conduct in procuring the release was, in all the circumstances, unconscionable. 22 WealthStone is entitled to an order declaring the release void to the extent that it would preclude its claims in this proceeding. Further, WealthStone is entitled to damages in the sum of $115,533.51 (subject to the possible need to adjust this figure as discussed in [719] below).

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PLEADINGS 23 At the commencement of the hearing, Equity's pleading was its second further amended statement of claim. On day 3 of the hearing, I granted leave (by consent) for Equity to amend its pleading and file its third further amended statement of claim (the statement of claim). Broadly, the amendments introduced additional causes of action (in particular, breach of an obligation of good faith and unconscionable conduct). The amendments were partly responsive to an application by AMPFP to amend its defence (see below) and partly so that the pleaded case aligned with the case as opened. 24 Shortly before trial, AMPFP provided a proposed second further amended defence. Some of the proposed amendments were opposed. AMPFP filed an interlocutory application dated 9 October 2022 seeking (inter alia) leave to amend. Most of the amendments were ultimately consented to. The only outstanding dispute was AMPFP's application for leave to amend the defence to include paragraph 38(b), alleging that the applicant had failed to mitigate its loss. The issue was agitated on day 3, and I gave leave to AMPFP to amend to include this paragraph. AMPFP subsequently filed its third further amended defence to the third further amended statement of claim (the defence), which incorporates those amendments as well as pleadings in response to Equity's amended pleading. I note for completeness that the particulars to paragraph 38(b) of the defence include three lines that are redacted. On day 19, senior counsel for AMPFP stated that AMPFP does not rely on the redacted portion of those particulars. In other words, the Court does not need to have access to the words that have been redacted and they can be put to one side. 25 In addition to the above pleadings, there is an amended reply. This was not amended during the hearing. 26 The parties prepared points of claim and points of defence in relation to WealthStone's case. These documents were amended during the hearing. The latest versions of the documents are the further amended points of claim (the points of claim) and the further amended points of defence (the points of defence). There is also an amended reply to points of defence, which was not amended during the hearing.

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THE HEARING AND EVIDENCE 27 Equity relied on lay evidence from the following witnesses: (a) Kylie Braschey, a director of Equity; (b) Leanne Scott, a director of Equity; (c) Michael Finch, the sole director and majority shareholder of WealthStone; (d) Neil Macdonald, the Chief Executive Officer and Company Secretary of ampfpa; (e) Damien Jordan, a director and the Chair of ampfpa at the relevant times; (f) Timothy Jones, a director of ampfpa at the relevant times (he was not required for cross-examination); (g) Neill Brennan, the Managing Director of Augusta Ventures (Australia) Pty Ltd; the company is part of the Augusta group, which provides litigation funding (he was not required for cross-examination); and (h) Louis Young, a director of Augusta Ventures Ltd and Augusta Pool 523 Limited (Augusta Pool 523), the litigation funder for the proceeding (he was not required for cross-examination). 28 Ms Braschey gave evidence in a clear, honest, helpful and straightforward manner. I accept her evidence. 29 Ms Scott's evidence was largely corroborative of Ms Braschey's evidence and the cross-examination of Ms Scott was brief. Apart from one factual error in her first affidavit (referred to below), which is of no consequence, I accept Ms Scott's evidence. 30 Mr Finch displayed a clear recollection of the relevant events and a good grasp of the detail of the documents and other relevant matters. His answers to questions were careful and precise. I accept his evidence. 31 Mr Macdonald was a good, honest and careful witness. He has a deep and thorough knowledge of the industry. He gave precise answers to questions and sought to assist the Court. If and to the extent that it was suggested in cross-examination that Mr Macdonald lacked objectivity because of ampfpa's role in bringing this proceeding about, I reject that suggestion. I accept his evidence, save where otherwise indicated below (in respect of certain minor matters). 32 Mr Jordan was not always responsive to questions put to him during cross-examination. His answers were on occasion unnecessarily discursive. That said, I am satisfied that he gave evidence honestly and accept him as a reliable witness. I accept his evidence, save where otherwise indicated below (in respect of certain minor matters). 33 Equity relied on expert evidence from the following witnesses: (a) Mr George Siolis, a partner of RBB Economics, based in Melbourne; (b) Mr Robert Neill, a financial services adviser; and (c) Ms Dawna Wright, a forensic accountant (she was not required for cross-examination). 34 I will make observations about the expert witnesses who were cross-examined later in these reasons. 35 AMPFP relied on lay evidence from the following witnesses: (a) Damian Byrne; (b) David Akers; (c) James Scott; and (d) Natalie Tatasciore, a partner of King & Wood Mallesons (she was not required for cross-examination). 36 Mr Byrne was the Senior Manager, Value Exchange & Proposition, within the Advice business of the corporate group headed by AMP Limited (the AMP Group or AMP) from July 2017 to July 2021. The title of the position subsequently changed to Head of Commercial Offer. At the relevant times, within AMP's Australian Wealth Management division, Mr Byrne was regarded as the custodian of the BOLR Policy, in the sense that he was regarded as the expert concerning, and the person responsible for, the terms of the BOLR Policy; queries about the BOLR Policy's intended operation, necessary changes, or interpretation and clarifications came to him. Mr Byrne reported to Mr Akers for most of the relevant period. 37 Mr Byrne was careful and precise in answering questions during cross-examination. He endeavoured to assist the Court. He made reasonable concessions. He was an excellent witness. I accept his evidence in relation to factual matters, save where otherwise indicated below (in relation to certain minor matters). Insofar as Mr Byrne expressed opinions (for example, as to whether there was an "economic change"), I accept that he held those opinions, but do not necessarily accept them. 38 Mr Akers was the Managing Director of Business Partnerships of the Australian Wealth Management division of the AMP Group between March 2019 and July 2021. Prior to that period, Mr Akers held the roles of Director of Channel Strategy and Services (between April 2017 and April 2018) and Acting Group Executive of Advice (between April 2018 and March 2019). He was also a director and the Chairperson of the AMPFP Board from March 2018 to July 2021. 39 Mr Akers was a good witness. He answered questions clearly and confidently. I accept his factual evidence, save for the matters discussed below. Insofar as Mr Akers expressed opinions (for example, as to whether sufficient time was allowed for consultation, and whether AMPFP had a right to amend the BOLR Policy under the LEP Provision), I accept that he held those opinions, but do not necessarily accept them. 40 Mr Scott was the National Manager of Transaction Strategy within Business Partnerships for the AMP Group from November 2018 to September 2021. In that role he was responsible for leading the Transaction Strategy team that supported AMP aligned practices, including those in the AMPFP network (described below), with merger and acquisition activity, including client register transfers. His role included supporting the Aligned Advice Licensees (described below), including AMPFP, in meeting their governance requirements around client register transfers. Mr Scott holds a Bachelor of Science from Loughborough University, England. He is a Chartered Management Accountant. From June 2012 to November 2017 (apart from a period of 12 weeks), he worked as a management accountant in a number of finance-related roles supporting Aligned Advice Licensees in the AMP Group. From November 2017 to November 2018 he was Transaction Strategy Manager in the Transaction Strategy team. 41 Mr Scott gave evidence in a precise and careful way. He made concessions where appropriate. I accept his evidence on all factual matters. Insofar as he expressed opinions, I do not necessarily reach the same opinions. 42 AMPFP filed an affidavit of Brian George, who was the Acting Managing Director of AMPFP from April 2019 to September 2020. However, AMPFP did not call Mr George to give evidence at the trial. The reasons were explained in an affidavit of Ms Tatasciore, parts of which are confidential. 43 AMPFP relied on expert evidence from the following witnesses: (a) Professor Mark Brimble, Professor of Finance and Dean, Griffith Business School; (b) Professor Alexandro Frino, Professor of Economics, Wollongong University; and (c) Mr Warren Tappe, the Valuations & Technical Manager of the Valuations team, which forms part of the broader M&A Services team in the Advice division of the AMP Group, a position he has held since June 2018 (he was not required for cross-examination). 44 As noted above, I will make observations about the expert witnesses who were cross-examined later in these reasons. 45 In addition to the documents annexed to affidavits, the parties tendered a number of other documents. 46 The expert evidence was presented as part of each party's case, rather than concurrently. 47 Following the hearing, the parties provided a Revised Court Book (Revised CB) containing the documents that went into evidence.

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AMPFP and the AMPFP network 48 At the relevant times, AMPFP was a wholly-owned subsidiary of AMP Limited, and the holder of an Australian Financial Services Licence (AFSL). AMPFP was one of three entities in the AMP Group that appointed representatives pursuant to authorised representative agreements. The other two entities were Charter Financial Planning Ltd (Charter) and Hillross Financial Services Ltd (Hillross). The effect of the authorised representative agreements was to authorise individuals and companies to provide financial services under the licensee's AFSL. In Mr Akers's first affidavit, AMPFP, Charter and Hillross are each referred to as an "Aligned Advice Licensee" and they are together referred to as the "Aligned Advice Business". I will adopt these expressions. 49 At the relevant times, the majority of financial planners who provided advice under an AFSL held by a member of the AMP Group were not employed by the AMP Group; they either operated as a sole trader or were employed by a corporate entity or through a trust arrangement. The remainder of the financial planners who provided advice under an AFSL held by a member of the AMP Group were employed by an AMP service entity. 50 The Aligned Advice Business offered its advisers and advice practices various services, such as access to compliance and business systems including financial advice tools, education and learning opportunities, to assist with their businesses. Historically, each Aligned Advice Licensee had its own unique characteristics, including in relation to service offerings, brand options and commercial proposition. 51 At the relevant times, AMPFP was the largest of the three Aligned Advice Licensees. More than half of the advisers (that is, financial planners who provided advice under an AFSL held by a member of the AMP Group) were appointed as authorised representatives of AMPFP. 52 The expression "AMPFP network" refers to the network of financial planning practices providing services under an authorisation from AMPFP.

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ampfpa 53 As noted above, ampfpa was an organisation representing financial planning practices in the AMPFP network. The members of ampfpa were current and former authorised representatives and/or accredited mortgage consultants of AMPFP. 54 At the relevant times, there was also a body called the Hillross Advisers Association, Inc (HAA). This was also a body representing financial planners. Subsequently, in January 2020, ampfpa and HAA merged. After that date, their combined activities were carried on by ampfpa. In February 2020, ampfpa changed its name to The Advisers Association. 55 At all relevant times, ampfpa's membership included all of the authorised representatives of AMPFP. AMPFP notified ampfpa of new and departing authorised representatives, and ampfpa also checked the Australian Securities and Investments Commission (ASIC) register about once a year to ensure that its list of AMPFP authorised representatives was up to date. Membership fees were paid to ampfpa by financial planning practices (on behalf of themselves and any authorised representatives and accredited mortgage consultants they employed). In 2019, practices paid an annual membership fee of $700 as well as a fee per authorised representative/accredited mortgage consultant of $450. 56 At all relevant times, ampfpa was governed by a Board of Directors, all of whom were members of ampfpa. Under ampfpa's Constitution, the Board was solely responsible for the affairs of ampfpa (clause 9.1). The Board had power to exercise all powers of ampfpa, other than those required to be exercised by members under the Constitution or the Corporations Act 2001 (Cth) (clause 9.3(a)). 57 During 2019, the members of the Board were: (a) Damien Jordan; (b) Scott Weeks; (c) Willem Beimers (from 16 September 2019); (d) Mark Borg (21 May 2019 - 20 December 2019); (e) Karen Grant (until 31 October 2019); (f) Todd Jeffrey (until 21 May 2019); (g) Timothy Jones; (h) David Kelsey (until 19 August 2019); and (i) Khoung Tang (from 22 January 2019). 58 Mr Macdonald was not a member of the Board, but he attended meetings of the Board in his capacity as CEO. The Board had a Chair and a Vice Chair. During 2019, the Chair was Mr Jordan and the Vice-Chair was Mr Weeks. 59 Aside from Mr Macdonald, ampfpa had three full-time staff and one contractor in 2019. Their roles were to deal with the day-to-day operations of ampfpa, manage member benefits that ampfpa arranged and provided, and address queries and complaints regarding ampfpa members' relations with AMPFP. 60 At the relevant times, one of the subcommittees established by ampfpa Board was the Remuneration Committee (RemCo). During 2019, the members were: (a) Mr Jordan (as Board Chair); (b) Mr Weeks (as Board Vice-Chair); (c) Mr Kelsey; (d) Mr Jones (from 17 June 2019); and (e) Mr Macdonald. 61 At the relevant times, RemCo was responsible for, among other things, engaging with ampfpa's members and with AMPFP regarding proposed changes to the BOLR Policy. RemCo did not hold a delegation from ampfpa's Board to conduct "consultation" with AMPFP for the purpose of the Master Terms and BOLR Policy.

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Some key concepts - institutional ownership and register rights 62 At the relevant times, AMPFP maintained "institutional ownership" of each client register. The concept of "institutional ownership" is conveniently described in the 2017 BOLR Policy (in the definition of "Practice and client institutional ownership"): Consistent with the terms of the AR [Authorised Representative] Agreement, AMPFP retains the relationship with those clients that were introduced to, and serviced by, the practice while an authorised representative of AMPFP. This is called "institutional client ownership". If the AR Agreement is terminated, the clients that have been serviced by the practice principal (or by an adviser within the practice) will remain with AMPFP and continue to be serviced by AMPFP or by another authorised representative of AMP. Neither the practice nor the practice principal has any goodwill or other proprietary rights in relation to the clients. As per the Master Terms, for a period of 6 months after termination of the AR Agreements, the practice and the practice principal must not, either on their own account or in association with any other person approach, entice, induce, or encourage an existing client (as defined in the Master Terms) to transfer or remove custom from AMPFP. Subject to any other agreement reached with the practice, AMPFP does not claim institutional client ownership for those clients of the practice that were existing clients of the practice prior to the practice signing the AR Agreement with AMPFP (or a previous agency agreement with AMP Life). (Footnotes omitted; emphasis added.) 63 The concept of "register rights" is also described in the 2017 BOLR Policy (in the definition of "Register and register rights"): For each practice, AMPFP creates a client register. The client register records the name and address of the client and the products held or services agreed by that client and for which AMPFP considers the practice to be the servicing practice of that client. The register includes, but is not limited to, those clients, products and services that have been allocated by AMPFP to the practice from the register of another practice or from an AMPFP register. [I]f the practice holds an AR [Authorised Representative] Agreement with AMPFP and is recognised as the owner of the register rights, the practice has contractual register rights in relation to those clients and products on the register, namely: - The right to contact and provide advice and other financial services to any client recorded on the register as authorised under the AR Agreement, subject to continued compliance with the obligations of the AR Agreement. This right does not prevent AMPFP contacting clients in line with any client protocols agreed from time to time between ampfpa and AMP and does not prevent the client approaching any other practice for advice and other financial services. - The right to access the client's files and records for the purpose of contacting and providing such advice and other financial services. - The right to receive payments when they are made, e.g., permissible ongoing fee for service or commission, as agreed under the AR Agreement in return for providing financial advice and other services as long as the clients and policies remain on the register. The practice is able to accumulate and build on the value attached to those register rights. The practice may realise the value in the manner noted below: - Complete a practice-to-practice transfer, where the practice seeks AMPFP's approval to surrender its register rights and transfer some or all of their clients on the register to another practice and for AMPFP to appoint the other practice as the servicing practice for those clients. - Apply to AMPFP for a Buyer of last resort benefit. (Footnotes omitted; emphasis added.) 64 As stated in the passage set out at [62] above, if an authorised representative agreement was terminated, the clients on the register would remain with AMPFP and continue to be serviced by AMPFP or another authorised representative of AMP. 65 Further, as the above passages record, the practice did not have proprietary rights in relation to the client register. The 2017 BOLR Policy allowed a practice to realise the value of its register rights by completing a practice-to-practice (P2P) transfer of some or all of its register rights (with AMPFP's approval) or by applying to sell back its register rights to AMPFP under the BOLR Policy.

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Master Terms 70 The document titled the Authorised Representative Deed of Agreement - Master Terms (the Master Terms) went through a number of versions. The version to which the parties referred in their submissions is the third version, published in June 2015. I will refer to this version of the Master Terms in these reasons. 71 The Master Terms contained a number of definitions in clause 1.1. These included a definition of "Practice Documents" as follows: Each of the following documents: (a) the Register and Buyer of Last Resort (BOLR) Policy; and (b) the Settlement and Recognition terms as Published from time to time by AMP Financial Planning or otherwise Notified by AMP Financial Planning to the Representative from time to time. 72 It is clear from the above that the expression "Practice Documents" included the BOLR Policy. 73 The expression "Representative" was defined as meaning the person that had been given an Authorisation by AMPFP and had signed an authorised representative agreement and included the Practice. 74 Clause 1.4 of the Master Terms provided a definition of the word "Consult" for the purposes of clauses 3.2 and 10.2 of the Master Terms. Clause 1.4 provided: 1.4 Consultation process The parties agree that a reference to Consult in clauses 3.2, and 10.2, means that there is no obligation on AMP Financial Planning to reach any agreement with the ampfpa but that AMP Financial Planning will: (a) give the ampfpa reasonable prior notice about the proposed changes having regard to the urgency with which the changes must be made; (b) advise the ampfpa about the proposed timetable for when those changes will come into effect; (c) explain why AMP Financial Planning considers that those changes are required and their implications for Representatives as a whole; and (d) consider, but not necessarily accept, any responses, options or alternatives offered by the ampfpa about those changes provided always that such responses, options or alternatives are provided to AMP Financial Planning promptly having regard to AMP Financial Planning's timetable for when those changes will come into effect. 75 Clause 2 of the Master Terms dealt with matters relating to the authorisation of the Representative. 76 Clause 3 dealt with professional standards and Practice Documents. Clause 3.2 was in the following terms: 3.2 Practice Documents (a) Without limiting the generality of any other obligations imposed on the Representative by this Agreement, the Representative agrees to comply with and be bound by the Practice Documents. (b) From time to time, AMP Financial Planning may change, up-date or issue new provisions of the current Practice Documents or issue new Practice Documents dealing with other issues affecting the Representative. The Representative must comply with, and be bound by, the terms of any changed or up-dated Practice Documents or any new Practice Documents. (c) Prior to any change to any Practice Documents or the issue of any new Practice Documents that, in the reasonable opinion of AMP Financial Planning, will have an adverse financial or other significant effect on the Representative, AMP Financial Planning will Consult with ampfpa about the changes or issue but there is no obligation on AMP Financial Planning to reach any agreement with ampfpa in connection with the changes or issue. (d) Where the Representative is Working for the Practice, the Practice Documents only apply to the Practice. (Emphasis added.) 77 It is common ground in this proceeding that, whether because of clause 3.2 of the Master Terms or otherwise, before making the 8 August 2019 Changes, AMPFP was required to consult with ampfpa within the meaning of clause 1.4 of the Master Terms.

[21]

BOLR Policy 78 As noted above, the version of the BOLR Policy in place at the time of the 8 August 2019 Changes was the 2017 BOLR Policy. 79 On pages 3-5 of the policy, a number of "principles and definitions are set out". These include: (a) The first of these is headed "Parties to the arrangement". This states that the policy forms part of the authorised representative agreement between each practice and AMPFP, and that, "[w]hen exercising the [BOLR] facility, all parties will act in good faith". (b) The description of "Practice and client institutional ownership" has been set out above. Likewise, the description of "Register and register rights" has been set out earlier in these reasons. (c) In the definition or description of "Control of entitlement" on page 4, it is stated that, if on termination of an authorised representative agreement a practice has not been an authorised representative for at least four years, it is not entitled to a BOLR benefit. (d) The description of "Discretion to discount or pay on special conditions" states that "AMPFP retains the right to apply a discretionary discount to a practice's Register Valuation (RV) at the time it is exercising [BOLR], if in AMPFP's reasonable opinion it is prudent to do so". The description includes: The basic rationale behind BOLR is that AMPFP will pay a practice a BOLR benefit where the practice is closing down and that practice has been unable to find another AMPFP practice to take over all or part of the register. In exchange for the [BOLR] payment, however, AMPFP expects to receive clear title to the register without any undue threat that the practice, or those associated with the practice, will materially diminish the value of the client base or encourage clients to move away from AMPFP. 80 The amendment term, which is located on page 5 of the 2017 BOLR Policy, has been set out in the Introduction to these reasons (see [6] above). 81 The 2017 BOLR Policy states on page 6 that "AMPFP has agreed to provide a Buyer of last resort facility on terms outlined in this policy". 82 In the section dealing with eligibility criteria, on pages 6-7, it is stated that the practice has the right to access BOLR only where (among other things) "the practice principal and all equity holders in the practice undertake not to compete". This section also deals with the practice having made reasonable endeavours to transfer the register rights to another practice authorised by AMPFP prior to exercising the BOLR rights. 83 On page 8 of the policy, the valuation methodology is set out. It is stated that, under Buyer of Last Resort terms, "a practice's client register will be valued at 4.0x annual ongoing revenue received by the practice in the prior 12 months". It is then stated that "[o]ngoing revenue is defined as the recurrent revenue to which the practice is entitled in relation to the register rights being transferred, including permissible trail commission, renewal income and ongoing fees". (I note that one type of ongoing revenue referred to in documents in evidence is ongoing fee arrangement (OFA) revenue.) Further details are then provided for the purposes of calculating ongoing revenue. There are also certain exclusions from ongoing revenue and register value. These include "[w]here AMPFP considers the revenue to be temporary and is expected to cease within 12 months of the exercise date" (page 9). 84 The 2017 BOLR Policy states (on page 9) that, once lodged, a BOLR application may not be withdrawn by the practice unless AMPFP agrees. This point is emphasised in Equity's submissions in the proceeding. When AMPFP introduced the 8 August Changes, subject to certain exceptions, they applied to practices (such as Equity and WealthStone) that had submitted a BOLR application prior to 8 August 2019, and those practices were not entitled to withdraw their BOLR application unless AMPFP agreed. 85 The 2017 BOLR Policy also states that "[i]f the other parties to the BOLR Licensee Buy-Back Agreement refuse to sign that Agreement after AMPFP has given those parties at least 7 days to do so, the entitlement to a Buyer of last resort payment will lapse". 86 The 2017 BOLR Policy contains terms relating to the notice period for exercise of the BOLR rights (at pages 10-11). The document states that the minimum notice period is "typically 12 months". However, for practices with more than 15 years' tenure at the exercise date, or practices willing to accept a register discount, the notice period is a minimum of 6 months. Further details are provided regarding the amount of the discount where a notice period less than 12 months is sought. For example, where the practice's tenure is over 4 years and up to 10 years, the register value is to be discounted to 80%. 87 The 2017 BOLR Policy contains terms relating to "Buyback assessment" (at pages 11-15). This section describes a process of assessment of client files, with four discrete components: (1) client file assessment; (2) minimum client data requirements; (3) compliance concerns; and (4) ongoing fee arrangement assessment. The assessment of these matters could result in the discounting of a client register, or the reduction in the amount to be paid by AMPFP to the practice. 88 Payment terms are dealt with on pages 15-16 of the 2017 BOLR Policy. Various "exit scenarios" are outlined, and details are provided for a certain percentage of the total amount to be paid at the exercise date, with the balance to be deferred to 6 or 12 months later (depending on specified criteria). 89 A document that provides a useful overview of the BOLR Policy and its commercial context (before the 8 August 2019 Changes) is a memorandum dated 17 July 2018 from Mr Akers to the AMP Limited Board titled "Overview of Buyer of Last Resort (Bolr) Schemes" (the Akers July 2018 Memorandum). The purpose of the memorandum was stated to be "to update the Board on key features and risks of Buyer of last resort (Bolr) and other buyout programs within the Advice business". 90 The section headed "AMP's Buyout Programs" stated: AMP has several buy-back models in place across its advice licensees, each with different terms and valuation methodologies. AMPFP's Buyer-of-last-resort (Bolr) model represents the highest valuation, the largest exposure, and is the most commonly utilised of AMP's buy-back models and this paper will focus primarily on the Bolr program. AMP's exposure to Hillross' EBB program is significantly smaller. The other programs (Hillross LBB and Charter) do not represent a premium to market, are infrequently [utilised] and are not considered to represent a material exposure. 91 As is apparent from the above extract, different buy-back models were in place in relation to AMPFP, Charter and Hillross. The buy-back model for the AMPFP network was referred to as the "BOLR" policy. The buy-back models in place for the Charter and Hillross networks were not referred to in this way. Consistently with this, when I refer in these reasons to the "BOLR Policy", I am referring to the policy in place for the AMPFP network. 92 Despite the above table indicating there were 800 practices in the AMPFP network, Mr Akers gave evidence in his first affidavit, which I accept, that: at the start of 2018, AMPFP had approximately 640 practices in its network; and, as at 8 August 2019, AMPFP had approximately 542 practices in its network. 93 Under the heading "The Bolr Ecosystem", the Akers July 2018 Memorandum stated: AMPFP's Bolr program is a buy-back arrangement under which practices may sell their client registers to the licensee and exit the industry, with AMP obliged to purchase based on a prescribed valuation methodology. All AMPFP practices with 4+ years tenure are eligible to exercise Bolr. An "ecosystem" has developed to support the … transfer of client registers from practice-to-practice or between practices and AMP, and based on reciprocal benefits to AMP and practices as shown in the chart below. AMPFP has several options to manage client books acquired from selling practices under Bolr, including (i) transfer/sell the client book to another servicing practice; (ii) maintain the practice as a "going concern" within AMP Advice's employed adviser model; (iii) transfer high-touch clients to an existing AMP Advice practice; (iv) transfer low-touch clients to the AMP Assist direct servicing model. Bolr has historically supported several objectives for AMP, practices and clients including: • Support practice through life-cycle: through the transfer of client books to practices looking to grow inorganically, or to seed start up practices with initial client books. • Provide continuity for clients when a practice exits: The client book of the exiting practice is transferred to another practice, with client servicing rights and obligations intact. • Enhanced adviser value proposition: Bolr is highly valued by practices and historically has been a key component of AMPFP's adviser value proposition. Practices principals that have successfully grown their business view Bolr as their nest-egg providing post-retirement security. Some practices also utilise Bolr as part of their internal business management activities, such as employee participation schemes and succession planning. (Emphasis added.) 94 In the section headed "Bolr Valuation and Terms", the memorandum stated: Bolr valuation is based on a flat multiple of 4x ongoing income (both fee and commission income). One-off or upfront income is not included. Bolr is product-agnostic - income is valued whether linked to an AMP or non-AMP product. Bolr valuation is subject to discounting where an exit audit indicates that the practice has not maintained adequate client records or met servicing and compliance standards. A review of recent transactions indicates an average discount of 20%, with most practices receiving discounts within the range of 10-25% (implying a valuation of 3.0-3.6x ongoing revenue). Deferred terms (12 months) also incentivise an adviser to provide effective handover to the next servicing adviser, and acts as downside protection should issues be found post settlement. (Emphasis added.) 95 As indicated in the above extract, in many cases where a practice sold its client register to AMPFP under the BOLR Policy a discount was applied by AMPFP. This could arise, for example, where AMPFP's audit of the client files revealed deficiencies in the records kept by the practice. In some documents (including the memorandum currently being discussed) this was said to imply a valuation of less than a 4x multiple of ongoing revenue. However, generally, including in Mr Scott's evidence, the multiple for a transaction was a matter that was treated separately from the question whether any discounts applied to the transaction. 96 Appendix 1 to the Akers July 2018 Memorandum sets out key terms of the 2017 BOLR Policy. The appendix stated: Eligibility All AMPFP practices with 4+ years tenure. Notice period 12 months (reduced to 6 months for practices with 15+ years tenure). Valuation Bolr valuation is based on a flat multiple of 4x recurring income which applies to all ongoing fee and commission income irrespective of whether linked to an AMP or non-AMP product. One-off or upfront income is not included. Bolr valuation is subject to discounting where:

                                                                                                                                                                                                                                                                                                   The practice has not maintained adequate client data and contact details.

                                                                                                                                                                                                                                                                                                   The practice has not maintained adequate client files and records.

                                                                                                                                                                                                                                                                                                   The practice has compliance or remediation concerns.

                                                                                                                                                                                                                                                                                                   In the case of fee for service clients, where the practice does not have a service package in place with the client meeting AMP's defined standards

Payment under Bolr is made in two instalments. In additional to the above discounts, an amount of 20% of the settlement price is deferred for 12 months and is "at risk", and may be adjusted in the event that the quality of the client book has significantly decreased since the date of settlement. Institutional client ownership AMPFP's Bolr policy is linked with its "institutional ownership" framework, where AMPFP retains ultimate ownership of client relationships introduced to practices while licensed by AMPFP. If the practice exits, the clients that have been serviced by the practice will remain with AMPFP and continue to be serviced by another AR licensed by AMP. Institutional ownership has historically been viewed as the "quid pro quo" for AMPFP's above-market Bolr multiple. Pre-Bolr exit responsibilities During their notice period, practices are required to:

                                                                                                                                                                                                                                                                                                   Notify clients of their departure

                                                                                                                                                                                                                                                                                                   Ensure client files and records are up-to-date.

                                                                                                                                                                                                                                                                                                   Obtain opt-ins in relation all existing servicing arrangements.

                                                                                                                                                                                                                                                                                                   Align their client servicing arrangements to meet AMP's standard service packages (via a variation of the agreement, in cases where they don't align).

Failure to undertake these activities may result in the relevant client policies not being valued under Bolr. Undertaking As part of exercising Bolr, practice principals and equity-holders undertake not to approach former clients, and not to work in the finance industry for a period of 3 years from the exit date. This precludes them from continuing business under another non-AMP licensee during the undertaking period.

[22]

(Emphasis added.) 97 The emphasised passages in the above extract draw a link between the BOLR Policy and institutional ownership terms. As explained above, under institutional ownership terms, AMPFP retained the relationship with the clients and, if the authorised representative agreement was terminated, the clients remained with AMPFP rather than with the practice; neither the practice nor the practice principal had any goodwill or other proprietary rights in relation to the clients. While these terms placed restrictions on practices, practices were prepared to accept this in circumstances where the BOLR Policy existed and the multiple payable under the BOLR Policy was above that payable in the external market (that is, the market for the sale and purchase of financial planning practices not subject to institutional ownership terms with AMPFP or like terms with another AFSL holder) (the external market). 98 Another document that provides commercial context for the BOLR Policy (before the 8 August 2019 Changes) is a draft memorandum dated December 2018 from Mr Byrne to Mr Paff and Mr Symons titled "Buy back (BOLR) Strategy" (the Byrne December 2018 Memorandum). The evidence includes a number of versions of this draft memorandum, prepared during the period from March 2018 to January 2019. The Byrne December 2018 Memorandum included the following text under the heading "Real or notional benefits of existing [buy]back models": Maintain customer servicing via market creation: From a customer perspective, BOLR supports ongoing servicing when a practice exits the industry. This is achieved with a guaranteed valuation and service alignment approach that supports the transition of client servicing rights from exiting practices to new or existing practices or AMP (Appendix 3). Practice value proposition: From a practice perspective, BOLR / EBB [a reference to one of the Hillross buy-back policies] represent a significant premium to market valuations and are therefore highly valued by incumbent practices. This practice value has encouraged practice recruitment and retention and provided an additional incentive for practice recurring revenue growth. Practice, customer, and value retention: From AMPs perspective, the premium paid under BOLR and EBB is a key reason for practices accepting institutional ownership terms, which have restricted practices from exiting the licensee without exiting the industry. These terms have been effective at retaining clients within the network and have discouraged AMPFP and EBB practices from becoming self-licensed or joining competing licensees. Support practice life cycle (start up, grow and exit): Historically AMP has resold acquired client registers to practices looking to grow inorganically, or to seed start up practices through PSO offers. This activity is more constrained now as AMP is actively acquiring registers and scaling internal servicing capabilities. (Emphasis added.) 99 In the first emphasised passage in the above extract, it is stated that the BOLR Policy represents a "significant premium to market". A large number of other documents in evidence also refer to the BOLR multiple representing a "premium" to market, being the external market. See, for example: the PowerPoint presentation dated April 2018 (AMP.5800.0116.0046 at _0001 and _0003); the draft memorandum dated May 2018 (AMP.5800.0093.0237, first page and _0002); the PowerPoint presentation of July 2019 (AMP.5800.0020.9035 at _0003). Further, Mr Byrne gave evidence in his affidavit that it was widely acknowledged within AMPFP and by practices that the valuation offered by the BOLR Policy was a premium to the external market value of the registers. In light of those documents and that evidence, I find that the BOLR multiple (prior to the 8 August 2019 Changes) represented a premium to the external market. 100 I note also that, in the second emphasised passage in the above extract, a link is drawn between the premium payable under the BOLR Policy and the acceptance by practices of institutional ownership terms. This is the same point as discussed at [97] above.

[24]

The period May 2017 to August 2018 102 During this period, AMPFP made a strategic decision to keep (rather than on-sell) a portion of the client registers that it purchased under the BOLR Policy. (Historically, the large majority of client registers acquired by AMPFP under the BOLR Policy had been on-sold to an existing or a new practice in the AMPFP network.) Also during this period, early strategic thinking commenced within AMPFP as to a future "end state" in relation to the BOLR Policy. 103 The evidence includes a memorandum from Justin Morgan (Head of Licensee Value Management at AMP) and Mr Akers to AMP's Advice Leadership Team dated 11 May 2017 on the subject "Buy Back and Planner to Planner Process Change". Mr Akers was taken to this document during cross-examination and gave the following evidence, which I accept: … what you were there identifying is a recommendation that AMP increase its ownership and ongoing servicing of customer registers purchased through licensee buyback policies?---Yes. … … But it did represent an intention to hold a greater proportion of registers than might have historically been the case in the past?---Yes. Yes. And so rather than acting as a clearing house of all registers through the buyer of last resort policy what this reflected was a change in strategy to retaining a proportion of those registers?---That's correct. 104 The evidence includes a memorandum dated 25 June 2017 from Mr Morgan to the AMP Life and NMLA Audit Committee on the subject "Customer Account Register Pool and Strategic BOLR review update". The memorandum's purpose was stated to be to provide an update on: • Changes to AMP's strategic approach to the purchase and onsell of client registers. • The Strategic Review of BOLR including Project Derby phase 3 105 The executive summary of the memorandum stated: • The establishment of a direct servicing capability through AMP Direct and AMP Advice has led to a change in our approach to managing business transactions across the network. Management is no longer actively working to minimize inventory levels. • Under our revised approach, exiting businesses are assessed to determine the most appropriate transaction pathway, with options including (i) internal succession, (ii) install new ownership in a viable existing business, (iii) sell the client registers to another practice and (iv) acquire and develop a direct servicing relationship. • This approach is being implemented and will be applied to the 75 business transactions scheduled to take place between July 2017 and June 2018. AMP expects to acquire a significant number of clients that will be serviced directly by AMP. • Policies in Register Company (except for leased policies) will now be held as intangible assets, rather than as inventory. ~$45m was transferred from inventory to intangible on 30 June 2017. • A program of work to update processes and systems relating to managing BOLR under changes to policy announced in 2016 is now almost complete. (Emphasis added.) 106 "AMP Direct" and "AMP Advice" were explained in the "Background" section of the memorandum. That section included the following: Under AMP's historical approach to managing the buy-back ecoystem, management has actively worked to on-sell a high proportion of purchased client registers, and reduce AMP's inventory level, to seed new business growth and to provide a growth channel for established practices. At the AMP Investor Strategy day in May 2017, management highlighted our intention to enhance AMP's operating margins through broader participation in the Advice value chain. One of the key opportunities to realise this objective is to implement a direct servicing capability that enables AMP to develop a service-based relationship for clients purchased through practice buy-back transactions. The establishment of (i) AMP Direct as a remote servicing model for low-touch clients and (ii) AMP Advice as a face-to-face servicing model for high touch clients, provides the opportunity to increase AMP's ownership of customer registers in a manner that would maximize AMP economic value, and offer a broader, deeper and more scalable servicing model to segments that are currently either non-serviced or else under-served. Under this approach, AMP can capture and maintain service fees attached to policies acquired by AMP (these fees are currently switched off). This revised approach is currently being implemented. Consistent with this approach, management is no longer actively working to minimize inventory levels, and expects to acquire a significant number of clients that will be serviced directly by AMP. Under our revised approach, exiting businesses are assessed to determine the most appropriate transaction pathway in the interests of our customers and the distribution network. Outcomes may include: 1. Internal succession within the business, where appropriate successor is identified. 2. Restructure and maintain the business as a viable going concern, owned by AMP, a new practice principal, or else under an equity partnership model. 3. Business to business transactions, which will continue to be supported where consistent with AMP's strategic interests. 4. Buy back and service through AMP Direct and/or AMP Advice, with all commission and/or servicing revenue accruing to AMP. (Emphasis added.) 107 "AMP Direct" was subsequently re-named "AMP Assist". The name "AMP Advice" remained the same. 108 During cross-examination, Mr Byrne provided the following explanation of AMP Assist and AMP Advice. AMP Assist was a phone-based advice service. AMP Advice was a face-to-face advice service. AMP Advice involved both: (a) employed advisers providing advice in AMP offices; and (b) self-employed practices operating under the processes, technology and systems of AMP Advice. 109 During cross-examination, Mr Scott gave the following evidence, which I accept: … at the time of the commencement of the buyer of last resort policy, in effect, from 1 July 2017, you were aware that AMP was changing its strategy with respect to on-selling registers by increasing the number of registers it would retain and have serviced by AMP Assist and AMP Advice?---Yes. And that strategy involved not on-selling as many registers as had occurred historically?---Yes. And concerned - rather than acting as a clearing house of registers through the buyer of last resort policy acting as a company which held a proportion of registers for direct servicing?---Yes. 110 The evidence includes a memorandum dated 4 July 2017 from Mr Scott to James Georgeson and John O'Farrell (of AMP) on the subject "Buyback update". The "Purpose" section of the memorandum stated that the paper explained the change in accounting treatment for "buyback transactions resulting from the strategic decision to service more policies internally" and for "external policy write downs on purchase". The executive summary included: The Advice business are making changes to practice transaction processes based on a revised decision-making framework that will support a range of outcomes for business transactions across the network including buyback, on-sell and planner to planner. Exiting businesses will be assessed, with a recommendation developed as to the most appropriate outcome in the interests of customers and the distribution network. Outcomes may include planner to planner transactions, internal succession within the business, and unbundling then allocating customers to an appropriate service channel. This will be aligned with a strategy to participate more in the Advice value chain and service policies internally. The change in strategy by the Advice business requires a reclassification of buyback policies held on the balance sheet. AMP accounting policy is that client registers which are held for sale in the ordinary course of business are classified as inventory. However, individual client policies will not be classified as inventory where either: (a) a decision has been made by the business not to sell the policy; and/or (b) the policy has an attribute that is been systematically excluded from sale (Emphasis added.) 111 The evidence includes a memorandum dated 22 November 2017 from Mr Akers to the AMP Limited Board titled "Revised approach to acquire client registers". The purpose of the memorandum was stated to be: To provide the Board with an update on our strategy under which AMP will acquire client registers from aligned practices through buyout transactions and providing direct servicing to clients through AMP Assist and AMP Advice. 112 The executive summary of the memorandum stated: AMP has implemented a revised approach to acquisition of customer registers, under which customers will be served through the channels most appropriate to meet their needs, including AMP Assist and AMP Advice. Previously AMP has on-sold acquired client registers wherever feasible to other servicing practices or as part of Practice Start-up Offers. Our revised approach will retain a growing portion of these registers to be serviced through AMP-owned channels. This approach is expected to deliver returns to the Advice business through the in-housing of existing product commissions and fee-for-service client relationships, while also recognising the potential value to AMP Group of expanding our addressable customer base. Over the next 5 years we expect to acquire ~$50m in customer registers per annum, with an aggregate capital investment of $250m. The financial impact is expected to approach hurdle excluding amortization and assuming lower cost to serve. We are well positioned to execute on this strategy given the investment in underlying technology and infrastructure in recent years, enabling us to digital engage and serve clients in a more personalized yet scalable manner. This strategy also enables us to take control of the inevitable increase in aligned businesses accessing buyer-of-last-resort terms over the coming years driven predominantly through the key deadlines for education standards; the trend of sub-scale businesses opting out and through more deliberate interventions by AMP on higher-risk and / or underperforming businesses. (Emphasis added.) 113 On 14 December 2017, the Commonwealth Government established the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Financial Services Royal Commission or the Royal Commission). The Honourable Kenneth Hayne AC QC was the sole commissioner. 114 In 2018, the Financial Adviser Standards and Ethics Authority (FASEA) announced educational requirements that advisers would need to meet. These changes placed pressure on advisers to consider their careers and their individual plans. This was particularly so for older advisers who were nearing retirement age and were concerned about taking educational courses and examinations for the first time in a long time. 115 During cross-examination, Mr Scott gave evidence, which I accept, that the strategy of AMPFP keeping (rather than on-selling) a portion of the registers acquired under the BOLR Policy was fully operational by early 2018. He gave evidence, which I accept, that from that point on (until August 2019), BOLR transaction registers (that is, registers acquired under the BOLR Policy) mainly went to AMP Advice and AMP Assist. 116 Further, Mr Scott gave evidence, which I accept, that AMP's strategy in the period early 2018 to August 2019 involved placing as many clients as possible with AMP Advice and AMP Assist and then finding a home for remaining clients that did not meet the exceptions criteria and accreditation criteria for clients of AMP Advice/AMP Assist. Where clients could not be placed with AMP Advice/AMP Assist, or there were other reasons for not placing them with AMP Advice/AMP Assist, the clients were on-sold. This was referred to in the evidence as a "partial on-sell transaction"; in other words, it involved the on-sale of only part, rather than the whole, of a register. 117 The evidence includes a draft memorandum dated March 2018 from Mr Byrne, Chris Fernie (the Head of Channel Strategy at AMP) and Julian Cappe (a consultant engaged by AMP's Australian Wealth Management division) to Mr Akers and Michael Paff (Managing Director of AMPFP and AMP Advice) titled "Buyback review". The draft memorandum set out an "early hypothesis of end state", which included a move away from the then current BOLR valuation methodology, and discussed an "early hypothesis of transition". In relation to the latter topic, the draft memorandum discussed "tactical changes" (described as phase 1) and a "glide path" (described as phase 2). The draft memorandum stated in part: Phase 2 - Glide path: As we move from the current BOLR valuation methodology to end state models it is recommended that an extended glide path be put in place. The concept of the extended glide path is to reduce the recurring revenue multiple very slowly so that growing practices are incentivised to remain in business and, over time, the new models become more attractive. With an anticipated 13 month notice period and a minimum of 3 months of consultation with the ampfpa, (and need to have some key tactical changes such as run clause in place before any engagement) it is unlikely that the glide path would commence until early 2020 at the earliest. The rate at which the multiple reduces by and the time horizon of the glide path can be modelled, but an indicative approach may be a five year transition where the multiple decreases by 0.03x per month (0.36 or ~9% pa). (Mark-up in original.) 118 During cross-examination, Mr Byrne gave the following evidence, which I accept, in relation to early 2018: And your view in early 2018 was that AMPFP should change its model to remove institutional ownership and remove any premium payable under BOLR, wasn't it?---Over an extended period of time, I saw that as, yes, something that the business should consider. Let me be clear: my question was different to the question that you sought to answer. Your view in early 2018 was that AMPFP should change its model to entirely remove institutional ownership and remove any premium payable under the buyer of last resort policy, wasn't it?---Over an extended period of time, yes. And so when you say, "Over an extended period of time", are you referring to the time at which your view was formed or the time at which those steps should be undertaken?---Time at which those steps should be undertaken. 119 Under the heading "Risks and challenges with hypothesis", the draft memorandum dated March 2018 stated in part: Timing risks: BOLR and institutional ownership are fundamental elements of the AMPFP and Hillross value propositions and the implications of change are far reaching. Practices and the adviser associations are highly sensitive to changes to these terms and there is an expectation that any reduction to practice value would be countered by an equal and opposite improvement in value elsewhere. Changes introduced under Derby were designed internally for approximately 7 months with the assistance of three phases of engagement with AT Kearney. There was then a series of negotiations with the ampfpa over a 10 month period (to April 2016) when the changes were launched. Those changes did not take effect for a further 13 months. Although these changes were material, they were also designed to not materially impact the overall valuation of the network (therefore there were both winners and losers as a result of the changes). Despite the AMPFPA agreement to changes, the transition paths and held value terms put in place, there was still a large volume of BOLR exits following the changes. In recent discussions with the AMPFPA they have also noted that they would have preferred to have gone slower with the BOLR changes and not to have agreed to launch when we did. With this context, the aforementioned transition plan would be considered aspirational and unlikely to be realised unless a more aggressive approach to adviser association consultation is taken. (Emphasis added.) During cross-examination, in relation to a later memorandum (dated December 2018) with similar text to that set out above, Mr Byrne said that on reflection he would characterise BOLR and institutional ownership as important, rather than fundamental, elements of the value proposition. 120 In April 2018, the second round of hearings of the Financial Services Royal Commission (which dealt with financial advice) commenced. Mr Byrne accepted during cross-examination that, during the course of the Royal Commission hearings in early 2018, AMP suffered significant brand and reputational damage. 121 At about this time, Mr Byrne, as part of an AMP working group, started working on the implications for the AMP Advice Licensees if grandfathered commission revenue were to end. 122 The evidence includes a draft memorandum dated May 2018 from Mr Byrne, Mr Fernie and Mr Cappe to the Advice Leadership Team of AMP on the subject "Commercial Buyback terms - review". The document was labelled "DRAFT for discussion". The "discussion questions" were identified as: 1. Problem: Are the top three issues with AMP buy back models: (1) the liability risks and exposure of a 'run' on BOLR, (2) perception issues relating to institutional ownership for EBB and BOLR, and (3) the premium to market valuation offered under AMPFP BOLR and to a lesser extent Hillross EBB? 2. End state: Does the removal of BOLR/EBB terms and institutional ownership make sense as a response to these problems in an end state? 3. Transition: Is an initial phase of internal preparation in 2018/19 followed by an extended glide path reduction in values from 2020-2025 preferable to a more immediate change? 123 The section headed "BOLR and the Royal Commission into Financial Services" stated: The Royal Commission into Banking and Financial Services has put AMP under intense media, customer and stakeholder scrutiny. A focus of that scrutiny has been AMPs charging of fees for no service when customers have been sold back to AMP and have remained in the 'BOLR pool'. This issue was the result of system and process failures, but in some cases it was because of a business practice. Although this issue was resolved in November 2016, there is understandably a heightened awareness of all processes surrounding our buy back arrangements and an imperative to ensure customer servicing is maintained when practices exit the industry. As a result of the negative stakeholder sentiment flowing from the Royal Commission, there has been a significant increase in practices asking about BOLR and also considerable media speculation on the potential for practice exits and AMPs liability. AMP is beginning to see a stepped increase in exit notices - with 5 received in the first week of May (last week), compared to an average of less than 1 week since the start of the year. As a result of the Royal Commission, it is likely that practices within the network will have heightened sensitivity surrounding any changes to BOLR terms. This sensitivity is fuelled by speculation within the network surrounding; the future of grandfathered commissions, future changes to OFAs, the future of vertical integration, the future of licensee incentives, changes to AMP leadership, and the potential to make changes to BOLR terms outside the established notice period. In such an environment, it is likely that practices may submit their exit notices in an attempt to secure current terms, or act irrationally when changes are introduced. 124 I have referred to the Akers July 2018 Memorandum at [89] above. I now set out some additional extracts from that memorandum. In the section headed "Financial Impact", the memorandum stated: AMP's total Bolr liability is $1.2Bn across ~800 practices (not including audit discounts). Since 2016, AMPFP has undertaken an average of 60 Bolr transactions a year, at average $1m each (ie. aggregate ~$60m transaction value pa). Prior to 2015, annual Bolr was ~$30-40m pa, with the recent uplift being linked to accelerating industry disruption. The strategic plan for Advice forecasts that Bolr volumes will remain at an elevated level over the next 5 years driven by adviser demographics and increasing industry professionalisation standards (est. $80m pa). Since the Royal Commission hearings on financial advice, 22 Bolr notices for total $17m have been received, representing a moderate short-term increase in exits above normal levels (many of these practices were considered high propensity to exit even prior to the Royal Commission). More recent propensity modelling (excluding Royal Commission fallout) suggests 2019 is likely to be the year we see the [largest] number of exits; linked to FASEA milestones. 125 After discussing "Risks and issues", the memorandum contained a section headed "Changes to Bolr terms". This stated in part: AMPFP periodically reviews its Bolr terms to ensure they meet the needs of AMP, advisers and customers, and comply with the evolving regulatory landscape. Changes to Bolr terms can be made with 13 months notice to advisers, or with a shorter notice period by agreement with the AMPFPA (adviser representative association). In 2013 and 2014, the Bolr terms were updated for compliance with FoFA, including the alignment of value for AMP and non-AMP products on the licensee APL. In 2016, AMP and the AMPFPA agreed to further revise Bolr terms to introduce standardised client service packages, deferred payment terms and more stringent audit requirements, and to remove "deemed" values for client policies not providing ongoing income to the adviser. To achieve agreement to these changes, AMP agreed to apply a flat 4x valuation multiple to fee-based revenue (some types of fee arrangements were previously valued at 1x) and also to attribute value to products not on the licensee APL. Changes to value were implemented over an extended valuation transition period ("glidepath") so as to minimise practice disruption. 126 The final section of the memorandum, headed "Bolr terms - future changes" included: As AMPFP continues to evolve its adviser proposition and respond to industry change, it is likely that Bolr will need to be modified so as to value advice businesses as a "going concern" rather than on the basis of their held client registers. For mature businesses, this is likely to be … based on a profitability multiple rather than a revenue multiple. Future changes to Bolr will also need to reconsider the relevance and value of institutional ownership terms. To minimise disruption that might trigger an acceleration of exits, changes are likely to be introduced over an extended transition glidepath.

[25]

The period September 2018 to January 2019 127 During this period, AMPFP developed a proposal, for presentation to ampfpa, to change the valuation methodology in the BOLR Policy for grandfathered commission revenue. 128 On 17 and 18 September 2018, a meeting of AMP's Advice Leadership Team took place. Mr Byrne was tasked with formulating a BOLR strategy in light of the predicted recommendations of the Royal Commission, including the likely cessation of grandfathered commissions. 129 On 28 September 2018, the interim report of the Financial Services Royal Commission was released. This specifically discussed the removal of the grandfathering provisions from the conflicted remuneration legislation. 130 Mr Byrne gave evidence in his affidavit, which I accept, that at the forefront of his mind, whilst formulating the BOLR strategy, was not only the risk of a "BOLR run" (i.e. a large number of BOLR applications being submitted by practices), but also the challenges facing both the financial planning industry and practices given the market sentiment towards AMP at the time and broad distrust in the financial planning industry. 131 The evidence includes a draft memorandum dated October 2018 from Mr Byrne to Mr Paff and Luke Symons (Director of Channel Performance & Growth, AMP) titled "Buy back (BOLR) Strategy". Part 2 of the draft memorandum addressed a number of immediate challenges confronting AMPFP that would require changes to buy-back terms. The draft made the following comments about grandfathered trail commissions: The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry ('Royal Commission') has raised questions as to the appropriateness and future viability of grandfathered trailing commissions. Changes under FOFA provisions allowed pre-2013 commission arrangements to be grandfathered and continue to be paid until such time that the grandfathered arrangement ceased. It is believed that the recommendation from the Royal Commission will lead to legislative change prohibiting the continuation of grandfathered commissions. It is not yet known if or when any legislation will come in to effect. It is reasonable to expect that legislation will be put in place in the second half of 2019 and that a transition phase may result in commissions ending by the end of 2020 or earlier. The draft memorandum then set out a number of options that could be considered by way of amendments to the BOLR Policy. 132 In the period October 2018 to January 2019, Mr Byrne continued to work on a proposed BOLR strategy. The evidence includes various iterations of the draft memorandum of October 2018 discussed above. 133 In about January 2019, AMPFP began to consider whether an "economic change" within the meaning of the LEP Provision had occurred with respect to grandfathered commission revenues, enabling changes to be made to the multiple in the BOLR Policy with respect to such revenues. 134 On 27 January 2019, an email exchange took place between Mr Scott and Julian Cappe and Ben Ebert (of AMP). The latest email in the chain, which was from Mr Scott, responded to a question that had been raised about the difference between "Bolr intangibles" and "Bolr inventory". Mr Scott responded: Inventory was where the registers were available for onsell under the old strategy. Intangibles is where the registers are being held internally and not to be sold. As per retail strategy with AMP Assist to service the policies.

[26]

The period 1 February to mid-March 2019 135 In this period, AMPFP presented to ampfpa a proposal to change the valuation methodology in the BOLR Policy for grandfathered commission revenue. 136 On 4 February 2019, the final report of the Financial Services Royal Commission was published. Two key recommendations relevant to the financial planning industry were: (a) that grandfathering provisions for conflicted commissions should be repealed as soon as reasonably practicable; and (b) a requirement that all clients (pre- and post-FOFA clients) move to annual opt-in arrangements (as compared to this occurring every two years). 137 The Commonwealth Government announced that day that it intended to take action on all of the final report recommendations, including ending grandfathered commissions effective 1 January 2021. 138 On 4 and 5 February 2019, a meeting of the joint Boards of ampfpa and HAA took place. 139 At approximately 7.00 pm on 4 February 2019, Mr Akers attended a meeting at the AMP Building with Mr Paff, Mr Jordan and Mr Weeks to discuss the Royal Commission final report. At that meeting, they briefly discussed some of the recommendations made in the final report that would impact the advice practices of AMPFP. 140 On 5 February 2019, at approximately 8.00 am, Mr Akers again met with Mr Paff, Mr Jordan, and Mr Weeks at the ground floor of the AMP Building. On the same day, at approximately 11.00 am, Mr Akers attended part of the meeting of the joint Boards of ampfpa and HAA. 141 On 8 February 2019, Mr Paff sent an email to Mr Jordan and Mr Macdonald (of ampfpa) (copied to Mr Akers and Mr Byrne) with the subject "ampfpa BOLR consultation - CONFIDENTIAL". The email stated: As we have discussed this week, Monday's Royal Commission report has provided us with greater clarity. Further to our discussions this week, I am writing to you as members of the ampfpa board to outline proposed urgent changes to the AMPFP BOLR terms. As per the requirements set out in the BOLR Policy, AMP Financial Planning (AMPFP) is consulting the AMP Financial Planners Association (ampfpa) prior to making these changes and seeking your feedback. The purpose of the attached memo is to outline; the changes proposed to the BOLR terms, explain the rationale and impact to AMPFP practices and outline the proposed timeline for announcement. Could I ask you to please share this memo with the other members of the ampfpa board. With the Royal Commission final report now released, AMPFP is expecting to announce these changes by Friday the 15th of February. Given this timeline, any feedback that the ampfpa wishes AMPFP to consider will need to be provided in writing to myself no later than 4pm (AEST) Wednesday the 13th of February 2019. If you would like to discuss or meet to understand these change please let me know. Please be aware that the information in this Memorandum is confidential and market sensitive. You have been provided with this information on a confidential basis for the purposes of consultation with AMPFP. It must not be disclosed to anyone outside of the ampfpa board. 142 Attached to the email was a memorandum from Mr Paff to the ampfpa Board dated 8 February 2019 with the subject "Proposed changes to AMPFP Buyer of Last Resort terms". The memorandum stated that AMPFP was proposing "urgent changes" to the terms of the BOLR Policy. In the section headed "Rationale for change", the memorandum referred to the likely changes to the treatment of grandfathered trailing commissions and relied on the LEP Provision as justifying the proposed changes to the terms of the BOLR Policy. In particular, it was stated that AMPFP had formed the view that an "economic change" had occurred within the meaning of the provision. The proposed changes to the BOLR Policy were: • From the date of announcement (proposed to be 15th February 2019), the BOLR valuation multiple for all grandfathered commission policies will be reduced from 4 to 2.3 times. • A transition period will run from 1 March 2019 to 1 December 2020 whereby the BOLR multiple for all impacted grandfathered commission policies will incrementally reduce by 0.1 times per month to 0 times (glide path). • The BOLR multiple for all impacted grandfathered commission policies will be 0 times from 1 January 2021 onwards. 143 A few days later, Mr Jordan's practice lodged a BOLR application. The exercise date was after 8 August 2019. 144 On 14 February 2019, Johnson Winter & Slattery, a firm of solicitors acting for ampfpa, wrote to David Cullen, General Counsel for AMP Limited, in relation to the changes outlined in the 8 February 2019 memorandum from Mr Paff (referred to as the "Paff Memo" in the letter). The letter stated in part: If the "changes" foreshadowed by the Paff Memo are sought to be implemented, AMPFPA members will have been sorely misled and deceived. Many AMPFPA members have been induced to incur significant debt in order to buy a register for their practice in the AMP network, in most cases borrowing from AMP's banking division (or other banks under tripartite agreements with AMP) and offering up not only the register but also their family homes as security. AMP (via AMPFP) set the asking price in the same way as the BOLR payment calculation, and in many cases further confirmed that value by its banking arm applying its credit criteria to that asking price, thus representing to the member that the member could proceed with confidence on the basis of that value to put their family home at risk and spend significant amounts of time and money on maintaining and developing the practice. 145 The letter challenged the proposition, expressed in the 8 February 2019 memorandum, that an "economic change" within the meaning of the LEP Provision had occurred. The letter also challenged the asserted urgency of the changes. The letter sought an urgent assurance that AMPFP would not purport to implement the changes, and reserved the right to take action (including legal action) if that assurance was not forthcoming. 146 On 15 and 18 February 2019, there was further correspondence between AMPFP and ampfpa (or their lawyers) in relation to the proposed changes to the multiple in the BOLR Policy for grandfathered commissions. 147 On 18 February 2019, at approximately 2.00 pm, a meeting took place attended by Mr Akers, Mr Paff, Mr Macdonald, Mr Jordan, Mr Weeks and Mr Kelsey (a Director of ampfpa) to discuss the proposed changes to the BOLR Policy in relation to grandfathered commission revenue. The meeting occurred on a without prejudice basis, but evidence has been given about the meeting by Mr Jordan and Mr Akers in this proceeding. During the meeting, Mr Akers and Mr Paff agreed to give ampfpa until 4.00 pm on 20 February 2019 to provide AMPFP with further information regarding the proposed changes. 148 On 20 February 2019, ampfpa provided a "Discussion Paper" to AMPFP. (The heading includes the date "190220". It is common ground that this number represents the date in reverse order, i.e. 2019 02 20, and that the date of the document is 20 February 2019.) Although the document is labelled "Without Prejudice", neither party contended that it was subject to without prejudice privilege in this proceeding. The paper referred to Mr Paff's memorandum (of 8 February 2019) and stated that it provided "little detail, proposed a glide path without any financial certainty (likely to be worthless to most practices as written), limited information on implementation". The memorandum set out a "Problem Statement" regarding the present situation as ampfpa saw it. The memorandum then set out a "Proposal/Initial thinking". 149 On 22 February 2019, the Commonwealth Government released the exposure draft of the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 (Cth) for public consultation. The exposure draft removed grandfathering arrangements for conflicted remuneration in relation to financial advice provided to retail clients, and other banned remuneration, from 1 January 2021. From that time, it was highly likely that grandfathered commission revenue would cease within two years. 150 In February 2019, Mr Paff resigned from his role as Managing Director of AMPFP and took up another role in the AMP Group. Mr Paff and Mr Akers had agreed that he would stay with AMPFP until the end of March 2019. Mr Paff's last day as Managing Director of AMPFP was 31 March 2019. Following Mr Paff's departure from the role: (a) on 10 April 2019, Mr George (previously, General Manager of Financial Planning in Queensland for AMPFP) was appointed as the Acting Managing Director of AMPFP; and (b) Mr Akers assumed greater responsibility in relation to the tasks previously undertaken by Mr Paff, particularly in relation to the ongoing communications with ampfpa. 151 AMPFP did not attempt to implement and did not announce changes to the treatment of grandfathered commissions in the BOLR Policy at any stage in February 2019. 152 On 6 March 2019, Mr Byrne sent an email to a number of people within AMP, including Mr Akers, with the subject "Holding statement on OFAs - not a memo". The email refers to OSA (ongoing service arrangement) and OFA (ongoing fee arrangement) revenue. The email stated in part: I understand that one of the 'hot topics' after we announce changes to gf commissions will be the concern that further changes are likely to be made on the valuation of OSA/OFA revenue. Practices are likely to be very sensitive to the extent to which AMP may make changes to buy back terms that would reduce [or] remove the value associated with OFA revenue. When grandfathered commission revenue is removed from valuations, it is estimated that ~60% of the remaining value will be made up of ongoing advice fees. 153 The email discussed a number of complications relating to OSA/OFA revenue, including that there were a number of reasons why "it would be beneficial for AMP to change valuations for OFAs in the future". The email discussed "messaging" and recommended a number of messages that were considered to be "a compromise between committing to nothing and reducing valuable optionality for AMP". The suggested messages included: AMPFP needs to give practices 13 months notice of a change to BOLR unless economic, legislation or product changes make the terms inappropriate. We do not believe there has been an economic event, legislative event or product event that has made the current OSA terms inappropriate. The fact that AMPFP pays a premium on OSAs relative to the market, is not in itself an economic event and does not give us the right to change the terms. 154 Mr Akers gave evidence during cross-examination, which I accept, that, at this stage, AMPFP had not conducted an exercise to determine whether or not an "economic change" within the meaning of the LEP Provision in relation to OFA revenue had occurred. 155 The evidence includes a memorandum dated 12 March 2019 from Mr Akers to the CEO of AMP Limited (Francesco De Ferrari) on the subject "Changes to valuation for grandfathered commissions". The first section, headed "Background - why we are proposing to act", stated: Over the next few years advisers will experience an unprecedented level of economic disruption as a result of industry change. Direct impacts on adviser revenue will include: • Removal of grandfathered commission before 1 January 2021 (~25% of practice income) • The expected loss of ongoing fee revenue across passively-serviced clients who are unlikely to pay for annual advice (ave. 5-10% of practice income) • Potential changes to licensee terms and incentive programs • Potential challenges to risk and bank loan commissions within 1-3 years These changes will result in significant cashflow and capital loss for most self-employed practices. A large number will be unprofitable or much less profitable or facing debt serviceability issues. Many will struggle to restore their profit margins, while also adjusting to new pressures on service, compliance and educational standards. Propensity modelling indicates that >700 practices may seek to exit within 1-3 years at an aggregate transaction value of $900m (incl. 175 already exiting). Since the Hayne Report was published, 45 practices ($70m value) have submitted their exit notice. To mitigate against the capital risk of an uncontrolled "BOLR run" and ensure a viable future advice network, the Advice business is developing a consolidated program of work as shown below. There are considerable inter-dependencies across activities. This paper focuses primarily on the revaluation of grandfathered commissions under licensee buyout terms. 156 Section 2 of the memorandum set out some key details relating to grandfathered commissions. 157 Section 3 was headed "Details and timing of proposal". This section related to AMPFP, Charter and Hillross. The memorandum stated that "[w]e propose to communicate the following changes to the network on Tuesday 19 March". In relation to the AMPFP network, the proposed changes to the BOLR Policy were: • Valuation of grandfathered commissions will immediately reduce from 4x to 2.2x, then reduce by 0.1x / mth to nil value by December 2020 ('Glide Path') - effective immediately. • If the end date of revenue changes, the glidepath will adjust to reflect the remaining period where revenue will be paid (eg. the glidepath will shift to 0.6x if 6 months remaining). It appears from the above that, as at 12 March 2019, proposed changes to the multiple for grandfathered commission revenue under the BOLR Policy were still being considered. 158 The memorandum also discussed: alternatives to the current proposal; the existing buy-back pipeline (that is, the pipeline of practices that had submitted a BOLR application); the impact of the proposed changes on advisers; the economic impact to AMP; key risks and consequences; and the reshaping of AMP's self-employed advice network. 159 Section 8, headed "Key Risks" and Consequences", stated: Our action will materially erode practice valuations and have a high impact on trust in AMP and our relationship with adviser associations and practices. Specific risks and consequences include • Relationship/trust impact: AMP licensees have historically played a benefactor role enabling licensed practices to accrue significant wealth and withstand prior economic disruptions through capital and cashflow support. It is likely that many practices expect that AMP will protect practice capital under the current circumstances, eg. through a partial buyback offer. Under the current circumstances and following the Royal Commission, AMP it is no longer reasonable or economically feasible for AMP to play this role and absorb the majority of the financial impact. Many practices will be disappointed and angry that AMP is not protecting their downside capital risk. • Mental health: the changes will cause many practices to fail and may impact on the health and well-being of practice principals. AMP field staff will receive wellbeing and sensitivity training. • Legal action: by advice practices (individually or class action) or adviser associations. AMP has received legal advice on our proposed change. • Exits: risk of higher-than-expected practice exits, which may exceed our capacity to execute, and may accelerate client losses. • Product outflow: risk that a breakdown in trust leads to accelerated platform outflows. • Media: risk of negative media about AMP's treatment of advisers, and the initial shareholder focus of our proposed changes to grandfathered commissions. • Impact on high-value practices: exit of future leaders may impact on future vitality of network. It is critical that AMP support identified high-value practices through the transition. It is noteworthy that the risks and consequences outlined above related to proposed changes to the BOLR multiple for grandfathered commissions; the changes to the BOLR multiple ultimately proposed and implemented in July/August 2019 related to all ongoing revenue, not only grandfathered commissions. 160 In mid-March 2019, Mr Akers formed the view, after consulting with Mr Wade, Mr De Ferrari and other members of the AMP's Advice Leadership Team, that it was preferable not to proceed at that time with the proposed changes to the BOLR Policy that had been raised with ampfpa in February 2019. Instead, changes to the BOLR Policy would be considered in the context of a broader strategic review of AMP's advice business. Accordingly, in mid-March 2019, AMPFP decided not to proceed at that time with the changes to the BOLR Policy that had been raised with ampfpa in February 2019. It is unclear whether the decision not to proceed was expressly communicated to ampfpa.

[27]

The period mid-March to 25 July 2019 161 In this period, AMPFP considered and developed more wide-ranging proposed changes to the valuation methodology under the BOLR Policy, namely changes that went beyond grandfathered commission revenue. 162 On 20 March 2019, a meeting took place between Mr Akers (of AMPFP) and Mr Weeks and Mr Macdonald (of ampfpa). There was no discussion of the changes to the BOLR multiple in relation to grandfathered commissions that had been proposed by AMPFP to ampfpa in February 2019. 163 The evidence includes an internal AMP memorandum dated 4 April 2019 from Mr Scott and Ben Ebert to the Buyback Oversight Committee. This was a subcommittee of the Advice Financial Risk & Capital Committee and was a forum for senior leaders within the Aligned Advice Licensees to meet to work through issues that affected buy-back arrangements generally across AMPFP, Charter and Hillross. The memorandum included a statement that there were over 40 transactions in the pipeline due for April and May, and that they should be able to deliver 30 of these in that timeframe. It is then stated that "BOLR transaction registers mainly go to AMP Advice/AMP Assist and we are aiming to complete 3 of these per week". During cross-examination, Mr Scott confirmed that the BOLR transaction registers mainly went to AMP Advice and AMP Assist at that time. 164 The evidence includes an email exchange on 10 April 2019 between Mr Cappe, Mr Fernie and Mr Byrne (all within AMP) with the subject "Revalue - Bold option". The initial email was sent by Mr Cappe. The responding email was sent by Mr Fernie and includes his comments inserted in red-coloured text in the earlier email. 165 The initial email (from Mr Cappe) commenced by stating: "[w]hen taking Luke through the B2B paper this morning, he again raised the challenge of how we could be more aggressive on Revaluation if we were optimising for shareholder value". The reference to "Luke" is to Luke Symons. 166 The initial email includes the following statement in bold: "What is the boldest action we could take on Revaluation?" Under that heading, Mr Cappe wrote: "Aggressive changes to Bolr valuation (AMPFP and EBB)". After this, Mr Fernie inserted in red-coloured text: • Immediate removal of G/F commissions (as per current strategy) • Change OFA multiple to 2x under economic trigger - assuming that we have the fact base to support this based on changes to internal market. The reference to "economic trigger" is, I infer, a reference to the economic change aspect of the LEP Provision in the BOLR Policy. The reference to the "internal market" is, I infer, to the market for the sale and purchase of practices within the AMPFP network (the internal market). 167 Mr Fernie also inserted the following statement in red-coloured text (and bold): DB's suggestion was maybe go to 3x for OSA but with higher deferred component. Might reduce impairment and perception of change The reference to "DB" is to Damian Byrne. 168 The initial email (from Mr Cappe) also set out benefits and key risks. The following key risks were identified: • Planner trust/sentiment - very high impact • Planner mental health - very high impact • Very high legal / class action risk • Risk of negative media • This could slow reshape, as marginal practices no longer have an attractive exit option. • High write-offs in practice finance as a very large number of practices no longer have capital to meet their debt • Retention risk in AMPFP/Hillross - Institutional ownership is no longer linked to a market premium. Risk of high-value practices challenging insto. [i.e. institutional] ownership and leaving with their clients. • Higher risk of AMP subject to a takeover - if we take the view that our Bolr liability is currently a "poison-pill" that Macquarie etc is reluctant to digest. (Emphasis added.) As highlighted in the above extract, one of the risks identified by Mr Cappe was a retention risk in circumstances where "[i]nstitutional ownership is no longer linked to a market premium". The risk identified was that practices would challenge institutional ownership terms and leave the network in circumstances where there was no longer a premium to market. 169 At about this time, in mid-April 2019, Mr Byrne started giving consideration to whether there had been an "economic change" for the purposes of the LEP Provision that would justify a change to the BOLR multiple for OFA revenue (as distinct from grandfathered commission revenue). 170 The evidence includes a memorandum dated 23 April 2019 from Alex Wade (CEO, Australian Wealth Management, AMP) and Mr Akers to the AMP Limited Board on the subject "Reshape of aligned advice". The section of the memorandum heading "Background" included: The Advice business is facing a period of extraordinary disruption as a result of ongoing industry reform, which has accelerated following the 2018 Royal Commission. Key challenges include: • Revenue disruption: removal of grandfathered commission (~25% of practice income, with some practices much higher), expected loss of fees linked to low-touch "offer of advice" service (~10% of practice income), and also potential challenges to risk and loan commissions within 1-3 years; • Increased costs: Significantly higher cost to provide advice, and constraints on business capacity due to tightened policy and record keeping requirements; technology benefits are slow to materialise (both in AMP and across the industry); • Increase compliance and governance: higher level of regulatory scrutiny, significantly increasing controls and the risk of advice; new FASEA education and professionalism requirements; industry-wide look back on 'fees for no service'. 171 In the section of the memorandum headed "Removal of Grandfathered Commissions", it was noted that the Coalition (then in government) and the Australian Labor Party (ALP) (then in opposition) had proposed different end dates for legislated removal of grandfathered commissions, namely 31 December 2020 (Coalition) and 31 December 2019 (ALP). A federal election was due to be held on 18 May 2019, not long after the date of the memorandum. 172 In the section of the memorandum headed "Proposed management action" four distinct actions were proposed. These were: (a) revaluation of buy-back terms; (b) reshape the network; (c) retain high-value practices; and (d) redesign licensee offer and terms. Mr Akers gave evidence in his second affidavit, and I accept, that these were four key responses to mitigate capital risk and to transition to a leaner and higher quality advice network. Mr Akers gave evidence, and I accept, that: this proposal was noted by the Board of AMP Limited; it became known internally as the "4 Rs"; and each component was individually designed, formed part of an overall strategy, and needed to be executed together in order to achieve the overall objectives of the AMP Advice Business. 173 In relation to revaluation of buy-back terms, the proposal was to use the "economic trigger" (a reference, I infer, to the LEP Provision) to immediately revalue grandfathered commissions. Later in this part of the memorandum, it was stated in part: The Advice business is also reviewing the option to revalue ongoing advice fees for actively advised clients to align with realistic resell multiples, in order to significantly reduce AMP's impairment risk. The trigger for this change is under review. (Emphasis added.) 174 In May 2019, at Mr Akers's direction, members of an AMP working group were working on formulating a number of proposed changes to the BOLR Policy, including a reduction in the valuation multiple applied to all recurring revenue. As part of this, in May 2019, AMP engaged external management consultants, Bain & Company, to assist and support the working group in relation to the development of proposed BOLR changes, as well as AMP's strategy for redesigning the business model of the Aligned Advice Business more generally. 175 In May 2019, a key workstream for Mr Byrne, Mr Scott and Mr Cappe was considering whether the economic trigger in the BOLR Policy was available; that is, they were working to gather data and information to determine whether there had been an "economic change" that would allow changes to be made to the BOLR multiple (for all revenue) without the need to give 13 months' notice. 176 On 13 May 2019, Mr Byrne sent Mr Cappe a draft PowerPoint presentation relating to "Revaluation of buyback programs". The presentation included, in the second slide, three options for changing the multiple for OFA revenue in the BOLR Policy. Option 1 was a ~3x multiple; option 2 was a ~2.5x multiple; and option 3 was a multiple of less than 2x. The draft slide stated that an economic change had occurred making the BOLR multiple inappropriate, relying on qualitative matters (based on the Financial Services Royal Commission recommendations) and quantitative matters (based on recent transactions, including Charter and Hillross transactions). 177 Also on 13 May 2019, there was an email exchange between Mr Cappe and Mr Byrne in relation to the draft PowerPoint presentation. Mr Cappe expressed the view that Charter and Hillross transactions were not directly relevant to the revaluation of OFA revenue under the BOLR Policy (which concerned only the AMPFP network). 178 The evidence includes a PowerPoint presentation titled "Revaluation of G/F commissions and OFAs under buyback programs (draft)" (AMP.5800.0048.5362). Based on the date of the "host" email, it appears that the presentation was prepared on about 13 May 2019 (rather than the date appearing in the Revised CB index). The third slide is headed "Basis for applying BOLR change in response to economic change (AMPFP)". After summarising the LEP Provision, the slide stated: Proposed Framework for change: 1. An economic change has occurred. 2. The change significantly affects the income or value of the business of AMPFP. 3. The change is of a general and systemic nature. 4. AMPFP's proposed approach, based on revaluation is reasonable, under the circumstances of the economic change 5. (ie. a disinterested person looking at the fact base would find AMP's approach to be reasonable) 6. AMPFP is acting in good faith. 179 The subsequent slides canvassed options to revalue grandfathered commission revenue and OFA revenue (in relation to AMPFP, Charter and Hillross). 180 On 18 May 2019, a federal election was held. The Coalition was re-elected to government. It was therefore highly likely that the legislated date for cessation of grandfathered commissions would be 31 December 2020 (or 1 January 2021). 181 On the afternoon of 28 May 2019, a meeting took place between Mr Akers and Mr Jordan at AMPFP's offices in Docklands, Melbourne. Mr Akers initiated the meeting as he was going to be in Melbourne that day. (Mr Akers was based in Sydney and Mr Jordan was based in Melbourne.) In the course of the meeting, Mr Akers said words to the effect that "we need to get Remco together, because AMPFP wants to make changes to BOLR but we want to go through a robust, well-governed process". Mr Jordan asked Mr Akers when AMPFP was planning on making the changes, and he said that AMPFP wanted to make the changes "soon". Mr Akers referred to proposed changes to the valuation methodology in the BOLR Policy, but did not otherwise give Mr Jordan any detail about the nature of the proposed changes to be discussed. 182 On 20 May 2019 at approximately 1.45 pm, a joint AMPFP and ampfpa webinar took place. It was attended by members of ampfpa and the HAA. The format of the webinar was a question-and-answer panel whereby Mr Weeks asked Mr Jordan and Mr Akers various questions about topics relevant to the financial practices in the Aligned Advice Business. During the webinar, the following exchange occurred: Weeks: What's the view or position in terms of grandfathered revenue and BOLR because this is a very, very important question that everyone is asking at the moment? Akers: So even in the [ampfpa Board] there's a recognition that grandfathered commission valuations have changed. And I think unless something unforeseen happens, grandfathered commissions as a revenue flow is going to disappear. So the valuation of those revenue flows will inevitably change, so it's not if - it's when. We deeply considered whether it should be changed earlier in the year and we did that through interaction with [the ampfpa]. That wasn't the right time, and we didn't see a need to make a change earlier in the year. But clearly with the election, legislation looming, that will be back on the table as something we need to look at. What I do know is, there's no one out in the network that's willing to pay anything for a grandfathered commission policy and so the premise of some of the way that our business model has worked - you know valuations that were defendable worked and the ecosystem worked - I think are being challenged, and challenged by people in the network. I need to respond in the right way, with the right consultation about how we might go about changing that.

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183 During cross-examination, Mr Akers gave evidence, which I accept, that as at the end of May 2019, capital outlay requirements were being estimated within AMP on the basis of a planning assumption that there would be a revaluation of the BOLR multiple to 2.5x ongoing revenue. 184 During June and July 2019, there were many internal AMP meetings to develop and finalise proposed changes to the BOLR. This included developing the papers that were ultimately provided to ampfpa RemCo on 26 July 2019 (see below). Significant time and resources were spent by Mr Akers's team preparing the proposed BOLR changes, modelling the data supporting the proposed BOLR changes and preparing for the consultation with ampfpa in relation to the BOLR changes. Legal advice was obtained from both internal and external lawyers as part of this process (and had also been obtained in the preceding months). Mr Akers considered that legal advice. The content of that legal advice is not in evidence, as it is subject to legal professional privilege. 185 Mr Macdonald gave evidence in his first affidavit that by 4 June 2019 he was aware of reports that AMPFP had major changes planned that would be adverse to planners. He stated that he was not aware of any specific changes. I accept that evidence. 186 The evidence includes a memorandum dated 7 June 2019 from Adam Ortmann (Director, Practice Finance, AMP) to the Credit Risk Committee of AMP. The paper related to the proposed introduction of new credit criteria to the AMP Bank Limited (AMP Bank) commercial credit policy and commercial credit procedures, in light of "structural changes" due to be announced in late June 2019 by the Australian Wealth Management division of AMP. (The majority of practices in the AMPFP network borrowed from the AMP Bank. The amount that a practice could borrow from the AMP Bank was a function of the multiple of recurring revenue under the BOLR Policy.) In the background section of the paper it was stated: Australian Wealth Management (AWM) have tacitly finalised a strategy for their Wealth products and their Adviser network. Namely: • Grandfathered Commissions (GF) for all AMP products will cease to be paid by Wealth by 31 August; • Recurring revenue of a Practice, for the purposes of valuing the Licensee Buy Back (BOLR, EBO etc), will be valued at [2.5]x, down from up to 4x; & • The Practices within the respective AMP Licensees will be 'reshaped' over the next 12-18m such that only those that are profitable and scalable with a history of compliance will be part of the Advice network; the number of individual Advice Practices (by number, not size) will likely halve. The above proposal, which is subject to change, is planned to be announced post AMP Limited Board approval in late June. It appears from this memorandum that, by 7 June 2019, a proposal had been developed within AMP to change the valuation methodology in the BOLR Policy in relation to all ongoing revenue (not just grandfathered commission revenue). The proposed multiple was 2.5x, but that figure appeared in square brackets, indicating it had not been finalised. The balance of the memorandum canvassed responses that could be taken in relation to different cohorts of practices that had borrowed from the AMP Bank. 187 On 18 June 2019, Mr Macdonald (on behalf of ampfpa) sent a letter to Mr Akers expressing concern about changes being made to the advice business without consultation with ampfpa or ampfpa's involvement. 188 On 20 June 2019, Mr Akers sent an email to Mr Macdonald (copied to Mr Wade and Mr De Ferrari of AMP and Mr Jordan of ampfpa) in response to Mr Macdonald's letter of 18 June 2019. The email stated that Mr Akers was looking to schedule "a deeper briefing with RemCo in the coming weeks". 189 On 21 June 2019, Mr Macdonald (on behalf of ampfpa) sent emails to Mr Akers reiterating concerns about lack of consultation and to the effect that ampfpa did not consider the communications in February 2019 to constitute consultation. 190 From 20 June 2019 to 9 July 2019, Mr Jordan was in the United States. During his absence, Mr Weeks was the acting Chair of ampfpa's board and of RemCo. 191 While Mr Jordan was in the United States, a telephone conversation took place between Mr Jordan and Mr Akers. The call took place at approximately midnight on 25 June 2019 in New York, which was mid-afternoon in Sydney on 26 June. The conversation included an exchange to the following effect: Akers: AMPFP are going to make some big changes. We want to meet with Remco. Jordan: I am in New York. Scott [Weeks] is in charge while I am away. I'll be back in Australia on 10 July, but if you need to meet with Remco sooner, Scott has got my delegation and can do anything I can do. You can do it without me and start the process.

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During the conversation, Mr Akers said words to the effect that he could not commence the consultation process yet, as he was still waiting for sign off internally. Mr Akers did not give Mr Jordan any details of the proposed changes. 192 On 12 July 2019, Mr Byrne provided Mr Akers, Mr George and others (all within AMP) with a PowerPoint presentation dated July 2019 titled "Consultation approach". The presentation concerned the proposed approach to consultation in connection with proposed changes to the buy-back policies in relation to the AMPFP, Charter and Hillross networks. The first slide indicated a proposed consultation period of 2-3 weeks. The fourth slide set out consultation principles and working principles: • Consultation principles: • There is a formal consultation process that we are following prior to making changes to BOLR or Settlement and Recognition terms • Consultation is not the same as negotiation and we are unlikely to reach agreement on everything • AMP is committed to a consultation process that includes: • Providing proposed changes in writing • Explaining the rationale and impact of proposed changes • Setting a timeline for the process, and when feedback is required • Considering and responding to feedback provided • It is critical that confidentiality is maintained. Leaked information has the potential to disrupt the process and may create greater urgency, thereby reducing the proposed consultation timeline • Working principles (agreed between AMPFP and ampfpa previously): • Open, transparent, and genuine • Seek to understand each other's perspective • We encourage expression (thoughts, feelings and actions) • We recognise and respect all views and opinions • We look for common ground • We acknowledge past challenges and learn from our history • We use it to share and embrace the future • We work collaboratively to build a supportive and caring community 193 The sixth slide referred to "[l]essons learnt from previous consultation" and stated that "[o]ur recent track record with ampfpa RemCo consultation has not been very successful". The slide set out details in respect of three previous matters: the Derby project changes to the BOLR Policy; proposed changes (in 2018) to the settlement and recognition terms; and the proposed changes (in 2019) to the valuation methodology for grandfathered commissions. The next slide set out "what we may want to do differently this time". 194 On 18 July 2019, Mr Akers and Mr Jordan had a telephone conversation. During that discussion, Mr Akers said words to the following effect: It would be good to get together after the board meeting [on 23 July 2019] to speak about moving forward engagement with Remco. While I'm still waiting on the green light from Francesco [De Ferrari] to be able to share the proposed changes with you, I am hoping to have that soon. I suspect we will also need you to sign a confidentiality agreement before we can talk through the details. 195 On 22 July 2019, Mr Akers sent an email to Mr Jordan (copied to Mr George) stating that he had "largely got approval to proceed with Consultation" and that there was "just one last person to confirm" and he expected to receive that confirmation that morning. The email stated: Brian [George] will work with the legal team to get you a suitable NDA [non-disclosure agreement] document to sign. This is intended for REMCO members. Will this create any Governance issues for the wider Association Board or members? I understand RemCo is the authorised body to perform the Consultation with so hopefully should be OK to have it for a subset. (Emphasis added.) Mr Jordan did not respond to that email indicating that there would be governance issues. 196 Mr Akers required final approval from Mr De Ferrari and the relevant people on the Group Leadership Team, including Mr Cullen and Helen Livesey (then, Group Executive, People & Corporate Affairs, AMP), before he could present proposed changes to the BOLR Policy to ampfpa for their feedback. 197 On 23 July 2019, Mr George sent an email to Mr Jordan (copied to Mr Akers) stating that Mr Akers was "still seeking final signoff to enter consultation" and attaching a draft non-disclosure agreement. 198 Later on 23 July 2019, Mr Akers received final approval to commence consultation with ampfpa in relation to the proposed BOLR changes. Mr Akers then phoned Mr Jordan. They had a discussion to the following effect: Akers: We need the members of Remco to sign a non-disclosure agreement prior to the meeting. Jordan: This is new, we have never had to do these before in any of our meetings, why this time? Akers: What we want to talk about is market sensitive information and we want to line it up with an announcement to the market.

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199 Mr Jordan gave evidence in his first affidavit that, to his knowledge, AMPFP had never requested a member of ampfpa's Board to sign a non-disclosure agreement in relation to matters between AMPFP and amfpa, and that, prior to these exchanges, he had never signed a non-disclosure agreement or received a request to sign such an agreement from AMPFP. I accept that evidence. 200 Mr Akers gave evidence in his affidavits that the information to be disclosed to RemCo at the 25 July 2019 meeting included information that was confidential and market sensitive. I accept that evidence. 201 On 23 July 2019, Mr Jordan sent an email to Mr George (copied to Mr Akers) setting out the current members of RemCo, namely Mr Jordan, Mr Macdonald, Mr Kelsey, Mr Jones and Mr Weeks. 202 Mr Macdonald gave evidence in his second affidavit that, on the morning of 24 July 2019, he had a telephone conversation with Mr George in relation to the draft non-disclosure agreement and that, during the conversation he (Mr Macdonald) said words to the following effect: I'm not an ampfpa board member, and the document doesn't reflect that. I'm also concerned that RemCo will need to be able to talk to the whole ampfpa board about what is addressed at the meeting. RemCo isn't delegated to make decisions on behalf of the ampfpa board. (Emphasis added.) 203 Mr Macdonald's affidavit evidence is that, after he raised those matters, Mr George responded with words to the effect of: OK, I understand your concerns. Let's just have this meeting and then we can sort those issues out. 204 During cross-examination, it was put to Mr Macdonald that at no time in the lead-up to the 25 July 2019 meeting did he suggest to Mr Akers or anyone else from AMPFP that RemCo was not the correct body for the interactions that were being proposed. Mr Macdonald agreed with that proposition, but in his subsequent answers he referred to having raised the matter with Mr George. Mr Macdonald also gave evidence during re-examination about the conversation with Mr George referred to above. In the absence of any contrary evidence (as Mr George was not called), I find that Mr Macdonald did have a conversation with Mr George as set out in [202]-[203] above. 205 On 25 July 2019 (at 8.53 am), Mr Akers sent an email to Mr Wade with the subject "Some topics for you to cover with the Board". This was a reference to the AMP Limited Board, which was meeting that day. The email comprised a list of matters, including: • Commencing consultation with AMP FPA today for key Master Term changes • Revalue BOLR from 4 to 2.5 for all revenue types • Glidepath for grandfathered commissions to zero by end 2020 (Emphasis in original.)

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The meeting on 25 July 2019 between AMPFP and RemCo 206 On Thursday, 25 July 2019, a meeting took place between AMPFP and RemCo during which AMPFP informed RemCo of proposed changes to the BOLR Policy. The meeting took place at the offices of AMP at Alfred Street, Sydney. The meeting was with members of RemCo rather than the Board of ampfpa. Those present at the meeting were: Mr Akers, Mr George and Mr Byrne (on behalf of AMPFP) and Mr Jordan, Mr Weeks, Mr Jones and Mr Macdonald (on behalf of RemCo). Mr Kelsey was not present as he was overseas. 207 Each of Mr Macdonald, Mr Jordan, Mr Jones, Mr Byrne and Mr Akers gave evidence about the 25 July 2019 meeting. There are some differences in matters of detail between their accounts of the meeting (eg, the time it lasted, things that were said at the meeting, etc.). Ultimately, little, if anything, turns on these differences. In the following paragraphs, I have made findings about some of these matters of detail by seeking to reconcile the various accounts (where possible) and, where that is not possible, determining which account is more likely to be correct. 208 Other than proposed non-disclosure agreements, no documents had been provided to the RemCo members in advance of the meeting. Mr Jordan gave evidence in his first affidavit that, ordinarily for meetings between AMPFP and ampfpa, AMPFP would provide ampfpa with a set of pre-reading materials. I accept that evidence. 209 The meeting commenced at approximately 9.00 am and concluded at approximately 12.00 pm. Approximately the first hour of the meeting was occupied with negotiating the terms of the non-disclosure agreement that AMPFP required each of the RemCo members to sign (drafts of which had been previously provided), and with the Remco members then signing the non-disclosure agreements. The second part of the meeting involved the AMPFP representatives going through a PowerPoint presentation. The representatives from AMPFP were seated on one side of the table, and the representatives from RemCo were seated on the opposite side of the table. The PowerPoint presentation was shown on a screen at the end of the room. 210 At the beginning of the meeting, each of Mr Akers and Mr George said that they "could not talk about the proposed changes until the nondisclosure agreements are signed" (or words to that effect). During the process of negotiating the terms of the non-disclosure agreement, a lawyer for AMP came in and out of the meeting to make amendments to the draft agreement. Following the period of negotiation, each of the RemCo members signed the non-disclosure agreement. The RemCo members had discussed beforehand that it was better to sign the non-disclosure agreements and hear what AMPFP had to say in the meeting, than not to sign them and be in the dark about what AMPFP had planned. The agreements as signed did not enable the RemCo members to disclose the details of AMPFP's proposed changes to the BOLR Policy to ampfpa members. Subsequent to the meeting, Michelle Grant (Mr Macdonald's PA) and Mr Kelsey also signed the non-disclosure agreement. 211 There is a conflict in the evidence as to whether, in the course of the meeting, the RemCo members expressed a concern about not being able to disclose the content of the meeting to the ampfpa Board. Mr Macdonald gave evidence in his first affidavit that they did. Mr Byrne gave evidence in his affidavit that he did not recall anyone voicing such a concern. Mr Akers also gave evidence in his first affidavit that no issue was raised about the meeting being with RemCo rather than the ampfpa Board. Mr Akers maintained that position during cross-examination. On balance, I find that the concern was not raised at the meeting. 212 The evidence includes a copy of the PowerPoint presentation that was presented during the second part of the meeting (AMP.5800.0020.9035) (the July 2019 PowerPoint Presentation). The PowerPoint presentation contained a large number of slides. The AMPFP representatives at the meeting talked to approximately 15 of the slides, and skipped over the balance. Mr Akers opened and framed the discussion, and Mr Byrne spoke to the specific details regarding the BOLR changes and the information in the slide deck. During Mr Byrne's presentation, Mr Akers added comments to contribute to the sections of the slide deck that were presented by Mr Byrne. Whilst Mr George also presented, Mr Byrne and Mr Akers spoke the most during the meeting. 213 Although Mr Akers gave evidence in his first affidavit that a hard copy of the slide deck was provided during the meeting (and collected at the end), most witnesses gave evidence that they could not recall a hard copy being provided or that a hard copy was not provided. On balance, I find that a hard copy of the slides was not provided during the meeting. 214 There is a conflict in the evidence as to whether the AMPFP representatives said that the RemCo members were not allowed to take notes. In his first affidavit, Mr Macdonald stated that someone from AMPFP said words to the effect, "you are not allowed to take notes". This is disputed in Mr Byrne's affidavit and Mr Akers's first affidavit. On balance, I find that this was not said. It may be that Mr Macdonald has misremembered a statement by Mr Akers (referred to below) that they were not taking minutes. 215 During the meeting, Mr Akers repeatedly asked "what are your thoughts?" or similar questions seeking feedback from the RemCo members. While the Remco attendees provided short comments on the material that was being presented throughout the presentation, those comments were brief and were in the nature of reactions. There was brief discussion between Mr Akers and Mr Jordan in relation to some of the slides. 216 At one stage during the meeting, the following exchange occurred: Jordan: Where is the meeting material? Akers: After the meeting you'll get a copy of the changes and the reading material that we want you to go through. Today is just about taking you through the framework that we're thinking about. George: We're happy to take feedback as we go through the slide deck.

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221 The July 2019 PowerPoint Presentation was structured in such a way that two sections were expressed to be "for consultation", while other sections were expressed to be "not for consultation". The first section labelled "for consultation" related to the proposed changes to the valuation methodology under the BOLR Policy and comprised seven slides. 222 The first slide in that section, headed "1. RESET buy-back terms - Rationale for change" (p 0011) stated: The AMPFP Buyer of last resort policy provides that "AMPFP has the right to make any change to this policy should legislation, economic or product changes render any part of this policy inappropriate following consultation with the ampfpa" 1. An economic change has occurred relevant to the valuation of client books • During 2018 and 2019, AMPFP has observed a quantifiable and sustained decrease in the value of register rights across all revenue streams in the market for the acquisition of register rights (refer to next slide). 2. AMPFP believes that the quantifiable and sustained decrease in the value of register rights is an economic change that has occurred within the meaning of this clause, as evidenced by the following factors; • an economic change has occurred, relevant to the valuation of acquiring advice businesses (demonstrated by internal and external valuations of advice businesses in the acquisition market) • the economic change significantly affects the income or value of the business of AMPFP and/or its authorised representatives • as this has occurred across a number of transactions of AMPFP and the industry more generally, the change is of a general and systemic nature • the economic change renders the Buyer of last resort policy inappropriate because the policy currently operates to require AMPFP to acquire ongoing revenues at a value significantly higher than what AMP can reasonably expect to receive back when they on-sell them. 3. As a result, AMPFP is proposing to amend; • The Buyer of last resort multiple used to value all ongoing grandfathered commission revenue • The Buyer of last resort multiple used to value all non-grandfathered ongoing revenue (Emphasis added.) This was the slide to which most discussion was directed. When this slide was presented, an exchange to the following effect took place: Jordan: On what grounds do you think you can pull the economic card? Akers: In this environment, it's within our rights to use the economic lever. Jordan: How is it an economic change? We're not working in a true economic market. We can only buy and sell to each other. Akers: It doesn't make commercial sense for us in terms of a value exchange because we're buying these back at 4 times and given grandfathering is going, we can't on-sell them to existing practices for the same amount. We're on-selling them for significantly less than that. Even with ongoing fee arrangements, the 2 year opt in is changing to a 1 year opt in, and this means the books are no longer worth 4 times.

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223 The next slide, headed "1. RESET buy-back terms - Decrease in value of register rights" (p 0012), stated in part: During 2018 and 2019, AMPFP has observed a quantifiable and sustained decrease in the value of register rights across all revenue streams in the market for the acquisition of register rights Grandfathered Commission Revenue multiple: The Royal Commission made a recommendation to cease the payment of grandfathered commission as soon as practicable and it is expected that the government will adopt these recommendations and legislate the removal of grandfathered commissions by 1 January 2021. As Grandfathered commission revenue is likely to cease on or before 1 January 2021, the market valuation of these policies has dropped to reflect the future value expected to be generated. Ongoing Revenue multiple Since June 2018, it has become evident that AMPFP's internal market is no longer applying a multiple of 4x for client books. The following trends have now been identified: • Some practices are no longer purchasing client registers. There is a very significant decrease in the proportion of client register sales being made to practices. • Transactions that proceed are using a reduced multiple Additionally, since October 2018, there have been no AMPFP sale transactions that have proceeded at a valuation of 4x, indicating that there is no longer a viable resell market at that valuation. Since the release of the Hayne report in February 2019, the volume of transactions and the average multiple of those transactions has dropped significantly. 224 The slide headed "1. RESET buy-back terms - Ongoing revenue multiple" (p 0013) set out a proposed change to the multiple for ongoing revenue other than grandfathered commissions. The proposed change was from the current multiple (4.0x) to 2.0x or 2.5x. Under the heading "Why [2.0]x or [2.5]x?" the slide stated: • An economic change has resulted in a change to client register valuations: • There has been an increase in practice exits • Transactions that do proceed are at a reduced multiple • Since October 2018, no transaction from AMPFP to practices has proceeded on a multiple of 4x • Market change is also impacting lease arrangements (resulting in a financial loss to AMPFP) • External market shows average revenue multiple of 1.5x to 2.5x (excluding GF revenues) • It would be reasonable for AMPFP to reset to a new valuation level such that; • AMPFP and practices would be broadly able to rely on the BOLR methodology for both purchase and sale transactions (ie to be able to buy and sell at the same multiple) • AMPFP could continue to perform its role across in purchasing and reselling businesses without the expectation of incurring losses on each transaction, AMPFP would need to reset to a multiple more closely aligned to the external market (Emphasis added.) Mr Jordan gave evidence in his first affidavit that he was "pretty shocked by this" slide. Mr Akers gave evidence in his first affidavit that, at times during the meeting, he observed that the RemCo members appeared to express shock. I find that the members of RemCo were shocked by the proposed changes. An exchange to the following effect occurred: Jordan: If you genuinely think you can do this without a notice period and rip the guts out of BOLR, you are kidding yourselves, it's not going to fly. If you guys think you can honestly pull this trigger and get away with it, this will be tested. And you're betting against yourselves putting a 2 times multiple in there and telling us what you're planning to do. Akers: This is why we're having this conversation - we want a sense of your views on it and your feedback.

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225 There is a conflict in the evidence as to whether Mr Jordan expressed a preference for a 2.5x multiple rather than a 2.0x multiple. Mr Byrne gave affidavit evidence that he did. During cross-examination, Mr Macdonald accepted that Mr Jordan did express a preference for a 2.5x multiple. Mr Jordan, in his second affidavit, disputed that he expressed a preference for 2.5x; he stated that he did not make any comments regarding whether the multiple should be 2.0x or 2.5x because he was of the view that AMPFP could not make a change of this kind without consulting and providing proper notice. Mr Jordan maintained that position during cross-examination. On balance, I find that Mr Jordan did not express a preference for a 2.5x multiple. The proposal to change to a multiple in the range 2.0x to 2.5x was such a shock that it is unlikely that he engaged with the proposed range in such a way to convey a preference for 2.5x. 226 At no time during the meeting did the RemCo members ask AMPFP to consider setting a multiple higher than 2.5x. However, during the course of the meeting, Mr Macdonald said words to the following effect: I don't understand why you are talking about the BOLR multiple being out of step with the market. We all know that BOLR is and always has been at a premium to market. If you say it is out of step with market, then why aren't you moving the multiple to 3.5 times, to align with the Hilross EBB? 227 The slide headed "1. RESET buy-back terms - Grandfathered commissions multiple" (p 0014) stated that AMPFP was proposing to make the following changes to the BOLR multiple for grandfathered commission revenues "on the basis of the economic change provisions" in the BOLR Policy. The proposed change was from the current multiple (4.0x) to a multiple of 1.42x, with a glide path from 1 September 2019. The slide stated that the 1.42x multiple would change to 1.33x on 1 September 2019 and then reduce by 0.0833x per month until January 2021 when it would be valued at 0x. Under the heading "Why is [1.42]x and the glide path appropriate?" the slide stated: • The glide path will align BOLR value with economic value of the remaining cash flows of GF revenues. • Royal Commission recommendation to cease grandfathered commissions as soon as practicable • Government is expected to legislate the removal of grandfathered commissions with effect from 1 January 2021 • External market data suggests some product manufacturers have already commenced ceasing grandfathered commissions payments and this is likely to increase • Some institutions are already valuing grandfathered commissions policies as being worthless (0x): e.g. Steve Prendeville, managing director of consultancy firm Forte Asset Solutions "I'm currently placing zero value on grandfathered revenue," 228 The slide headed "1. RESET buy-back terms - Practice impact" (p 0017) addressed the impact of the proposed changes on practices in the AMPFP network. 229 The July 2019 PowerPoint Presentation included a section, labelled "not for consultation", that concerned "Proposed changes to AMPFP Commercial Terms - BOLR exemption and 13 Month notice". 230 That section included a slide headed "Exemption to changes: Current thinking" (p 0019) that stated that "[i]mmediate changes to BOLR will apply to practices in the pipeline", that is, practices that had submitted a BOLR application before 8 August 2019. The slide set out a number of exemptions that were under consideration. One of these was referred to as "held value". (Held value was an incentive program provided to certain practices in the network following changes made to the BOLR Policy on 27 April 2016, to assist practices that were adversely impacted by the changes to the BOLR Policy at that time. The intention of the held value incentive was to provide practices with a window of opportunity (being, between 1 January 2021 and 30 June 2021) to submit a BOLR application under the pre-2017 BOLR valuation terms, provided that the practices met minimum growth and quality requirements that were measured from May 2016 to December 2020.) The slide stated that practices meeting the "eligible retiree" criteria for held value that were in the pipeline would be paid based on their held value amount. Another exemption under consideration was that practices with an agreed exercise date prior to 8 August 2019 that had been delayed and had not agreed to or requested a later exercise date. When this slide was shown, an exchange to the following effect took place: George: It [the change] will impact anyone who has not reached their settlement date. Jordan: That's unbelievably disgusting. Those people have worked their whole life and are ready to retire. You need to protect the pipeline as an absolute and fundamental given. Akers: We've thought about that and it's too much of an impact, but we'll come up with a framework.

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234 There is a conflict in the evidence as to whether the AMPFP representatives said they would provide a copy of the slide deck (i.e. the PowerPoint presentation). Mr Jordan gave evidence in his first affidavit that this was said. He maintained that evidence during cross-examination. Mr Byrne gave evidence in his affidavit that: he does not believe the AMPFP representatives said they would send the slide pack, particularly as provision of this document was not part of the consultation plan he had prepared; this was because AMP wanted to be precise about the consultation materials and the slide presentation contained a great deal of context and background; Mr Byrne said words to the effect that they would "finalise the consultation material and provide it as soon as possible"; by that he meant the terms sheet and consultation letter he had been preparing. Mr Akers gave evidence in his first affidavit that Mr Jordan requested a copy of the slide deck and that he (Mr Akers) responded to the effect "I want to update the consultation materials before sending them across, to incorporate my reflections from the meeting". On balance, I find that the AMPFP representatives did not say they would provide the slide deck; rather, they said that they would provide the consultation materials (as subsequently provided - see below) (which Mr Jordan took to be a reference to the PowerPoint presentation). 235 During cross-examination, Mr Akers was asked questions about whether there was a willingness within AMPFP to vary the proposed OFA multiple of 2.5x. He was taken to comments made by Mr Byrne in an email dated 15 July 2019 to the effect that there should be no willingness to vary the 2.5x multiple. The following exchange then occurred: … And that was also your position, wasn't it?---I had a high conviction that 2.5 times was the right answer. That was your position as well, wasn't it, Mr Akers?---That 2.5 times was the right multiple, yes, it was. … And, on that basis, you had no willingness to vary that multiple, did you?---Next to none. … You had next to no willingness to vary the multiple of 2.5 times because that was what Mr De Ferrari had told you, wasn't it, Mr Akers?---No. So when going into consultation, the requirement is to go in with a firm view, not a soft or fluffy view, to the association. So we've tabled a set of changes with a very firm view. You will see in the documents that we actually put a range of two to 2.5 times into the documents at the commencement of consultation, and obviously consultation is to table our views, to take feedback, to consider that feedback. It does not require us to negotiate, and it does not require us to make changes irrespective of the feedback that we receive from the AMPFPA. You went into that meeting with next to no willingness to vary the multiple from two and a half times, didn't you?---That's correct.

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The "Formal Consultation materials" provided on 26 July 2019 237 On 26 July 2019 (at 5.18 pm), Mr Akers sent an email to Mr Jordan (copied to Mr Macdonald, Mr George and Mr Byrne) attaching "Formal Consultation materials". In the email, Mr Akers stated that he looked forward to meeting with Mr Jordan on 31 July in Melbourne "to step through your feedback". The documents provided under cover of that email were: (a) a draft terms sheet titled "AMP Financial Planning Buyer of last resort policy changes" with the date 8 August 2019 - this comprised 8 pages, including an appendix (the Draft Terms Sheet); and (b) a memorandum dated 26 July 2019 from Mr Akers to the ampfpa Board - this was 8 pages, including an appendix (the Akers July 2019 Memorandum). 238 Although the latter document was addressed to the ampfpa Board, the paper was only emailed to members of RemCo. They considered that they were not permitted to disclose it to the Board of ampfpa given the non-disclosure agreements they had signed. Therefore, the Draft Terms Sheet and the Akers July 2019 Memorandum were not provided by the RemCo members to the ampfpa Board (before 8 August 2019). 239 These were the only documents provided by AMPFP to RemCo in connection with the proposed changes to the BOLR Policy discussed at the meeting on 25 July 2019. The PowerPoint presentation from the meeting was not provided. 240 The Draft Terms Sheet is a draft of a document that AMPFP proposed to release subsequently to announce the changes to the BOLR Policy. The document's first paragraph stated: AMPFP has reviewed its current Buyer of last resort policy and the following changes are being implemented. AMP Financial Planning (AMPFP) has consulted the AMP Financial Planners Association (ampfpa) with these changes. 241 The document had a section headed "Changes which take effect immediately on 8 August 2019", followed by a section headed "Future changes which take effect on 8 September 2020 - 13 months' notice". The section headed "Changes which take effect immediately on 8 August 2019" stated: Buyer of last resort multiple Effective from 8 August 2019 the Buyer of last resort multiple used to value all ongoing revenue will be [2.0-2.5] times the ongoing revenue paid to the practice in the preceding 12 months to exercise date, subject to the ongoing terms of the policy. These value changes apply to all Buyer of last resort transactions with an exercise date (or the date which the practices AR Agreement is terminated, whichever is later) on or after 8 August 2019. Grandfathered commission revenue multiple Effective from 8 August 2019, the Buyer of last resort multiple for all grandfathered commission revenue will be reduced from 4 times ongoing revenue to 1.42 times ongoing revenue paid to the practice in the preceding 12 months. A transition period will then run from 1 September 2019 to 1 December 2020 whereby the Buyer of last resort multiple for all grandfathered commission revenue will incrementally reduce by 0.0833 times ongoing revenue per month (glide path). The glide path will apply until grandfathered commission revenue ceases or AMPFP considers the grandfathered commission revenue to be temporary and is expected to cease within 12 months of the exercise date. The Buyer of last resort multiple for all grandfathered commission revenue will be 0 times from 1 January 2021 onwards. The changes do not differentiate between AMP products or non-AMP product generated grandfathered commission revenue. Grandfathered commissions associated with all wealth management products including Superannuation, Retirement/Pensions, Life products and Investment products will be impacted by the change. The legal structure of these products is irrelevant to inclusion (ie Master-trust, Wrap, Life products, Superannuation interest, etc). For more information on grandfathered commissions, please refer to appendix A. The Buyer of last resort multiple for grandfathered commissions that applies will be the multiple in force on the Buyer of last resort exercise date or the date the AR Agreement is terminated, whichever is the later. For more information on the glide path value for each month, please refer to Appendix A of this notice. Important As per the current Buyer of Last Resort terms, revenue that has ceased or that is expected to cease within 12 months of the exercise date (or date the AR Agreement is surrendered) is excluded from the valuation. AMPFP will exclude from the calculation of register value those revenues that AMPFP considers to be temporary and are expected to cease within 12 months of the exercise date (or date the AR Agreement is surrendered). For example, if grandfathered commissions are expected by AMPFP to be legislated to cease on 1 January 2021 then all valuations from 1 January 2020 will exclude grandfathered commissions. (Words emphasised in bold in above extract were highlighted in yellow in original.) 242 The Akers July 2019 Memorandum stated in the "Purpose" section: As you are aware, AMPFP commenced consultation with AMP Financial Planners Association (ampfpa) on changes to the Buyer of last resort terms in February of this year. Since then, we have continued our consultation with ampfpa and have been working with ampfpa to evolve the proposed changes to the Buyer of last resort policy and to fully understand the impacts of the changes to the Buyer of last resort policy to the network. AMPFP has observed a quantifiable and sustained decrease in the market value of register rights and it has become inappropriate for AMPFP to continue to value ongoing revenue income at a multiple of 4 times for Buyer of last resort payments, as this would require AMPFP to pay significantly more for the register rights than it could recover when it sells those rights. This decrease in value is an economic change for AMPFP, and accordingly AMPFP has decided to rely on the economic change provisions in the Buyer of last resort policy to amend the valuation multiple used in the Buyer of last resort policy. AMPFP has taken the feedback provided by ampfpa since February into account and has developed an updated proposal in respect of changes to the Buyer of last resort terms and to Settlement and recognition terms policy. The purpose of this memo is to outline the changes, explain the rationale for them and their impact to AMPFP practices and outline the timeline for the changes. As per the requirements set out in the Buyer of last resort policy and in the Settlement and recognition terms, AMP Financial Planning (AMPFP) is consulting with the ampfpa prior to making these changes and seeking your feedback. AMPFP proposes to announce these changes as a matter of urgency on 8 August 2019. Given this timeline, any feedback that the ampfpa wishes AMPFP to consider must be provided to AMPFP no later than noon on Tuesday 6 August 2019. Please provide any feedback on the proposal to me via email. AMPFP will consider any written feedback provided by the ampfpa prior to making and announcing any change. (Emphasis in first paragraph added.) 243 Insofar as the first paragraph of the above extract suggests that consultation had taken place on a continuing basis between February 2019 and July 2019, it does not reflect the facts. There was a period of engagement between AMPFP and ampfpa in February (and perhaps March) in relation to proposed changes to the multiple applicable to grandfathered commission revenue. The proposed changes were strongly opposed by ampfpa and AMPFP did not pursue the changes in February or March 2019. It was artificial to suggest that there had been a continuing process of consultation between February and July 2019. 244 The next section of the Akers July 2019 Memorandum, headed "Rationale for immediate changes to Buyer of last resort valuations", stated in part: During 2018 and 2019, AMPFP has observed a quantifiable and sustained decrease in the value of register rights across all revenue streams in the market for the acquisition of register rights (refer to Appendix A). The AMPFP Buyer of last resort policy provides that 'AMPFP has the right to make changes to this policy should legislation, economic or product changes render any part of this policy inappropriate following consultation with the ampfpa'. AMPFP believes that the quantifiable and sustained decrease in the value of register rights is an economic change that has occurred within the meaning of this clause, as evidenced by the following factors; • an economic change has occurred, relevant to the valuation of acquiring advice businesses (demonstrated by internal and external valuations of advice businesses in the acquisition market) • the economic change significantly affects the income or value of the business of AMPFP and/or its authorised representatives • as this has occurred across a number of transactions of AMPFP and the industry more generally, the change is of a general and systemic nature • the economic change renders the Buyer of last resort policy inappropriate because the policy currently operates to require AMPFP to acquire ongoing revenues at a value significantly higher than what AMP can reasonably expect to receive back when they on-sell them. As a result, effective from 8 August 2019, AMPFP is proposing to amend; • the Buyer of last resort multiple used to value all ongoing grandfathered commission revenue from 4.0x to 1.42x the ongoing revenue paid to the practice in the preceding 12 months to exercise date. Refer to the Buyer of last resort terms sheet for more information on the definition of grandfathered commissions. • the Buyer of last resort multiple used to value all ongoing grandfathered commission revenue will then incrementally reduce by 0.0833 per month from 1.33x from 1 September 2019 (glide path). The glide path will apply until grandfathered commission revenue ceases or AMPFP considers the grandfathered commission revenue to be temporary and is expected to cease within 12 months of the exercise date. The glide path multiple will be 0 times from 1 January 2021 (or such earlier date) onwards so that no value will be attributed to ongoing grandfathered commission revenue from that date. • the Buyer of last resort multiple used to value all non-grandfathered ongoing revenue from 4.0x to [2.0-2.5x] the ongoing revenue paid to the practice in the preceding 12 months to exercise date. • these value changes apply to all Buyer of last resort transactions with an exercise date (or the date which the practices' AR Agreement is terminated, if later) on or after 8 August 2019 including practices currently serving their notice period. … AMPFP will consider whether dispensation of the changes will apply to practices where special circumstances specific to the practice may apply. This may include consideration for recent start up practices or practices on lease arrangements. Principles for applying dispensation and a defined process for managing such cases would also be under consideration. A key consideration of applying any such dispensation will be to ensure it can be achieved in a compliant way. Please refer to the attached terms sheet for more detail on this proposed immediate change to the Buyer of last resort policy. AMPFP requests ampfpa views on the proposal by no later than noon on Tuesday 6 August 2019. (Words emphasised in bold in the eleventh paragraph of the above extract were highlighted in yellow in original.) 245 The Akers July 2019 Memorandum included a section headed "Proposed timeline for consultation and announcement of changes", which stated in part: • 8 February 2019 • Consultation with the ampfpa commences • Thursday 25 July 2019 • Consultation period with the ampfpa continues • Tuesday 6 August 2019 • Feedback on the proposal to be provided by no later than noon (AEST) • Thursday 8 August 2019 • AMPFP to complete review of all feedback provided by ampfpa • AMPFP to decide whether to proceed with the proposal and, if so, what (if any) amendments should be made to the proposal • If AMPFP decides to proceed with the proposal (in the form set out in this note or in an amended form): • AMPFP announces changes to Buyer of last resort policy • Changes to Buyer of last resort policy apply. 246 The next section of the memorandum addressed the impact of the proposed changes on practices. It included the following table: 247 The following is an explanation of the table based on Mr Byrne's affidavit evidence: (a) the column on the left labelled "Impact" refers to the total valuation impact of the BOLR changes to different sets of AMPFP practices. For example, "<50%" refers to AMPFP practices that would experience a reduction in the value of their register rights of less than 50% as a result of the BOLR changes; (b) the second and fourth columns, labelled "% of practices (by#)", refer to the number of AMPFP practices that would experience the valuation reduction specified in the "Impact" column, expressed as a percentage of the total number of AMPFP practices; (c) the third and fifth columns, labelled "% of practices (by $ value)", represent the proportion of practices that would experience the valuation reduction specified in the "Impact" column, expressed as a percentage of the total value of the register rights of all AMPFP practices. 248 During cross-examination in relation to the above table (albeit in a different document), Mr Byrne accepted that the effect of the table was that, if the multiple were changed to 2.5x (and the glide path were adopted for grandfathered commission revenue), 73% of practices by number would experience a reduction in the value of their register rights of more than 50%. (The 73% figure is produced by adding 36%, 24% and 13%, which appear in the second column.) 249 Appendix A to the Akers July 2019 Memorandum provided information said to justify the proposition that there had been a quantifiable and sustained decrease in the value of register rights. It stated: Grandfathered Commission Revenue multiple: The Royal Commission made a recommendation to cease the payment of grandfathered commission as soon as practicable and it is expected that the government will adopt these recommendations and legislate the removal of grandfathered commissions by 1 January 2021. As Grandfathered commission revenue is likely to cease on or before 1 January 2021, the market valuation of these policies has dropped to reflect the future value expected to be generated. Ongoing Commission Revenue multiple Since June 2018, it has become evident that AMPFR's internal market is no longer applying a multiple of 4x for client books. The following trends have now been identified: • Some practices are no longer purchasing client registers. There is a very significant decrease in the proportion of client register sales being made to practices. • Transactions that proceed are using a reduced multiple Additionally, since October 2018, there have been no AMPFP sale transactions that have proceeded at a valuation of 4x, indicating that there is no longer a viable resell market at that valuation. Since the release of the Hayne report in February 2019, the volume of transactions has dropped significantly and there is still a much-subdued market for the purchase of client books. External market Market feedback is that the valuation of financial advice businesses has declined from its historic range. Sample market commentary as follows: • Paul Tynan, chief executive of Connect Financial Services Brokers, says that the opt-in recommendation has driven the price of advice firms down "more than anything else. It's pushed the valuations down because you've got to engage the client every year instead of just issuing an invoice," Advisers will be increasingly unable to service the bottom half of their revenue books - the threat of which is limiting the asking price for sellers. Values have come down considerably in the last year and are being sold at revenue multiples "nowhere the threes". https://www.professionalplanner.com.au/2019/05/opt-in-osas-drag-on-practice- values/ • Radar Results: The valuation gap between high-quality financial advice businesses and conventional practices is growing, with the sector quickly turning into a buyers' market. Buyers now have a larger selection of sellers from which to choose and therefore, can negotiate lower price multiples and obtain better payment terms. Conventional practices (as opposed to high quality practices) are currently selling for between 1.5 and 2 times recurring revenue (excluding grandfathered clients). • Citi Research suggest that there are recent quotes in the 1.5x to 2.5x range as per their paper titled The future of institutionalised Advice' dated 21 May 2019. It cites increased pressures to justify the premium on the value paid for client registers given the current economic environment. 250 Mr Byrne accepted during cross-examination that the material provided by AMPFP to RemCo did not include practice level data as to the impact of the proposed changes. He also accepted during cross-examination that the data that was provided to RemCo did not separately identify the effect on the practices in the pipeline. Mr Akers accepted during cross-examination that the material provided to RemCo did not include data underlying the asserted economic change. 251 During cross-examination, Mr Byrne gave the following evidence about the effect of the proposed changes on practices in the pipeline (i.e. practices that had submitted a BOLR application): Those participants in the pipeline that had lodged their BOLR application - - -?---Yes. - - - they weren't actually allowed to leave the pipeline unless AMPFP consented, were they?---That's my understanding, yes, for withdrawing their notice. Yes. So what had happened is they had lodged their application under the extant BOLR policy understanding that they would be paid four times recurring revenue, including grandfathered commission, if they received an exercise date before 31 December 2019, but the effect of the 8 August 2019 changes was to substantially remove that entitlement but, nonetheless, lock them into the obligation to complete the BOLR policy, wasn't it?---Yes. The terms of the BOLR policy are that the terms in place at the exercise date are the ones that are to be used. Yes. And for those practices that would be unable to pay out their practice loans under the revised value, the terms of the BOLR policy meant they would receive nothing at all, didn't they?---Any payment was to go towards the payment to cover the practice finance loan; is that what you are talking about? Well, as the custodian of the BOLR policy, what you were aware of is that, before any entitlement to receive a BOLR payment could be received, a practice had to pay out its practice finance loan, didn't it?---Yes. Yes. And so the effect of making the 8 August changes on those practices in the pipeline is that they may be unable to pay out their practice loan because of the revised valuation that had been applied?---Yes. And they may be unable, therefore, to receive any BOLR benefit as a consequence?---Yes. And they were unable to withdraw from the process?---Without the permission of AMP Finance, yes.

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27 July 2019 to 7 August 2019 252 During the weekend of 27 to 28 July 2019, RemCo considered the Formal Consultation materials. During the period 27 July 2019 to 7 August 2019, RemCo obtained legal advice and public relations advice in relation to the proposed changes. The RemCo members also sought valuation advice from an industry expert, Steve Prendeville. (The non-disclosure agreements did not preclude RemCo providing some material to lawyers and advisers.) 253 On Sunday, 28 July 2019 (at 6.41 pm) Mr Jordan sent an email to Mr Akers with the subject "Proposed changes to AMPFP Buyer of last resort". The email stated: I refer to your memorandum relating to proposed changes to AMPFP Buyer of last resort terms and AMPFP Settlement and recognition terms which REMCO received after the close of business on Friday the 26th of July 2019 and after our meeting with you last Thursday. Your 'Purpose' in those documents states [As you are aware, AMPFP commenced consultation with AMP Financial Planners Association (ampfpa) on changes to Buyer of last resort terms in February of this year. Since, then we have continued our consultation with ampfpa and have been working with ampfpa to evolve the proposed changes to the Buyer of last resort policy to fully understand the impacts of the changes to the Buyer of last resort policy to the network.] This statement is factually incorrect and a complete misrepresentation of ampfpa's interactions and communications with you. We previously informed you, including by a letter sent by our lawyers, that the changes you wanted to make to BOLR were not capable of being made simply by consulting with us. We reiterated this position last Thursday and told you that we did not view our meeting as consultation for the purpose of amending the terms of the BOLR or any other purpose other than engaging with you to hear what you have to say to see whether there are any changes you propose that could be made by way of consultation. At our meeting with you last Thursday, you had requested that we provide you feedback on the policy changes prior to noon on the 06th of August 2019. Now that we've received the documents and have had an opportunity to review them over the weekend, Remco views the content within them as the most serious sequence of changes that will impact our members (including their clients) in the history of our relationship with AMP. We will, therefore, need to engage with our professional advisers within the confines of the NDA. We are unaware of their availability at this stage, but we will most likely have to cancel the meetings next week which were scheduled last Friday before we had received the documents. Also, the overall timeframe currently proposed is unreasonable given the proposed changes and the impact they could have on our members. You have had since at least May 2019, and probably longer, to put the proposals together, so it is not unreasonable that we need more than a number of days to consider them when you have taken a number of months. I also want to remind you about the set of guiding principles that we previously agreed several years ago would govern how we engage with each other. We are of the view that the documents received after the close of business on Friday the 26th of July 2019 do not adhere to or respect these principles. We request that you refresh yourself with these principles and comply with them in our future interactions. (Emphasis added.) 254 Later on 28 July 2019, Mr Akers phoned Mr Jordan. Mr Akers indicated that he was "calling to request that ampfpa set up another meeting and provide feedback". Mr Jordan reiterated the content of his earlier email and stated that ampfpa "first needed to consult with our professional advisers". 255 On Monday, 29 July 2019, Mr Jordan sent an email to Mr Akers advising that ampfpa would need to cancel the meeting scheduled for 31 July 2019 in Melbourne. 256 On Tuesday, 30 July 2019, Mr Akers sent an email to Mr Jordan. It stated: Thanks for your email and for your time last Thursday [25 July 2019]. We found the meeting helpful and adjusted some aspects of the consultation material after we met to take into account your comments - which is why the materials were sent to you on Friday rather than Thursday. In relation to the matters raised in your email below, and as set out in the consultation materials: • The Buyer of last resort policy provides that 'AMPFP has the right to make changes to this policy should legislation, economic or product changes render any part of this policy inappropriate following consultation with the ampfpa'. It also has the right to make changes to the policy by giving 13 months notice. • AMPFP believes that the quantifiable and sustained decrease in the value of register rights is an economic change that has occurred within the meaning of this clause. Where it believes that there has been no such economic change, it will provide advice practices with 13 months notice of the change. • As a result, effective from 8 August 2019, AMPFP is proposing to amend the Buyer of last resort policy and the Settlement and recognition terms in the manner set out in the consultation documents with a number of amendments commencing immediately and others commencing in 13 months, with some having a delayed implementation. • As per the requirements set out in the Buyer of last resort policy and in the Settlement and recognition terms, AMPFP is consulting with the ampfpa prior to making the immediate changes. • We consider that the time period for consultation is reasonable in the circumstances given the confidential and price sensitive nature of the information and changes and the need for many of them to be implemented before the information enters the market in any way. Furthermore, • The ampfpa is very familiar with the Buyer of last resort policy and the issues which need to be addressed urgently. • The large proportion of these changes (particularly the more significant ones) have been discussed in some form over the past 12 months including glidepaths for grandfathered commissions, changes to BOLR valuation multiples, etc • As mentioned in the consultation materials, we do believe that we have been in an ongoing dialogue about the substance of the changes for some time, although formal documentation was provided on Friday after our lengthy meeting on Thursday. As a result, AMPFP intends to announce these changes as a matter of urgency on 8 August 2019, and I know you appreciate the importance of this date for AMP, AMPFP and our Business Partners. • While we would ideally like to receive and consider any further comments from you before we finalise and announce the changes, we want to highlight that in the event that you do not respond to the consultation materials that we have sent to you, we intend to continue with the proposal. • Finally, AMPFP is committed to financial advice and to working with advisers and the ampfpa to improve the industry in the future. We see these changes as a necessary part of heading to that future, while also recognising the gravity of the situation and the significance of the proposed changes. We note that you have cancelled the ampfpa REMCO meeting which was scheduled for Wednesday the 31st of July in Melbourne. We are still available for this meeting and it is my preference to reconvene it, however, we are also available at any time this week and next Monday and Tuesday to further consult with you on the proposal. Meeting up is important and I do want to hear your perspectives prior to finalising our views, and especially to get your insights into how to best communicate the changes. I look forward to talking with you to better understand your position. (Emphasis added.) 257 On Thursday, 1 August 2019 (at 9.08 am), Mr Jordan sent an email to Mr Akers: I am genuinely perplexed as to how you could form the view that our communications in February 2019 amounted to consultation for the purposes of amending the BOLR policy. Our position on the proposed changes in February 2019 (as set out in two letters that our lawyers sent at that time - attached for your reference) was that the changes could not be made on the basis of consultation. In your memo for the ampfpa board dated 26th of July 2019, you state 'AMPFP has taken the feedback provided by ampfpa since February into account and has developed an updated proposal in respect to changes to the Buyer of last resort terms and to Settlement and recognition terms policy[']. We are only aware of the two letters sent in February 2019 by our lawyers. Your email below also says that you have a right to make changes on 13 months' notice. This is misconceived. Your "right" to make changes on 13 months' notice is a mandatory precondition if the change is to the valuation methodology for registers and to any other change having a materially adverse financial or other significant effect on a practice. Your proposed changes fit squarely within this category. Therefore, for the changes to be effective, AMPFP must give 13 months' notice to all of the practices that have entered into agreements with AMPFP on these terms before AMPFP can make those changes. I reiterate ampfpa's willing to consult with AMPFP in relation to Buyer of last resort where it involves matters and proposed changes that can be made on the basis of consultation. As mentioned in my email to you on Sunday the 28th of July, the ampfpa are in the process of engaging with our professional advisers. We will let you know when we have received their advice. (Emphasis added.) 258 On 1 August 2019 (at 5.05 pm), Mr Akers sent an email to Mr Jordan seeking confirmation that he wanted to cancel the meeting they had scheduled for 2 August 2019. Mr Jordan replied (at 6.34 pm) that they (RemCo) were still waiting on their professional advisers and would need to cancel the meeting on 2 August 2019. 259 On 1 August 2019 (at 9.51 pm), Mr Akers sent a further email to Mr Jordan (copied to Mr Macdonald, Mr George and Mr Byrne): I wanted to follow up the email that I sent you earlier in the week regarding our consultation with the ampfpa on the Buyer of last resort Policy, to confirm a few items. You have confirmed that the ampfpa no longer want to meet tomorrow with AMPFP. I would like to know what times next week (or over the weekend if suitable) we should set aside to receive any additional feedback, if any. I also wanted to let you know that based on further consideration of the feedback that you provided last Thursday [i.e. 25 July 2019], AMPFP have made the following adjustments to the proposal: 1. AMPFP confirms that the Buyer of last resort multiple used to value all ongoing revenue will be 2.5 times. We are no longer considering a revaluation to 2.0x as part of the proposed amendments. 2. AMPFP confirms that we are no longer proposing to turn off DMA [Development and Marketing Allowance] or BGA [Business Growth Allowance] to practices in the current BOLR pipeline and any changes will be consistent with the proposal for the wider network. Finally, I wanted to note that in the consultation documents sent to you we stated that the value changes "apply to all Buyer of last resort transactions with an exercise date (or the date which the practices AR Agreement is terminated, whichever is later) on or after 8 August 2019." We wanted to let you know that we have been reviewing the current BOLR pipeline and can confirm that we have identified 63 AMPFP practices (33% of practices in the pipeline) who are exiting on held value or have an original exercise date agreed to be before the 8th of August, but who have not completed settlement. Although these practices may not have surrendered their AR status by the 8th of August, they will not be impacted by the proposed change in terms. (Emphasis added.) By this email, AMPFP notified ampfpa RemCo that it proposed to adopt 2.5x rather than 2.0x as the BOLR multiple for ongoing revenue other than grandfathered commission revenue, and that it would not turn off DMA and BGA to practices in the pipeline. There is an issue whether these changes were in response to "feedback" given during the 25 July 2019 meeting. I have found, above, that Mr Jordan did not express a preference for a 2.5x multiple. Further, to the extent that statements were made by the RemCo members during the meeting, they were in the nature of reactions rather than "feedback" on the proposed changes. 260 Further, by the above email, AMPFP gave notice to ampfpa of two categories of practices in the pipeline that would not be impacted by the proposed changes. 261 On Friday, 2 August 2019, RemCo received a 26-page draft valuation report from Mr Prendeville. The report was not provided to AMPFP. 262 On the same day (at 6.08 pm), Mr Jordan sent an email to Mr Akers stating that they (RemCo) had been conversing with their advisers, but their position had not changed since the email he had sent on 1 August 2019 in the morning. 263 Later on 2 August 2019, Mr Akers called Mr Jordan. Mr Akers requested that RemCo meet with AMPFP and provide feedback. Mr Jordan told Mr Akers that "ampfpa was still engaging with its advisers, and the position has not changed from the email I sent you earlier". 264 On Monday, 5 August 2019, Mr Jordan and Mr Macdonald, on behalf of ampfpa, sent a letter to the Directors of AMP Limited in relation to the proposed changes to the BOLR Policy. After setting out the proposed changes to the multiple, the letter stated: A change of this magnitude will of course have serious adverse financial effects on ampfpa members. Many of our members have been induced to incur significant debt to 'buy' client registers, in many cases borrowing from AMP's banking division (or other banks under tripartite agreements with AMP) and offering up their family homes as security. AMPFP set the asking price for client registers at 4 times recurring revenue, the same as the BOLR payment calculation, and in many cases further confirmed that value by its banking arm applying its credit criteria to that asking price, thus representing to the member that the member could proceed with confidence to put their family's main asset at risk, and to spend significant amounts of time and money on maintaining and growing the practice with a view to benefitting from the BOLR payment on exit from the industry. 265 The letter referred to the provisions of the BOLR Policy regarding amendment and AMPFP's claim that there had been an "economic change" entitling it to amend the terms of the policy. The letter contended that AMPFP was not entitled to amend on this basis, setting out detailed reasons. Further, the letter contended that no change could be made without consultation with ampfpa and that the period that had been provided was "patently inadequate for consultation". Insofar as the Akers July 2019 Memorandum had stated that consultation had commenced in February 2019 and had continued since then, the letter of 5 August 2019 stated that that was "simply untrue". The letter stated that it was "plain" from Mr Akers's email of 30 July 2019 that AMPFP had no intention of engaging in substantive consultation. The letter also stated that ampfpa was willing to engage in consultation with AMPFP in relation to the BOLR Policy, but such consultation must be "substantive and not token". 266 On Tuesday, 6 August 2019, Mr Akers sent a letter to Mr Jordan and Mr Macdonald in response to their letter of 5 August 2019 to the AMP Limited Board. The letter stated: We refer to your letter to the AMP Limited Board dated 5 August 2019, and thank you for providing us with feedback on the proposed changes to the AMPFP Buyer of last resort policy (Policy). We understand your letter reiterates comments in respect of the timeline of the consultation process and AMPFP's right to make certain changes immediately, a concern you have raised since AMPFP commenced consultation on changes to the Policy in February 2019. We note the concerns you have highlighted as to the extent of changes to the Policy. AMPFP appreciates the scale of the proposed changes and has therefore sought, and continues to seek, the ampfpa's views and input on the proposal. In my email to you, dated 1 August 2019, we set out important adjustments that we have made to AMPFP's proposal based on feedback the ampfpa has provided us. In addition to your comments on the extent of the changes, we are very interested in discussing any more particular concerns that you have in respect of the proposal. We requested that your feedback be provided by 12pm today. We are happy to meet with you at any time prior to the announcement to consider and discuss any more specific concerns that you have. As noted in February 2019, in our memorandum of 26 July 2019, and our recent feedback email of 1 August 2019, the proposed amendments to the Policy are important to AMPFP, and we are interested in continuing to engage with you in respect of them. In that light, please let us know a time that would be convenient for us to meet with you or the amfpa Board to discuss the proposed changes further. We continue to seek to move forward with you in a way that builds a strong and sustainable advice business for both advisers and clients. We look forward to hearing from you further. (Emphasis added.) 267 On Wednesday, 7 August 2019, Mr Jordan and Mr Macdonald sent a letter to the AMP Limited Board enclosing copies of ampfpa's letter dated 5 August 2019 and Mr Akers's letter in response dated 6 August 2019 and challenging some of the propositions in Mr Akers's letter. In the letter of 7 August 2019, ampfpa stated that the manner in which AMPFP proposed to effect the changes to the BOLR Policy "risks irretrievable damage, not only to advisors individually but to the AMP advice business as a whole". 268 In the period between the end of the meeting on 25 July 2019 and 7 August 2019, no further meeting between AMPFP and RemCo took place. RemCo did not provide any feedback to AMPFP on the proposed changes to the BOLR Policy (beyond what was said during the meeting on 25 July 2019). In summary, the position that RemCo adopted was that the changes could not contractually be made without 13 months' notice, and that insufficient time had been provided for consultation.

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AMPFP Board papers and meeting (7 August 2019) 269 On 7 August 2019, at 6.30 pm, a concurrent meeting took place of the AMPFP, Charter and Hillross Boards. 270 The papers for that meeting included a memorandum dated 7 August 2019 from Mr Byrne to the Boards of AMPFP, Charter and Hillross on the subject "Commercial term changes" (the Byrne August 2019 Memorandum) and the attachments to that memorandum. The attachments included: (a) a paper titled "Revaluation of register rights" (the Revaluation of Register Rights Paper); and (b) a document dated 8 August 2019 setting out the BOLR terms - this is a final version of the Draft Terms Sheet provided by Mr Akers to ampfpa RemCo by email on 26 July 2019 referred to above. 271 The Byrne August 2019 Memorandum recommended that the Boards of AMPFP, Charter and Hillross resolve to approve changes to the buy-back terms, and the settlement and recognition terms, outlined in the memorandum. 272 The section of the memorandum headed "Revalue of AMPFP BOLR multiples" set out the following proposed changes: Proposed term changes When 1.1 Immediate revaluation of multiple from 4x to 2.5x (will include GF commission, OFAs, Risk, Bank, other recurrent revenue) -Economic event lever Immediate 1.2 GF commission glide path from 1.42x to 0 by Jan 2020 (glide path overridden to 0 if cessation of revenue has occurred or is likely within 12 months) - Economic event lever Immediate 1.3 Practices who have submitted their BOLR notice (pipeline practices) are impacted by the revaluation changes unless they are eligible for held value or had an original exercise date prior to the 8th of August that has been delayed Immediate

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273 The Byrne August 2019 Memorandum set out the following reasoning in support of the proposition that there had been an "economic change" within the meaning of the LEP Provision: As outlined in the 'Revaluation of Register Rights' paper, over the last 18 months and in particular since the commencement of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission), there have been a number of market forces which individually and combined have resulted in a material decrease in the fair market value of a significant number of advice businesses. These market forces have become particularly apparent with the recommendations made by the Commissioner in the Final Report of the Royal Commission (Final Report), and subsequent political, regulatory and social responses to the Final Report. As a result, from the release of that Final Report, there has been an economic change which has rendered the valuation methodology, particularly the valuation multiple in the Bolr policy and any premium to market reflected in that valuation multiple, inappropriate. The issues for AMPFP are as follows: 1. AMP has observed a quantifiable and sustained decrease in the value of register rights across all revenue streams in the market for the acquisition of register rights. This has been across all AMP licensees and the external market. The BOLR valuation has not adjusted to the new market rate 2. The artificially high price benchmark under the BOLR policy is resulting in practices not able to find suitable buyers at comparable pricing outside of the BOLR policy, despite undertaking otherwise reasonable endeavours to secure such a buyer, thereby increasing barriers to exit for practices; 3. AMPFP is no longer able to sell client registers at the same value as they purchase the registers under the BOLR policy. 4. AMPFP is therefore either retaining businesses it cannot on-sell for an appropriate amount or selling practices for a loss Therefore, as there is an economic change which has rendered the BOLR terms inappropriate AMPFP is proposing to exercise its right of amendment to the BOLR policy after consultation with the ampfpa. Based upon the above it is proposed to align the BOLR valuation multiples with the external market. Given the current market conditions and the external market data available, the proposed multiple is 2.5x. (Footnote omitted; emphasis added.) 274 I observe that, insofar as this memorandum proposed aligning the BOLR multiple with the external market, this represented a departure from the previous position where the BOLR multiple represented a premium to the external market (see [99] above). During cross-examination, Mr Akers rejected the proposition that the multiple of 2.5x was approved on the basis of aligning the BOLR valuation multiple with the external market. He gave evidence that, prior to this date, the team established that the proposed multiple "would be a defendable multiple to implement". However, the extract from the memorandum set out above does suggest that part of the thinking in adopting a multiple of 2.5x was to align the BOLR multiple with the external market. 275 I note that the proposed changes did not involve any change to institutional ownership terms; they were left intact. 276 The Byrne August 2019 Memorandum included (on page 2) a table indicating the impact of the proposed changes on practices. The table contained the same information (in relation to revaluation to 2.5x) as the table set out at [246] above. 277 The memorandum included the following (on page 3): It should also be noted that the buy back terms and settlement and recognition terms require AMPFP to act in good faith in relation to a change in its terms. The Board will therefore need to satisfy itself that the proposed variations are fair, reasonable, and consistent with the overall objectives of the terms. The following factors are noted in relation to AMPFP acting in good faith and the changes being reasonable: • The proposed revaluation to 2.5x is within the upper market range of valuations of client registers. • Practices who are exiting on held value or have an original exercise date agreed to be before the 8th of August, but who have not completed settlement will not be impacted by the revaluation changes. This represents 63 AMPFP practices (33% of practices in the pipeline) • It may be easier for practices to find suitable buyers outside of the Bolr policy, enabling them to more easily discharge their obligations to take reasonable endeavors to secure such a buyer, decreasing barriers to exit for practices; and will allow AMPFP to sell client registers acquired under the BOLR policy at, or around, the same value as they purchase the register rights under the BOLR policy. • This change will allow for greater alignment between the purchase value and the realisable market value of the underlying practice register in order to: • ensure that AMPFP can continue to facilitate a market for client registers and act as a clearing house to managing timing differences which may otherwise prevent a transaction, allowing planners to continue to have access to a Bolr policy; and • enable AMPFP to remain economically viable. (Footnote omitted; emphasis added.) 278 As set out in the above extract, as at 7 August 2019, approximately 63 practices in the AMPFP network (being 33% of the practices in the pipeline) were eligible for the held value exception or the delayed exercise date exception. 279 The Revaluation of Register Rights Paper provided more detailed reasoning in support of the propositions that there had been an "economic change" within the meaning of the LEP Provision that had rendered the existing BOLR Policy inappropriate and that the proposed changes were reasonable in the circumstances and in good faith. The document in evidence has parts redacted for legal professional privilege. AMPFP had obtained legal advice in relation to the proposed changes to the BOLR Policy. 280 Section 1.1 of the paper addressed the proposition that "An economic change has occurred relevant to the valuation of register rights". This was structured under the following sub-headings: (a) The Royal Commission recommended significant changes that will impact on the value of register rights and advice businesses. (b) Increased regulator scrutiny and industry controls. (c) Planner exits driven by industry disruption. (d) Exacerbation of existing industry changes. (e) Large industry planners are scaling back or exiting their advice business. 281 Section 1.2 of the paper was headed "The change significantly affects the value of register rights and thus the income or value of the Licensee and/or its Authorised Representatives". The paper stated that the analysis that followed excluded "grandfathered commission client books", which had experienced an even greater decline in value and were being addressed separately. This section of the paper included: The economic change has led to a significant and increasing disconnect between the valuation of register rights sold to AMPFP under Bolr terms and the values at which AMPFP can resell those register rights. This has resulted in … financial loss to AMPFP, without change these losses will increase significantly. … Since June 2018, it has become evident that AMPFP's internal market is no longer applying a multiple of 4x for client books. The following trends have now been identified: • Some practices are no longer purchasing client registers. There is a very significant decrease in the proportion of client register sales being made to practices. • Transactions that proceed are using a reduced multiple (even excluding grandfathered commissions) and this multiple has continued to reduce through 2019 (See Appendix 1). The following chart is a summary of recent Bolr resell and planner-to-planner transactions showing the downward pressure on valuations (31 transactions in total sample). Since October 2018 there have been no transactions that have proceeded at a valuation of 4x, indicating that there is no longer a viable resell market at that valuation. Since the release of the Hayne report in February 2019, the volume of transactions has dropped significantly, there is a much-subdued market for the purchase of client books, with the average transaction multiple dropping below 3.0x. In addition, there have been 11 transactions for total $500k that AMPFP was forced to execute at nil value (not included in the above figures) as there were no interested buyers at any value - and AMPFP decided to transfer the client registers for free, as preferable to leaving the clients as "orphaned" without a servicing adviser. 282 Mr Byrne gave evidence in his affidavit that the views set out in the above extract were based upon an analysis of AMPFP's internal market, conducted by Mr Cappe, Mr Scott and Mr Byrne. In reference to the graph set out above, Mr Byrne stated it showed the average transaction multiple, by quarter, for 31 sales of AMPFP-linked register rights that had taken place between November 2017 and April 2019; the average multiple in the graph refers to the weighted average revenue multiple at which an AMPFP practice had acquired a client register from either AMPFP or another AMPFP practice during the specified time period; this data was sourced by Mr Scott, from a review of transaction approval reports and the graph was then prepared by Mr Cappe from that data. 283 Mr Byrne also gave evidence that the graph did not include all transactions that took place during the November 2017 to April 2019 period; a number were excluded from the analysis either because the valuations did not involve a revenue multiple or the revenue multiple was lower than 4.0x for bespoke reasons that were reflective of the unique circumstances of the transaction rather than because of economic changes within the industry; they did not want to include these transactions because they might artificially lower the average multiple being applied to transactions and they wanted to accurately reflect the market value of register rights within the internal market. 284 I observe that in the graph, the average transaction multiple for the two most recent quarters was 2.9x. However, the changes that were proposed (and adopted) involved a reduction of the BOLR multiple to the lower figure of 2.5x. On the face of it, the data presented in the graph did not support a reduction of the BOLR multiple to 2.5x. 285 The Revaluation of Register Rights Paper stated that the Charter and Hillross transaction market provided an additional indicator of the perceived value of client books. The average multiple for transactions of Charter practices since November 2017 was 2.4x and the average multiple for Hillross transactions was 2.0x. The paper then discussed the external market and stated that market feedback was that the valuation of financial advice businesses had declined from its historical range. Sample market commentary was set out. 286 Section 1.3 of the Revaluation of Register Rights Paper was headed "The change is of a general and systemic nature". 287 Section 1.4 of the paper was headed "The economic change has rendered the existing Bolr policy inappropriate". 288 Section 1.5 of the paper was headed "AMPFP's proposed approach, based on a revaluation of OFA's is reasonable, under the circumstances of the economic change. AMPFP is acting in good faith." 289 After setting out the proposed new multiple of 2.5x, the paper discussed discounting under the BOLR Policy and proposed that under the revised valuation multiple, the option to discount client registers for compliance and quality issues would remain. 290 During cross-examination, Mr Byrne gave the following evidence in relation to the papers for the Board meeting (which he prepared): … in preparing those papers you recognised that there would be a substantially adverse financial effect on practices from the introduction of the proposed changes to the BOLR multiple, didn't you?---Yes. 291 The evidence includes the minutes of the concurrent meeting of the Boards of AMPFP, Charter and Hillross at 6.30 pm on 7 August 2019. The meeting was chaired by Mr Akers. The other Directors at the meeting were Lucinda McCann (a Director of all three companies) and Chris Digby (a Director of Charter and Hillross). Ms McCann attended via teleconference. Mr Byrne, Mr George and others attended the meeting. Mr Byrne presented on, and answered questions in relation to, the Byrne August 2019 Memorandum and its attachments. The minutes record that the Directors noted and discussed the Byrne August 2019 Memorandum and the Revaluation of Register Rights Paper. The minutes referred to "[t]he consultation that has taken place with the AMPFPA". The minutes set out a number of matters drawn from the Revaluation of Register Rights Paper. The Minutes record that the Boards resolved to approve the changes to licensee buy-back and settlement and recognition terms as set out in the minutes. This included the following changes to the multiples under the BOLR Policy: 3.1 Revalue of (AMPFP) BOLR multiples 3.1.1 Effective from 8 August 2019 the BOLR multiple used to value all ongoing revenue (except grandfathered commission revenue) will be 2.5 times the ongoing revenue paid to the practice in the preceding 12 months to exercise date, subject to the ongoing terms of the policy. 3.1.2 Effective from 8 August 2019, the BOLR multiple for all grandfathered commission revenue will be reduced from 4 times ongoing revenue to 1.42 times ongoing revenue paid to the practice in the preceding 12 months. A transition period will then run from 1 September 2019 to 1 December 2020 whereby the BOLR multiple for all grandfathered commission revenue will incrementally reduce by 0.08331 times ongoing revenue per month (glide path). The glide path will apply until grandfathered commission revenue ceases or AMPFP considers the grandfathered commission revenue to be temporary and is expected to cease within 12 months of the exercise date. The BOLR multiple for all grandfathered commission revenue will be 0 times from 1 January 2021 onwards. These changes do not differentiate between AMP products or non-AMP product generated grandfathered commission revenue. 3.1.3 Practices who have submitted their BOLR notice (pipeline practices) are impacted by the revaluation changes unless they are eligible for held value or had an original exercise date prior to the 8th August that has been delayed by AMP with effect from 8 August 2019.

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Announcement of the 8 August 2019 Changes 293 On 8 August 2019, the changes to the BOLR Policy (including the changes referred to as the "8 August 2019 Changes" in these reasons) were announced by Mr Akers during a presentation at the Professional Development Day in Sydney, which was live-streamed to ampfpa members. 294 The changes to the BOLR Policy were the subject of a "Questions and answers" document dated 8 August 2019, which was distributed to practices. The document included the following questions and answers: 7. What is the valuation change for all other ongoing revenues? Effective from 8 August 2019, the Buyer of last resort multiple for all ongoing revenues (except grandfathered commission revenue) will be reduced from 4 times ongoing revenue to 2.5 times the ongoing revenue paid to the practice in the prior 12 months. 8. Why are the changes to Buyer of last resort valuations happening? We have an ongoing responsibility to our clients and our shareholders to build a sustainable advice model that works for advice practices and for AMPFP. There has been an economic change which has resulted in a quantifiable decrease in the market value of register rights linked to ongoing revenue, including in respect of grandfathered commissions. This change has meant that it is inappropriate for AMPFP to continue to pay 4x valuation on ongoing revenue as AMPFP is unable to sell register rights at this rate. Accordingly, it is not economically viable to continue to value ongoing revenue at a multiple of 4x. 9. Why aren't the Buyer of last resort valuation changes on a 13-month notice period? As per the Buyer of last resort policy, AMPFP has the right to make any change to this policy should legislation, economic or product changes render any part of this policy inappropriate following consultation with the ampfpa. This right does not require that AMPFP provide 13 months' notice. 10. Was the ampfpa consulted with these changes? Yes, as per the requirements set out in the Buyer of last resort policy, AMPFP has consulted the ampfpa with these changes. 295 Mr Akers gave evidence in his first affidavit, which I accept, that as part of the announcement of the BOLR changes on 8 August 2019, AMPFP decided that two additional categories of practices should be considered for special exemption from the changes. These were: certain advisers who were considered to be "eligible retirees"; and practices that had purchased client register rights from AMPFP in the period from November 2016 to 8 August 2019 at a valuation multiple of 4.0x and had a practice debt with AMP Bank. 296 The AMP Group also made a number of other market announcements on 8 August 2019, including the AMP Group's financial results for the first half of the 2019 year. (AMP Limited reported on a calendar year basis.) In relation to AMP's Australian Wealth Management division: (a) AMP announced a non-cash impairment of $2.35 billion (post tax) to write down goodwill across the Australian Wealth Management and AMP Life divisions. This aggregate figure included a write-down on valuations of advice registers held by the Aligned Advice Licensees, including AMPFP, given the changes to the BOLR Policy that had simultaneously been announced. (b) AMP announced an estimated capital outlay of $550 million, which was anticipated to be spent over the next 18 to 24 months. The $550 million capital outlay was to be used for the following kinds of matters: (i) impairing and provisioning for client registers held by AMP that were no longer valued at 4.0x ongoing revenue and for expected continuing losses where AMP would continue to be purchasing registers at a value higher than could be on-sold (even after the change to 2.5x ongoing revenue); (ii) practice debts with AMP Bank, reflecting the reduced likelihood of recovery from practices for their business loans, which they had taken out to purchase client registers; (iii) financial and non-financial support for those practices that were staying with the Aligned Advice Licensees, including education support, small business consulting for practices and technology support; (iv) investment directed to creating a more sustainable business model for advisers and AMP, as part of a three-year transformation program; (v) investment in practices via minority equity stakes, as part of aiding suitable practices and capitalising on the growth opportunities emerging in the market; and (vi) support for practices exiting the AMP network, including dedicated case managers, increased resourcing to ensure AMP could effectively transition clients between practices, and wellbeing support for practice owners, their staff, and families.

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Evidence as to whether reasonable notice was given of the proposed changes 300 Mr Macdonald gave evidence in his first affidavit that: even if ampfpa (rather than a subset of its Board) had been provided with the "Formal Consultation materials" on 26 July 2019, the deadline for feedback of noon on 6 August 2019 did not allow ampfpa sufficient time to consult with AMPFP about the proposed changes to the BOLR Policy; in consulting with AMPFP regarding changes to the BOLR Policy, ampfpa's role is to represent the interests of its members; the changes proposed in the "Formal Consultation materials" were significant ones which would have a major impact on the interests of ampfpa's members - the proposed changes resulted in an immediate reduction in the value of the businesses being operated by ampfpa's members of almost 40% in most cases, and in some cases much more. 301 Mr Macdonald gave evidence in his first affidavit that, had AMPFP allowed more time and broader disclosure of the proposed changes, he would have caused ampfpa to take the following steps as part of a process of consultation: (a) seeking to have the remaining Board members made privy to the "Formal Consultation materials"; (b) discussing the proposed changes among Board members to consider their scope and formulate an initial position for discussion with AMPFP; (c) seeking legal advice about the permissibility of the proposed changes, including the fact that AMPFP proposed to make them without 13 months' notice; (d) obtaining depersonalised data from AMPFP disclosing the financial impact on members and analysing that data; (e) seeking professional advice on the legal, tax and accounting implications for practices of the proposed changes; (f) considering the changes in detail, and consulting with members, in order to identify whether the proposed changes would give rise to any unintended consequences, or have particularly harsh impacts on any subset of practices, and if so whether there was a way that those unintended or harsh consequences could be managed differently or avoided; (g) providing feedback to AMPFP and discussing options for areas that were contentious; (h) seeking to work with AMPFP to identify steps that could be taken to reduce or otherwise manage the impact of the proposed changes, while at the same time addressing any legitimate justification for the changes advanced by AMPFP; and (i) receiving a terms sheet regarding the proposed changes from AMPFP and then forming a position on the terms sheet ratified by ampfpa's Board, and communicating that position to AMPFP, including any follow up discussions or points of action. Mr Macdonald accepted during cross-examination that the above steps reflected steps taken during previous consultations, and that those consultations concerned changes made with 13 months' notice. Mr Macdonald maintained that he would have encouraged ampfpa to take the above steps if there had been more time. 302 Mr Macdonald gave evidence in his first affidavit that, had the above steps been taken in this case, they would have permitted ampfpa to obtain a detailed understanding of the impacts of the proposed changes on ampfpa's members, across those members' various circumstances; that detailed understanding was required for an effective consultation because, based on his experience in past consultations, such an understanding is necessary to allow ampfpa to give meaningful feedback to AMPFP and obtain meaningful adjustments that address member concerns; by requiring ampfpa to provide feedback by noon on 6 August 2019, ampfpa did not have the opportunity to use its knowledge of members' circumstances and analysis of the proposed changes to achieve any of the above ends. During cross-examination, it was put to Mr Macdonald that the last part of that evidence was not a valid statement (T455, lines 12-18). The transcript records Mr Macdonald as responding "Maybe not to do some of them". There was a difference between the parties as to whether the transcript correctly recorded Mr Macdonald's answer and I was requested to listen to the audio. Unfortunately, there were practical impediments to doing so. Having regard to the question and the context, I take Mr Macdonald to have been accepting a qualification to his written evidence to the effect that it may have been possible to achieve some of the above ends. 303 Mr Macdonald gave evidence in his first affidavit that his best estimate, based on past experience and the issues involved, is that properly considering, responding to and engaging with AMPFP in relation to the changes proposed would have taken at least 12 weeks and possibly materially more. He stated that that estimate was based on an assumption that AMPFP was prepared to engage meaningfully with ampfpa in relation to its feedback on the proposed changes. 304 In the course of cross-examination (at T420-432, 442), Mr Macdonald accepted that there were a number of types of feedback that RemCo could have provided to AMPFP within the period of time provided for consultation and that, ultimately, RemCo decided not to engage (in other words, not to provide feedback). 305 Mr Akers gave evidence in his first affidavit that he considered at the time, and continued to consider, that the period AMPFP allowed for consultation in relation to the BOLR changes was reasonable in the circumstances. This was so for a number of reasons, including: (a) the nature of the changes and their market sensitivity; (b) that the members and representatives of ampfpa were, by definition, working in the financial advice industry and were familiar with the matters bearing on the BOLR changes; (c) that the proposed changes to the BOLR multiple in relation to grandfathered commission revenue had been extensively discussed with ampfpa in February 2019; and (d) that it was highly likely that prior to the 25 July 2019 meeting ampfpa had sought advice about possible changes to the BOLR Policy from their professional advisers, including Johnson Winter & Slattery, whom ampfpa had engaged in February 2019. In this regard, he recalled members of RemCo speaking with their solicitors regarding the non-disclosure agreements prior to the commencement of the 26 July 2019 meeting. 306 During cross-examination, Mr Akers gave evidence, which I accept, that, at a personal level, he would have preferred to have had a longer consultation period. He was taken to an email dated 2 July 2019 that he sent to Mr De Ferrari in which he sought endorsement to commence formal consultation with ampfpa. The email explained why Mr Akers wanted to commence consultations at that stage. The explanation included: "We should undertake an extended Consultation given the complexity and impacts". During cross-examination, Mr Akers gave evidence that he considered the contractual changes to be simple and that the complexity lay in the broader announcements they were making to the advice network. Mr Akers stated that his preference was to have as long as possible with ampfpa, as a matter of change management, not because he felt this was a requirement to meet the definition of consultation. He stated that he considered the most material changes, being the change in the multiple from 4.0x to 2.5x and the glide path for grandfathered commission revenue, to be simple in nature, and noted that the glide path had been previously tabled with ampfpa. 307 Mr Akers was cross-examined on whether it was commercially open to announce the changes to the BOLR Policy on a date later than 8 August 2019. He answered "hypothetically". He explained that AMP had deliberately planned for those changes to be announced on 8 August 2019, as part of a broader announcement to the market. 308 Later in these reasons, I will consider whether reasonable notice was given of the proposed changes to the BOLR Policy.

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The period after 8 August 2019 309 Mr Akers gave evidence in his first affidavit, and I accept, that in the period after 8 August 2019: (a) some of the practices in the pipeline were provided with the option of withdrawing their BOLR application; (b) consideration was given as to how to address the impact of the 8 August 2019 Changes on practices that had recently bought a register from AMPFP based on an ongoing revenue of a multiple of 4.0x; ultimately, AMPFP renegotiated the purchase price of the registers these practices had purchased from AMPFP; for those that had not paid the full purchase price (as part of the purchase price was deferred for 12 months), this deferred payment was reduced, sometimes being reduced to zero; for practices that had already paid in full for the register, or where the portion of the deferred payment was not sufficient to address the change in the value of the register, a settlement was agreed; and (c) consideration was also given to a number of other specific exemption requests that practices raised with AMPFP in their own unique circumstances. 310 Mr Akers gave evidence in his first affidavit, and I accept, that since implementing the 8 August 2019 Changes, AMPFP has done further work on reshaping its Aligned Advice Business. This work has included exiting a number of practices from AMPFP's network that were not sustainable, for example, practices where the principal would not meet the FASEA qualification requirements once they became mandatory. 311 On 11 September 2019, the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 (Cth) passed the Senate. 312 On 8 September 2020, the changes to the BOLR Policy announced on 8 August 2019 with 13 months' notice came into effect. 313 On 1 January 2021, the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Act 2019 (Cth) came into effect. As a result, grandfathered commission revenue no longer makes up any part of the revenue of financial planning practices. Since 1 January 2021, ongoing practice revenue has been largely made up of ongoing fee arrangement revenue; it has also included certain permissible commissions. 314 On 26 July 2021, Matthew Lawler (Managing Director of the Advice Business, AMP) informed practices and the ASX that AMP was introducing a new service model for the Aligned Advice Business, and that, as part of the new service model, the client register buy-back arrangements offered by each of the Aligned Advice Licensees, including AMPFP's BOLR Policy, would cease from 31 December 2021. The announcement stated that the new approach included three key components: • A new service proposition and fee model for advice practices, which has been competitively benchmarked against the industry and reflects the services offered. It includes a set of core services as well as user pay services. The new fee model will be phased in from 1 January 2022 to 1 January 2023. • The release of institutional ownership of clients from AMP Financial Planning to advisers, with the ability to transfer clients out of the AMP network. This change will take effect from 1 January 2022. • The conclusion of client register buy back arrangements from 31 December 2021, with practice principals able to take advantage of current terms remaining in place until this date.

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The period before May 2019 315 In about 2000, Mark Rossiter and Steve Muir, who were financial planners operating as sole traders and authorised representatives of AMPFP in Geraldton, Western Australia, commenced using the joint trading name "Equity Financial Planners". 316 In 2011, Mr Rossiter and Mr Muir decided to sell their client registers to AMPFP. Ms Braschey and Ms Scott, who worked for them, expressed interest in purchasing the client registers from AMPFP. 317 In June 2011, Ms Braschey and Ms Scott incorporated Equity Financial Planners Pty Ltd, the applicant in this proceeding. Ms Braschey and Ms Scott each set up family trusts holding 50% of Equity. They both became Directors and Ms Braschey became the practice principal. 318 Ms Braschey and Ms Scott did not want to acquire the entirety of each of Mr Rossiter and Mr Muir's client registers from AMPFP because the cost of doing so would have required them to take on more debt than they were willing or able to do. As a result, they came to an arrangement with AMPFP to carve out Perth-based clients from the total register to be purchased. 319 On 7 September 2011, Ms Braschey and Ms Scott submitted a business plan for Equity to AMPFP. 320 On 13 September 2011, AMPFP entered into an authorised representative deed of agreement with Equity. This utilised the standard form for a corporate practice. Both Ms Braschey and Ms Scott were named as guarantors and both signed as Directors on behalf of Equity. 321 On 2 December 2011, EFP entered into an Adviser Practice Finance Loan Agreement with AMP Bank for the amount of $1,756,766.80. Equity paid a deposit of $126,176.68, meaning the loan to value ratio (LVR) at the time that Equity took out the loan was 93%. Ms Braschey and Ms Scott were guarantors of the loan. 322 In January 2014, AMPFP made an offer to authorised representatives to sell their registers of corporate superannuation clients back to AMPFP by way of a partial BOLR request, at a multiple of 3.25x recurring revenue. Equity took up this offer. The BOLR value of Equity's corporate super clients was assessed at $90,626.49 in January 2014. That amount was paid in two instalments in 2014. 323 In 2016, Equity refinanced its practice finance loan with AMP Bank. The 2011 loan agreement was for a 10 year period, with payments of interest only during the first five years, and payments of principal and interest for the last five years. After the first five years, EFP was having difficulty meeting the payments. 324 Accordingly, on 7 December 2016, Equity entered into a new practice finance loan with AMP Bank for $1,410,872 (which was the then-outstanding balance under the 2011 loan agreement) for a further 10 year term. The longer term meant that the principal and interest repayment was lower than what it had been under the 2011 loan agreement once payments were of principal and interest. Equity provided security for its obligations under the 2016 loan agreement. Ms Braschey and Ms Scott guaranteed the loan. 325 From 2011 to early 2019, Equity's revenue was relatively steady being slightly more than $500,000 per annum. Approximately 57% of its revenue was made up of grandfathered commissions. 326 In early 2019, Ms Braschey was concerned about the likely cessation of grandfathered commissions (expected to be in January 2021) and the loss of revenue of that type. She did not think they would be able to replace that income. A particular concern was Equity's ability to service its practice finance loan if grandfathered commissions ceased.

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The period from May 2019 to August 2020 327 On 29 May 2019, Ms Braschey sent an email to Adam Carlyon of AMP (copied to Emma Ross of AMP and Ms Scott of Equity) with the subject "Equity's situation". The email noted that a large portion of Equity's income was from grandfathered commissions, which would likely be ending. The email explored whether it could remain in business with assistance from AMPFP, or at least walk away from the business with no debt. The email included: Our practice is a good solid business. We've maintained fairly consistent income levels since we began 8 years ago. We're not breaking any records when it comes to new business but we have been able to maintain our client base and the consistent level of income. The biggest drop we've had in loss of clients and FUM [funds under management] has been since AMP hit the news and following the Royal Commission, all things we had no control over. We've also made significant headway in repaying a large portion of our practice finance loan with AMP Bank. We originally started with a total debt of about $1.89m and it's currently sitting at about $1.16m, not a bad effort considering we've only been P&I for the last couple of years. 328 On 30 May 2019 (that is, before the 8 August 2019 Changes), Equity submitted an application to access the BOLR Policy. Equity requested an exercise date of 1 December 2019, which was approximately six months after the application. It was understood by Equity that there would be a notice period reduction discount, as the period was six months rather than the period of 12 months that would ordinarily apply. 329 On the same day (30 May 2019), Ms Braschey and Ms Scott sent a letter to Mr Akers. The letter commenced: This morning my business partner and I made the very difficult decision to submit BOLR. The decision was made due to our extreme concern that once grandfathered trail commissions are removed, we will be in the potential situation of having to declare bankruptcy as we won't be able to meet our AMP Bank practice finance repayment commitments, or indeed have sufficient cash flow to continue operating our business. 330 The letter sought "direction, consideration and guidance" from Mr Akers in circumstances where Ms Braschey and Ms Scott were "incredibly stressed and concerned about the future of [their] practice and [their] financial livelihoods". They wrote that submitting the BOLR application seemed to be the only solution currently identifiable that provided "some hope of leaving the industry without debt prior to the removal of grandfathered commissions". The letter continued: Leanne [Ms Scott] and I have owned Equity Financial Planners in Geraldton WA for the past 8 years. We were both employed by the previous practice owners for many years. They took BOLR and retired and Leanne and I bought the client register from AMP. It was a major financial commitment but we were encouraged by the then WA State Manager to go for it, so we basically hocked ourselves up to the hilt and bit the bullet. We made the huge financial commitment to take on this business with the goal of staying in the industry for many years. Now, following the Royal Commission and bad press generated by AMP's corporate actions, our business and personal futures seem to be collapsing. Our current register valuation (based on current BOLR Valuation figures) is $1,743,165 (excluding GST), with annualised ongoing revenue of approximately $436,000. Our practice finance debt (P&I) with AMP Bank is currently $1,161,032 with bi-monthly repayments of $7,960. At present we are able to meet our loan commitment, tax obligations and business running costs but it wouldn't take much of a drop in income for us to start struggling. (Emphasis added.) 331 The letter referred to a webinar that Mr Akers had presented the previous week, and asked whether he was able to assist them in any alternative strategy (to the BOLR application) that would enable them to continue their practice, reduce their debt and free up cash flow. The letter outlined the concern that, by taking a discount on settlement for a six month notice period, and adding any discounting for potential file issues, they may not receive a BOLR amount sufficient to pay out their debt. The letter raised a number of options that were alternatives to proceeding with the BOLR application. 332 On 13 June 2019, a telephone meeting took place between Ms Braschey and Ms Scott (on behalf of Equity) and Emma Ross, Ben Morgan and Anny Luo (on behalf of AMPFP). 333 On 14 June 2019, Ms Luo sent an email to Ms Braschey and Ms Scott (and also to Ms Ross and Mr Morgan of AMP) with the subject "Initial BOLR meeting minutes - Equity Financial Planners". The email thanked Ms Braschey and Ms Scott for their time yesterday and set out notes from the meeting. The email confirmed the following points: • Your current exercise date is on 01/12/2019 for a full BOLR with 6 months' notice period (taking 90% of your RV value); • Valuation data is based on 31/10/2019, data will be available on 07/11/2019; • Settlement date is the date you get paid, which usually falls after the exercise date; • Payment Terms: You will be paid with 90% of your Register Value, with 45% upfront payment on settlement date, and 45% deferred payment paid 12 months after your settlement date (subject to deferred payment adjustment); • Kylie and Leanne are joint equity holder for the practice, no other employed staff is working in the practice; • BOLR client file audit date - to be confirmed by the audit team; • You will need to complete service package alignment on portal (please see the attached service packages guide and planner portal guide); • You will need to make sure no FDS is fall due first 3 months after the exercise date - need to reset on portal (to be completed prior to valuation data date); • You will need to make sure no Opt-in is fall due for the 12 months after the exercise date- need to reset on portal (to be completed prior to valuation data date); • Transfer Clause to be included in service agreements, an individual template can also be sent if the clause was not included in your service agreements; • Client Register Assessment and information is completed and returned by mid July 2019 to ensure we are on track with the BOLR progression; • Practice files are stored in paper and AMPFP version COIN, I will send out paper boxes later for you to transfer and index those files; • Planned Leave dates- Kylie will be away for the next 3 weeks. (Emphasis added.) Although the above email indicates that the proposed exercise date would lead to Equity being paid 90% of its register value (implying a notice period reduction discount of 10%), subsequently (as discussed below) AMPFP said that this was an error and the notice period reduction discount would be 20%. 334 Attached to the email were a number of documents, including a draft buy-back agreement. The draft buy-back agreement (labelled "Final Draft 2 May 2018" but provided by AMPFP to Equity on 14 June 2019) (AMP.5800.0054.0064) included a restraint of trade clause (clause 11 and Attachment A). (To the extent that, in Ms Scott's first affidavit at paragraph 7, she suggested that AMPFP had not provided Equity with a proposed buy-back agreement, that is incorrect given the draft provided on 14 June 2019.) 335 Later on the same day, Ms Ross sent a follow-up email to Ms Braschey and Ms Scott with further information on the BOLR audit process. 336 On 8 August 2019, AMPFP announced the 8 August 2019 Changes. Ms Braschey and Ms Scott received an email from Mr George of AMP outlining the changes. Henceforth, AMPFP adopted the revised multiples set out in those changes when valuing Equity's register rights for the purposes of the BOLR Policy. 337 On 5 September 2019, AMPFP conducted Equity's BOLR audit. 338 On 14 September 2019, Ms Braschey received an email from AMPFP attaching a copy of the audit report. The BOLR audit result was a "fail" with an overall score of 57%. 30 files were reviewed - 13 of which failed, and 17 of which passed. The majority of the 13 "failed" files were stated to have failed because "the file does not comply with record-keeping Policies". 339 On 17 September 2019, Ms Braschey sent an email to AMPFP stating that Equity wished to lodge an appeal in relation to the BOLR audit results. 340 On 19 September 2019, Ms Braschey sent an email to Mr George attaching a letter addressed to AMPFP. The letter stated that Ms Braschey did not consider that the changes to the BOLR Policy announced by AMPFP on 8 August 2019 applied to Equity's BOLR application. 341 On 16 October 2019, Ms Braschey received an email from AMPFP stating the appeal to review Equity's BOLR audit had been unsuccessful. 342 Later on the same day, Ms Braschey sent an email to Ms Ross noting the negative determination regarding the BOLR audit appeal and requesting a second audit. At about this time, Equity also made a number of "exception requests", namely requests that exceptions be made in respect of certain clients or matters relating to the BOLR audit. 343 On 5 November 2019, Mr George sent a letter to Equity in response to the letter of 19 September 2019. In the letter, AMPFP maintained that the 8 August 2019 Changes were undertaken in accordance with the terms of the BOLR Policy and the Master Terms. 344 On 19 November 2019, Ms Luo sent an email to Ms Braschey and Ms Scott attaching a BOLR valuation (dated 18 November 2019) (the November 2019 valuation). The adjusted BOLR valuation was $413,637.67 (excluding GST). This figure was based on a 2.5x multiple for ongoing revenue (other than grandfathered commissions), a 1.08x multiple for grandfathered commission revenue (based on the glide path), a 25% audit discount and a 20% notice period reduction discount. The covering email from Ms Luo noted that the figure was not finalised and that Ms Braschey and Ms Scott could contest the valuation figures. 345 On 26 November 2019, in response to an email from Ms Luo that day, Ms Braschey sent an email to Ms Luo regarding Equity's BOLR valuation. The email stated that Equity did not agree with the valuation. The email stated that Equity was just finishing a list for the "Lookback" audit, and would then prepare a list regarding the valuation. The email stated that Equity was waiting to hear back from AMP in relation to exceptions/appeals that had been lodged for the BOLR audit. 346 On 27 November 2019, Ms Ross sent an email to Ms Braschey. Among other things, this referred to the application of 20% as the notice period reduction discount, and apologised for the earlier information that Equity would receive a 90% settlement. The email explained that all equity holders needed to have at least 10 years as an authorised representative to qualify for the 90% settlement. 347 On 16 December 2019, there was a telephone conversation between Mr Bank of AMP and Ms Braschey. During the call, Mr Bank said that AMP was currently overloaded with BOLR applications, and needed to push back Equity's settlement date. Later that day, Mr Bank sent an email to Mr Braschey seeking confirmation of Equity's agreement to a settlement date of 24 February 2020. 348 On 18 December 2019, Ms Ross sent an email to Ms Braschey and Ms Scott indicating that AMP had approved certain exceptions requested by Equity, including in relation to the restraint of trade clause, provided that: the client restraint remained in place; Ms Braschey and Ms Scott could not operate as authorised representatives; Ms Braschey and Ms Scott had to let AMP know for three years where they were employed; and they could not be in a position where they could influence clients. 349 During late 2019 and early 2020, there were email communications between Equity and AMP Bank regarding a request by Equity to reduce its payments to "interest only" rather than "interest and principal". This request was not accepted by AMP Bank. 350 In late 2019 and the period January-August 2020, there were email communications between Equity and AMP regarding exception requests and certain small adjustments to the valuation of Equity's register rights. An exception request which Equity had lodged in respect of eight clients on 24 September 2019 was accepted by AMPFP on 9 October 2019. Equity had also lodged exception requests in relation to two other clients. Equity received a number of emails to the effect that the exception requests had not yet been determined. As at 11 August 2020, Equity had not received a response in relation to these exception requests. 351 On 5 February 2020, Adam Ortmann (of AMP Bank) put forward the following proposal (marked "Without Prejudice" but included in the evidence without objection): As discussed, in exchange for the Bank not pursing all its rights available to it under the loan and guarantee documents, the Bank is willing to enter into a deed with you such that if you meet the terms and conditions of the deed (which are customary apart from requiring you to meet the terms of the BOLR - specifically the non-solicitation of clients) and your personal asset position as at today is true and correct (being of limited means to meet the shortfall), the Bank will forgive your debt in 3 years' time. Confidentiality is paramount and the Bank reserves the right to rescind this offer at any time if it was made public or available to anyone apart from your, and your business partner's, accountant &/or solicitor. Happy to discuss. 352 Equity did not pursue the proposal outlined above at this time. Equity did not seek, and was not provided with, a copy of the proposed deed. During cross-examination, Ms Braschey was taken to this proposal and provided a number of reasons why she did not pursue it at the time. She stated that her understanding was that any shortfall that was owing would still be owed to the bank in the meantime (i.e. during the three years) and Equity would be required to continue to meet the interest repayments. Ms Braschey said that she was concerned that they would not have any income to meet those interest payments, and there could be a reduction in the deferred payment (expected in 12 months' time) if there had been a "significant drop-off" in clients (thus increasing the loan balance and interest payments). Ms Braschey accepted during cross-examination that she did not raise these issues with Mr Ortmann. 353 It was put to Ms Braschey in cross-examination that if Equity had accepted the November 2019 valuation, and gone ahead with the deed proposed by Mr Ortmann in his email of 5 February 2020, Equity "could have walked away from AMPFP without becoming insolvent". The following exchange took place during cross-examination in relation to the 5 February 2020 proposal from Mr Ortmann: So, at that point, if EFP [i.e. Equity] had accepted the valuation and gone ahead with the deed that the bank was suggesting, EFP could have walked away from AMPFP without becoming insolvent?---In three years' time. In three years' time?---Depending on what the deed said and what other - what else was thrown at us. I don't believe it was that cut and dry. But you didn't ask any more questions about the details of the forgiveness deed, did you?---No. Because, in my opinion, it sort of all related to the deed that we weren't going to be provided with, until later, after we had accepted the valuation. And if you had have accepted the valuation, and gone through with that package that we just described, that would have meant the personal guarantees that you gave would not have been called on?---I don't know. And you would have been allowed to continue to work in the industry but not as an authorised representative?---That side of it, yes, I agree with. But this was an option that you decided against - - -?---Yes. - - - for Equity?---Yes. 354 In or about February 2020, Equity communicated to AMPFP that it wanted the lookback audit completed before finalising the valuation, because, if it were successful in the lookback audit, it would add weight to its requests in relation to the BOLR audit. 355 On 3 March 2020, Ms Scott's sister passed away after suffering from a serious disease. 356 On 18 March 2020, Ms Luo sent an email to Ms Ross that stated: "From my understanding … the Exception[s] for the bolr audit fail have been rejected. Has this been communicated to the practice?" Ms Ross responded: I haven't advised Kylie [Braschey] or Leanne [Scott] of the BoLR exceptions outcomes yet. Unfortunately, Leanne['s] sister has recently passed away. ... So I talked this through with Adam Carlyon, as I was worried the exceptions outcome would be too much for them to hear at this time. He agreed with me, we have to find the right time to have this conversation with them. ... I do realise that I have to communicate these outcomes. I have been asking Kylie how her conversation with the bank is going, regarding the BoLR payment not covering their practice finance debt. ... As Kylie says, she has submitted their files for the actual Lookback sampling audit. It would be interesting to see what the result is with this audit. If the result is not a pass, then it backs up why the BoLR audit discount will still apply, i.e. to cover the foreseeable remediation costs within the Equity client register. If it is pass. then there could be cause for us to review the BoLR discounts again. 357 Ms Braschey gives evidence in her second affidavit, which I accept, that AMPFP did not inform Equity, at or about this time, that Equity's exception requests relating to the two clients referred to at [350] above had been unsuccessful. As at August 2020, Equity still had not been informed of the outcome of the exception requests in relation to the two clients. 358 On 21 May 2020, Equity entered into a litigation funding agreement with Augusta Pool 523. 359 On 28 July 2020, Equity commenced this proceeding, which is a representative proceeding, by filing an originating application and statement of claim. 360 On 31 July 2020, Ms Luo sent an email to Ms Braschey following up in relation to BOLR valuation adjustments. 361 On 11 August 2020, Ms Luo sent an email to Ms Braschey attaching a revised BOLR valuation summary (the August 2020 valuation). The adjusted BOLR value of Equity's register rights was $417,476.22 (excluding GST). This figure was based on a 2.5x multiple for ongoing revenue and a 1.08x multiplier for grandfathered commission revenue (based on the glide path), with a 25% audit discount and a 20% notice period reduction discount. The difference between the August 2020 valuation and the November 2019 valuation was certain fee disclosure statement adjustments. These produced a small increase (of approximately $3,000) in the valuation. 362 I note that Equity does not take issue in this proceeding with the application of the 25% audit discount and the 20% notice period reduction discount. 363 Equity did not accept the August 2020 valuation, and the transaction was not finalised in the months after receipt of that valuation.

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The period after August 2020 364 During the financial year ended 30 June 2021, Equity saw a substantial drop in revenue (compared with the previous financial year) due to the cessation of grandfathered commissions. Ms Braschey said during cross-examination that they were actively trying to replace lost commissions (i.e. grandfathered commissions) with advice fees. I accept that evidence. 365 On 21 September 2020, Ms Braschey and Ms Scott had a meeting or conference call with Mr Getson, who was effectively the replacement for Ms Ross at AMP, in relation to the progress of the BOLR application and the lookback audit. At the meeting, Ms Braschey and Ms Scott sought an update on the BOLR audit discount. 366 On 12 October 2020, Ms Braschey sent an email to Mr Ortmann stating that the practice finance loan was now expected to crystallise and requesting a copy of the proposed deed of forgiveness. It is not clear what was meant by the loan crystallising. This may suggest that Equity was considering accepting AMPFP's valuation of its register rights, which would have crystallised a shortfall between the practice finance loan (approximately $1.1 million) and the valuation. 367 On 12 October 2020, Mr Ortmann responded to the above email. (Although the email is marked "without prejudice", it has been included in the evidence without objection.) Mr Ortmann stated that any deed whereby the AMP Bank released Equity from the shortfall would include a clause seeking a release by Equity from any further action (including the class action) against AMP. He stated that if Equity was comfortable to sign on this basis, please let him know and he would provide a deed for execution. Ms Braschey and Ms Scott did not respond to that email. 368 In about late 2020, Ms Braschey and Ms Scott were informed by AMPFP that their exception requests had not been approved. 369 On 21 February 2022, AMPFP's lawyers provided an open offer to settle Equity's claims, calculated on the terms of the BOLR Policy (after both the 8 August 2019 and the 8 September 2020 changes) with the valuation conducted as at 31 October 2021 (the October 2021 valuation). The letter stated that the adjusted BOLR value was $173,371.17 (excluding GST). As at the valuation date, grandfathered commissions had ceased entirely. They were therefore not included in the valuation. The valuation included an audit discount of 30%. Equity did not accept that offer. 370 Equity's revenue figures for the financial year ended 30 June 2022 did not include any grandfathered commissions, as these had ceased by (at the latest) January 2021. In the financial year ended 30 June 2022, Equity recorded a loss of approximately $71,000. 371 Ms Braschey gave evidence in her third affidavit that Equity's primary focus has always been on servicing existing clients and discovering new business opportunities within the existing client base (including identifying new products for existing clients and replacing old products). She gave evidence that Equity acquired a register comprising approximately 4,500 clients in 2011 and that, while this client base has reduced over time, Equity still has over 1,100 clients to service. She gave evidence that Equity's client base has steadily reduced since it acquired the client register for reasons including: (a) the partial BOLR sale of corporate superannuation policies; (b) damage to AMP's reputation, particularly from around March 2018 as a result of negative publicity associated with the Financial Services Royal Commission; (c) the transition by some of Equity's clients from non-industry superannuation funds to industry superannuation funds; (d) AMPFP's strategy, introduced in 2020, of fine tuning their product offering, including by reducing underlying investment options and changing trustees; and (e) since late 2019, a large number of superannuation policies held by Equity's clients that were classified as lost or inactive superannuation plans were rolled over to the Australian Taxation Office. I accept that evidence. 372 Ms Braschey gave evidence in her third affidavit that the servicing of existing clients remains Equity's primary focus, and that they now spend considerable time on client retention. She gave evidence that Equity has experienced difficulties signing up new clients since May 2019 for the reasons set out in paragraph 13 of her affidavit. I accept that evidence. 373 Ms Braschey gave evidence in her third affidavit that, with the exception of the change to working arrangements as a result of COVID-19 restrictions, the manner in which they have conducted Equity's business since May 2019 has been substantially the same as the way in which they conducted the business in the period from 2011 to May 2019. I accept that evidence. 374 As at the time of trial, Equity still had not sold back its register rights to AMPFP or otherwise sold its register rights. Equity remained an authorised representative of AMPFP and was able to give financial advice under AMPFP's AFSL. 375 In relation to Equity's current turnover and value, Ms Braschey accepted during cross-examination that the revenue of the business as at the time of trial was about $200,000 per year. In relation to selling the business, Ms Braschey said that "[s]elling it isn't … an option". In response to the question, "If you were going to sell the business today, you would want more than 200,000 for it?", Ms Braschey said, "I honestly don't know what market rates are". She also said: "I know the income it [the business] produces but I don't know what, on an open market, it would be worth". 376 In relation to the answer that "[s]elling it isn't … an option", Ms Braschey gave the following further evidence: [HIS HONOUR:] I was just wondering if you could explain to me why selling it isn't an option?---I don't know what, for want of a better term, practice to practice, taking AMP out of the picture, if I owned that client register now, and I was looking for a buyer, whether it would be based on one times income or two times income or one and a half times income. So I don't know what the value of it to sell would be. Does that answer your question? So do I understand from that that when you said selling it isn't an option, what you were - - -?---Well, apart from the fact that I don't know that I could ever find a buyer. Right?---But given that it's a Geraldton client base and most of the other financial planners in Geraldton are my age and looking at retiring, and selling their own books, so there's not a lot of succession potential for selling the book for the Geraldton base. 377 Ms Braschey gave evidence during cross-examination that (as at trial) the practice finance loan was slightly higher than $1.2 million. This was because interest had not been paid for over a year and interest had accrued. She accepted that there was no arrangement between Equity and AMP Bank regarding non-payment of interest. Ms Braschey accepted that, even if Equity were successful in the proceeding and obtained the amount of damages that had been sought in opening submissions (approximately $813,000) there would still be an outstanding loan of around $400,000.

[52]

Counterfactual evidence 378 Ms Braschey gave evidence in her second affidavit that, had the November 2019 valuation been calculated on the basis of a multiple of 4x for OFA revenue and grandfathered revenue, she would not have entered into the litigation funding agreement, and would not have agreed to be the representative party in this litigation. I accept that evidence, which was not challenged. 379 It is agreed between the parties that, had the valuation of Equity's register rights been calculated on the basis of the 2017 BOLR Policy without the 8 August 2019 Changes (but still applying the 25% audit discount and the 20% notice period reduction discount), the figure would have been $986,931 (excluding GST). This calculation is contained in an affidavit of Mr Tappe, filed by AMPFP. 380 Ms Braschey gave evidence in her second affidavit that: by the time the August 2020 valuation was received, she had come to accept that, even though AMPFP had originally informed her that a 10% notice period reduction discount was going to apply, AMPFP had made an error, and AMPFP was entitled to charge Equity a 20% notice period reduction discount; and she also accepted AMPFP's revised position in relation to certain small adjustments relating to the valuation. Ms Braschey gave evidence that she still had problems with two aspects of the valuation, namely (a) it had not been calculated based on a 4.0x multiple; and (b) AMPFP maintained an audit discount of 25%, which she thought (wrongly, it turns out) was still the subject of exception requests by Equity. I accept that evidence, which was not challenged. 381 Ms Braschey gave evidence in her second affidavit as follows: (a) Assuming Mr Tappe's calculations are correct (see [379] above), had the August 2020 valuation been calculated on the basis of a 4.0x multiple, and had Equity been informed that AMPFP had rejected Equity's exception requests, Ms Braschey would have formed the view that Equity should accept that valuation, subject to one matter, which is described below. (b) That matter arises because, by this time (i.e., August 2020), Equity had entered into a litigation funding agreement with Augusta Pool 523 and had started this class action. Under the agreement, Equity would have been liable to pay to Augusta Pool 523 certain entitlements including commission and potentially costs. Given Equity's financial position, Ms Braschey would have asked her lawyers to find out whether Augusta Pool 523 was willing to release Equity from any obligations it had under the litigation funding agreement. Unless Augusta Pool 523 was willing to do that, she would have formed the view that Equity should reject the valuation. (c) If Equity accepted the valuation, Ms Braschey would have sought the leave of the Court to settle Equity's claims and to withdraw as the representative party. (d) In the usual way, Ms Braschey would have discussed her views with Ms Scott and, if she supported them, that is the position Equity would have adopted. (e) If Equity had accepted such a valuation, and if AMPFP had then offered to Equity to enter into a buy-back agreement under which AMPFP would pay to Equity, in exchange for Equity surrendering its register rights, a BOLR benefit equal to that valuation, then Equity would have executed that buy-back agreement. 382 During cross-examination, Ms Braschey was asked questions relating to the figure of $986,931, which was calculated by Mr Tappe. Ms Braschey accepted that, if that figure had been offered by AMPFP on the exercise date (1 December 2019), it would have been less than Equity's practice finance loan at the time, and that Equity could only have gone ahead with the transaction if it came to an arrangement with AMP Bank (or had some other way to pay off the loan). 383 Ms Scott gave evidence in her second affidavit that she would have agreed with that approach. 384 I accept the evidence of Ms Braschey and Ms Scott set out at [380]-[383] above, which was not the subject of any real challenge during cross-examination. 385 Neil Brennan and Louis Young of the Augusta group gave evidence in their affidavits that, if Equity had been offered an adjusted BOLR valuation of $986,931 (i.e. the figure set out at [379] above), Augusta Pool 523 would have released Equity from its obligations under the litigation funding agreement. I accept that evidence, which was not challenged.

[53]

The period before December 2018 386 In 2005, Mr Finch started working in financial planning. 387 In about March 2009, Mr Finch was approached by John Coe of AMPFP, who was working in a role that involved recruiting financial planners to the AMPFP network. 388 After considering other options for setting up his own financial planning practice, Mr Finch decided to pursue the option of becoming a financial planner licensed through AMPFP. The existence of the BOLR Policy (including the 4.0x multiple) was one of the matters that contributed to his decision. 389 On 14 January 2010, Mr Finch signed a Practice Transition Agreement (Corporate Practice) with AMPFP to lease a register of clients for a four year period. 390 At about the same time, Mr Finch signed an authorised representative agreement with AMPFP (naming WealthStone as the "Practice" under that agreement). 391 At all relevant times, WealthStone was operated by Mr Finch as a sole trader practice. Mr Finch did not employ any staff to assist in the provision of financial planning services. 392 At the time Mr Finch started WealthStone, his only clients were the clients listed on the leased register. Over time, he began bringing on new clients. Many of those clients were people who he had done work for during his previous roles. Within six months of establishing WealthStone, approximately 20% of Mr Finch's clients were people he had brought across to the AMPFP network, and approximately 80% of his clients were those on the leased register. That proportion continued to change over time, with the number of clients that he introduced to the AMPFP network increasing as a proportion of his total business in comparison to the leased register. 393 On 2 December 2013, Mr Finch signed a document terminating the lease of the leased register (effective 14 January 2014). From that point on, Mr Finch continued to grow the business organically, and did not purchase any register rights from AMPFP. 394 When Mr Finch started his practice in 2010, he chose to use a fee-for-service model. Mr Finch stated in his affidavit that, to his observation, not many other financial planning practices were using such a model at that time, and he thought it was a way to differentiate his business. His idea was to simplify the fee structure and to market his business as a simple model where he charged a fee based on what services he was going to provide to the client. To enable him to do that, where he put a client into an AMP product with a grandfathered commission attached to it, Mr Finch rebated that commission, and charged an annual service fee instead. I accept that evidence. 395 In February 2018, Mr Finch was involved in a skiing accident, and suffered an injury. As a result of the injury, he had difficulty sleeping for a period of approximately six or seven months, which in turn made it difficult to work. 396 In his affidavit, Mr Finch gave evidence that, in around March 2018, AMP first began to receive significant media coverage coming out of the Financial Services Royal Commission. Mr Finch gave evidence that, on a day in or around March 2018, while he was waiting to see his shoulder surgeon, he received telephone calls from three clients, raising concerns about the media coverage of AMP and the Royal Commission and asking whether their funds should be invested with AMP. I accept that evidence. 397 Mr Finch gave evidence in his affidavit that, in the first few weeks after AMP began to receive significant media attention coming out of the Royal Commission, he was fielding calls every day from concerned clients. He stated that a large number of his clients phoned him during that period, with many of them telling him that they "did not trust AMP" and that they were worried about having their money invested with a company like AMP (or words to similar effect). I accept that evidence. 398 Mr Finch gave evidence in his affidavit that, from that time onwards, he spent very little time working to establish new client relationships; instead, he was spending a large portion of his time (particularly in the first half of 2018) working hard to persuade existing clients to remain clients. During that period, he lost several clients. I accept that evidence. 399 As a result of the challenges referred to above and their impact on his business, his personal circumstances following his accident, and what he considered to be the very significant increase in compliance requirements that had been imposed on him since he joined the AMPFP network, Mr Finch decided to sell his register. 400 In approximately May 2018, Mr Finch spoke to James Stone (the relevant Business Partnership Manager at AMP) about accessing the BOLR facility. Mr Stone investigated whether or not another practice in the AMPFP network wished to purchase the register. Mr Finch was not presented with any offers, and was not made aware of any other practice that was interested in buying his register. Mr Finch understood this to mean that Mr Stone had not been able to identify a buyer for the register.

[54]

The period from December 2018 onwards 401 On 7 December 2018 (that is, before the 8 August 2019 Changes), WealthStone submitted an application under the BOLR Policy. The nominated exercise date was 8 December 2019, being 12 months later. 402 On 20 December 2018, Taran Pelligra (of AMP) sent an email to Mr Finch (copied to Mr Stone and others) referring to a meeting that day and confirming the following matters: • Wealthstone's exercise date is the 08/12/2019. The valuation will be based on the 30/11/2019 data. • BOLR client file audit will be arranged- team have been in contact and looking to book in early Feb. • Practice has used BOLR package templates for service package alignment. • Practice has aligned all service packages in Portal, except two clients which are pending. • Michael [Finch] will update service package alignment, FDS and Opt-in dates into portal. • The following needs to be completed by early February 2019 to ensure we are on track with the exercise date. • Client Register Assessment and information is completed and returned. • Practice files are stored electronically on a hard drive. • Estimated BOLR valuation will come out around the 14/15th of December, you will then have the opportunity to review and accept/contest. • FDS and Opt-ins will be arranged to be reset to meet requirements for valuation. • Client letters will need to be sent out upon acceptance of valuation. 14 days before payment for AMP Advice and 7 days for AMP Assist client pathways. • A [statutory] declaration (attached) will need to be signed confirming you have sent the letters out and the files have been collected. 403 The email attached several documents, including a draft buy-back agreement. 404 On 27 and 28 February 2019, the BOLR audit was conducted. The outcome was that AMPFP proposed to impose a 25% audit discount. WealthStone appealed against the audit outcome. 405 On 4 April 2019, an email exchange took place between Mr Finch and Mr Stone. Mr Finch sent an email to Mr Stone referring to a webinar that had recently been conducted and enquiring whether AMP would fund the remediation costs resulting from his BOLR audit. In response, Mr Stone stated that, historically, AMP had not covered client remediation in the context of a BOLR audit. He outlined a series of steps that could be taken. These involved remediation being calculated and either paid by the practice before the BOLR payment, or subtracted from the BOLR payment. 406 On 24 April 2019, Carsten Zuber (of AMP) sent an email to Mr Finch with a calculation of the remediation amount resulting from the BOLR audit. The amount due to be paid to clients by way of remediation was calculated to be approximately $48,000. 407 On 26 April 2019, Mr Finch responded by email stating that he did not accept the audit findings and had appealed. He stated that he requested an escalation of the matter. Mr Finch stated that he did not accept the remediation and requested that no further action be taken in relation to the matter until the escalation had been completed. 408 In May 2019, there were further email exchanges between AMPFP and WealthStone in relation to the remediation issue. 409 In June 2019, AMPFP informed Mr Finch that they would be commencing his "lookback" audit (also referred to as lookback review). Mr Finch answered all of AMPFP's requests for documents and information in relation to that audit. Mr Finch did not receive a result for that audit during 2019. Nor had he received a result at the time of swearing his affidavit (14 September 2021). 410 On 8 July 2019, Mr Stone sent an email to Mr Finch with an updated remediation calculation. The revised figure was approximately $49,000. The email asked when the matter would be finalised. 411 On 15 July 2019 Mr Finch responded that the matter was being reviewed by the senior management of AMP, and he was unable to give any indication of when the matter would be finalised. 412 On 18 July 2019, Mr Finch sent an email to Mr Stone asking him to arrange a meeting with AMP management, himself and Mr Macdonald (of ampfpa) to discuss the outstanding issues. The email outlined the issues as follows: 1. BOLR Policy breach In execution of the Buyer of Last Resort (BOLR) agreement the licensee, AMPFP conducted an exit audit on 27/02/2019. The auditors materially breached the BOLR policy by applying audit questions that were different to the questions provided by the licensee on 4/09/2018. The potential financial loss to the practice as a result of this breach is $134,190.65 (client remediation $49,270.43 plus the discount applied to the business value @25% of $339,680.88 = $84,920.22). In addition, if the client remediation process is completed it will result in significant financial and reputational damage to both the practice and the practice principal. 2. Application of future standard The only standard the licensee can apply to the to the audit process is the licensee compliance standard that was applicable at the time the advice was provided. The licensee has materially changed several of the required standards in relation to the advice process, specifically offering or conducting the annual review and applied the amended standard to services provided years before the standard was introduced. It is impossible for the practice to adhere to a standard that is introduced in the future. The standards applied during the BOLR exit audit differs significantly to the standards applied during the annual audits conducted, the audit and compliance process the practice has relied upon to ensure the practice remains complaint with the required legislation. The current Buyer of last Resort Policy Effective 1 July 2017, page 5 "Changes to this policy" States - "Unless a shorter period of notice is agreed to by the ampfpa, AMPFP will give 13 months' notice of a change to the valuation methodology for registers and to any other change having a materially adverse financial or other significant effect on the practice". I have clearly demonstrated that between 12/03/2018, 04/09/2018 and 27/02/2019 AMPFP has made material change in assessment of the provision of the annual review. This change has been made inside a 13-month period, has not been agreed to by the ampfpa and has had a material adverse financial effect on the practice. 3. Failure of the licensee to address the outstanding issue An appeal to the audit outcome was launched with the licensee on 12/03/2019. Some of the outcomes were amended, however the issue addressed in point 2 were not amended. I referred the matter to Neil MacDonald (CEO ampfpa) on 05/03/2019 to advocate the practices position with the licensee. Since that date Neil has been attempting to have the issue resolved with AMP's senior management in particular Brian George, Eric Gibson, David Akers, and Mark Mullington. To date the licensee has not communicated with myself or the practice or offered a resolution via Neil to resolve the issue. (Emphasis in original.) 413 On 22 July 2019, Mr Stone sent an email to Mr Finch. The email provided the following response to Mr Finch's email: BOLR Policy breach We have spoken about this and I acknowledged that that email dated 4/9/18 did include an old set of BOLR questions, I have apologised for this. However, the email also contained the BOLR policy which included the BOLR Audit Questions. The BOLR Audit was conducted under this policy and the correct question set was applied. As your activities and file notes would have been recorded historically the document in question would not have altered the audit outcome. Application of future standard The BOLR Policy has not been changed, this question has been raised by yourself during 2 BOLR Audit Appeals and you have written responses with regards to this, AMP has applied the BOLR Policy correctly. You will note in Neil MacDonald's email of 15/7/19 he Neil states "Mark Mullington's position was that audit are following the licensee policy in this situation" Failure of the licensee to address the outstanding issue Your case has been reviewed by both Chris Scott - National Manager, Advice Auditing & Compliance and Mark Mullington - Chief Risk Officer - Australian Wealth Management who both agree that the Audit has been conducted correctly and the Audit outcome and client remediation outcomes remain unchanged. The Licensee has endeavoured to work with you, however as you have not been accepting of the Audit outcome, we have not been able to progress. An email dated 4/4/19 outlines an approach we discussed to maximize your valuation, to date you have chosen not to discuss this further. 414 On 29 July 2019, Mr Finch sent an email to Mr Stone stating that he completely disagreed with the outcome of the audit and believed it breached the BOLR Policy. He stated that, however, he had no other option than to accept the remediation. He therefore asked Mr Stone to proceed with the approach outlined in his 4 April 2019 email and have the matter referred to the exceptions committee. 415 On 30 July 2019, Mr Stone responded that he had submitted an exception request, but it would take a few weeks, possibly longer. 416 On 8 August 2019, AMPFP announced the 8 August 2019 Changes. Henceforth, AMPFP adopted the revised multiples set out in those changes when valuing WealthStone's register rights for the purposes of the BOLR policy. 417 On 9 September 2019, Mr Stone sent an email to Mr Finch stating that the exception request had been approved. The effect of this was that the remediation costs would need to be borne by WealthStone, but the audit discount of 25% would not be imposed. 418 On 19 September 2019, Mr Finch sent a letter to Mr Stone. Among other things, Mr Finch referred to 8 August 2019 Changes and stated that he did not accept that the reduced multiple applied to WealthStone's BOLR application. Mr Finch stated that a change of this nature must follow the terms of the agreement. Mr Finch stated that he had not agreed to the change in multiple, and he understood that any process that may have enabled such a change had not been complied with. The letter also dealt with other aspects of the BOLR process. 419 On 5 November 2019, Mr George sent a letter to Mr Finch in response to his letter of 19 September 2019. The letter stated that the 8 August 2019 Changes "were necessary and were undertaken in accordance with the terms of the Buyer of last resort policy and the Master Terms". The letter stated that there had been an "economic change" within the meaning of the BOLR Policy. 420 In the period November 2019 to January 2020, a number of email communications took place between Mr Finch and AMPFP regarding the valuation of WealthStone's register rights and finalisation of the buy-back transaction. AMPFP did not explain why there was a delay beyond the exercise date (8 December 2019). 421 On 31 January 2020, Taran Pelligra sent Mr Finch an email (copied to Mr Stone) attaching a draft buy-back agreement (EQU.100.005.0599). The email requested that he review, print and sign it. Mr Finch gave evidence in his affidavit, which I accept, that he read the draft buy-back agreement at or about the time he received it, and that two clauses in particular stood out to him: (a) clause 3.4, which he understood to mean that AMPFP would not pay him the deferred portion of his BOLR payment until it had received the results of his lookback audit; and (b) clause 5, which he understood to mean that AMPFP was requiring him to release his rights to make certain claims against AMPFP in relation to the BOLR benefit. 422 Mr Finch gave evidence in his affidavit, which I accept, that he was particularly concerned about clause 5, because he was aware that a class action was being proposed against AMPFP in relation to the 8 August 2019 Changes to the BOLR Policy and he wanted to be able to participate in that class action. 423 On 3 February 2020, there was an email exchange between Mr Finch and Taran Pelligra in relation to the draft buy-back agreement. One of the matters raised by Mr Finch was that the draft agreement (in cl 3.4) provided that the practice had to pay remediation costs arising from the lookback review. A further issue raised by Mr Finch was the ability of AMPFP to delay paying the deferred payment on account of the lookback review. In response to an email from Taran Pelligra asking if he could confirm that these were his only concerns, Mr Finch sent an email requesting that clause 5 (the release) be removed. He stated: "I want to retain the right to pursue legal remedy should the Licensee breach the agreement." 424 On 4 February 2020, Taran Pelligra sent an email to Mr Finch (copied to Mr Stone) stating, in part: Lookback clause - This has been amended and revised for your review. Clause 5 - We cannot agree to remove this clause. This is a key provision of the agreement for AMPFP. The release relates solely to payment of the BOLR benefit and it arises upon payment of the BOLR Benefit. This clause does not prohibit all claims for breach of the agreement, as it relates only with connection to the facts or circumstances giving rise to the BOLR benefit (i.e. calculations agreed, payment date). 425 The email attached a revised version of the buy-back agreement and requested that Mr Finch review, print and sign the agreement. Based on the final version of the agreement (see below), it is apparent that cl 3.4 (relating to the lookback review) had been amended in light of the matters raised by Mr Finch. 426 Mr Finch gave evidence in his affidavit (which I accept) that, at this time (4 February 2020), it was almost two months beyond his confirmed exercise date of 8 December 2019, and that he was very stressed and anxious to finalise his exit from AMPFP. 427 Mr Finch gave evidence in his affidavit (which I accept) that he discussed his concerns in relation to cl 5 of the buy-back agreement with Mr Stone at this time, and that during one of those discussions, an exchange took place to the following effect: Finch: There have been issues with my BOLR exit audit, AMPFP has just knocked me for 1.5 times recurring revenue, and now there is a clause releasing AMP from claims. Stone: What I recommend you do is get the 2.5 times through BOLR, and then go back through the class action for the difference. These are your options - you can sign the deed of release and leave, or not. Finch: I'm not in a position to make a choice, I've taken a new job. 428 Mr Finch gave evidence in his affidavit that he felt that he was left with no choice other than to sign the buy-back agreement because: (a) he believed that, if he refused to sign the agreement, AMPFP would terminate his licence anyway, and he would receive nothing at all; (b) he and his wife had contracted to start work in 2020, which was after his confirmed exercise date under the BOLR process (8 December 2019), and he was having to undertake that work while continuing to run WealthStone; and (c) he had existing financial commitments, and the BOLR benefit he was due to receive would help him meet those commitments. I note that the evidence set out in paragraph (a) above was admitted subject to a limited use ruling, namely that the evidence was limited to Mr Finch's belief of the matters there stated. Subject to that limitation, I accept the evidence of Mr Finch set out above.

[55]

The WealthStone Buy-Back Agreement 429 On 4 February 2020, AMPFP, WealthStone and Mr Finch entered into an agreement titled "Buyer of Last Resort Buy-Back Agreement" (the WealthStone Buy-Back Agreement) (EQU.100.005.0241). One of the key issues in relation to WealthStone's case is whether the release in cl 5 of the agreement (set out below) precludes WealthStone's claims. AMPFP contends that it does. The applicant puts forward a number of contentions in response. These are discussed later in these reasons. 430 The agreement set out some definitions on pages 5-6, including relevantly: (a) "BOLR Benefit" was defined as meaning "$176,121.41 (excl GST), being the Register Value calculated by AMPFP"; (b) "Initial Payment" was defined as meaning $33,656.10 (excluding GST), being 50% of the BOLR Benefit less the Initial Remediation; (c) "Initial Remediation" was defined as meaning $54,404.61 (inclusive GST), which is calculated in accordance with the AMP Compensation Policy; (d) "Deferred Payment" was defined as meaning the amount calculated as 50% of the BOLR Benefit less the Deferred Payment adjustment calculated in accordance with cl 4 and Lookback Costs (if any); (e) "Deferred Payment Date" was defined as meaning the date which is the last day of the Deferred Payment Period; (f) "Deferred Payment Period" was defined as meaning: (a) Subject to paragraph (b), the period commencing on the Completion Date and ending 12 months after the Completion Date. (b) If the Practice Principal has died or has been assessed as totally and permanently disabled in accordance with the BOLR Policy - the period commencing on the Completion Date and ending 6 months after the Completion Date. (g) "Relevant Party" was defined as: Jointly and severally: (a) the Practice; (b) the Practice Principal(s); and/or (c) the Equity Holder(s). (h) "Completion Date" was defined as meaning 21 February 2020 or such other date agreed between AMPFP and the Practice. 431 Other expressions were defined in cl 20.2: (a) "Completion" was defined as "[c]ompletion of the sale and purchase of the Register Rights in accordance with this Agreement". (b) "Register Rights" was defined as: The following rights in connection with the Client Register: (a) the right to contact and provide advice and other financial services and credit services to the Clients; (b) the right, but subject to the Privacy Act 1988 (Cth), to access to the Client Records; and (c) the right to receive Remuneration. (c) The expression "Register Value" was defined as: The value of the Register Rights calculated in accordance with the buyer of last resort valuation methodology as set out in the BOLR Policy (as amended from time to time) and as determined by AMPFP to be applicable to the Practice and in this regard, the determination by AMPFP shall be final in the absence of manifest error. (d) "Remuneration" was defined as "[t]he fees, commissions and other payments paid or benefits to the Practice pursuant to the Register rights". 432 Clause 3, headed "BOLR Benefit", provided: 3.1 BOLR Benefit Subject to this clause 3 and to clauses 1, 2 and 4, AMPFP will pay the BOLR Benefit to the Practice or as the Practice otherwise directs on Completion. 3.2 Staff restraints (a) The BOLR Benefit has been arrived at by AMPFP in the expectation that the value of the Client Register is preserved and that others associated with the Practice are reasonably restrained from soliciting or enticing Clients away from the Practice and/or from AMPFP. (b) AMPFP and the Practice agree that sound business practices would dictate that the Practice would secure appropriate commercial restraints from its employed and/or contracted financial planners to protect the goodwill and other rights in the Clients and the Client Register. (c) Before AMPFP is required to pay the BOLR Benefit, the Practice must provide to AMPFP with reasonable evidence that those restraints are in place. 3.3 BOLR Benefit paid in 2 instalments AMPFP will pay the BOLR Benefit in 2 instalments as follows: Instalment When payable Payment Conditions (i) Initial Payment On the Completion Date The amount of the Initial Remediation will be deducted and the balance paid to the Practice (ii) Deferred Payment On the Deferred Payment Date (subject to clause 4). Subject to Deferred Payment Adjustment and deduction of any Lookback Costs, with the balance paid to the Practice

[56]

3.4 Lookback (a) The parties acknowledge that a review of the advice, service and products provided to Clients by the Practice and Practice Principal is being undertaken, including by reason of AMP Group's commitments to ASIC (Lookback Review). The Lookback Review is being conducted in accordance with the AMP Compensation Policy. (b) The Practice acknowledges that any costs AMPFP or the AMP Group is required to pay to remediate any of the Clients resulting from the Lookback Review (Lookback Costs), irrespective of whether they are currently extant, shall be recovered as follows: (i) where the Review and Remediation program Fee for Service Delivery Review (October 2019) (Lookback Policy) states AMPFP shall be liable for such Lookback Costs, then it shall be paid by AMPFP and AMPFP will not seek to recover such Lookback Costs from the Practice; or (ii) where the Lookback Policy states that the Practice shall be liable for such Lookback Costs, then it shall be deducted from the Deferred Payment. In the event that the Deferred Payment was already paid to the Practice or if insufficient to recover the full Lookback Costs, then such Lookback Costs shall become a debt immediately due and payable by the Practice to AMPFP. For the avoidance of doubt, in no event shall the Lookback Costs payable under this clause 3.4(b) include any costs that were previously paid as remediation to a client. (c) The Practice and the Practice Principal agree that they will provide any assistance when requested with respect to the Lookback Review. 433 It is apparent from a comparison of the final version of cl 3.4 with the earlier draft of cl 3.4, that Mr Finch's concerns about the lookback review or audit had been addressed. In particular, the clause no longer stated that the practice was necessarily liable to pay any remediation arising from the lookback review. Further, the clause no longer stated that, where AMPFP was unable to calculate the lookback costs by the end of the deferred payment period as a result of factors beyond the reasonable control of AMPFP, the deferred payment would be delayed. 434 Clause 5, headed "Release", provided: On payment by AMPFP of the BOLR Benefit to the Practice, each of the Relevant Parties hereby releases AMPFP from all and any present or future claims, proceedings, suits and Liabilities arising out of or in connection with the facts or circumstances giving rise to the BOLR Benefit. 435 Clause 15 was headed "Independent advice" and contained an acknowledgement by the Relevant Parties that they had had the opportunity to obtain their own independent accounting, taxation and legal advice. It also contained an acknowledgement that they had reviewed, understood and agreed to the terms and conditions of the agreement. 436 Clause 19.3 was headed "Entire agreement" and provided that the agreement constituted the entire agreement of the parties about its subject matter, and superseded all previous agreements, understandings and negations on that subject matter.

[59]

Mr Scott's evidence 441 Mr Scott, who was called by AMPFP, affirmed six affidavits in this proceeding, but the third affidavit did not go into evidence. The affidavits that went into evidence were: his affidavit of 7 May 2021 (First Scott Affidavit); his affidavit of 13 December 2021 (Second Scott Affidavit); his affidavit dated 21 July 2022 (Fourth Scott Affidavit); his affidavit of 28 September 2022; and his affidavit of 25 October 2022 (Sixth Scott Affidavit). 442 Mr Scott gave evidence during cross-examination, which I accept, that the work detailed in his affidavits was not undertaken prior to 8 August 2019; it was all done after the start of 2021. 443 In the First Scott Affidavit, Mr Scott exhibited a "records table" containing information about the sale and purchase of client register rights in the period 1 January 2017 to 8 August 2019. The information in the records table relates to AMPFP, Charter and Hillross. In other words, it is not limited to transactions in the AMPFP network. The records table contains information about 350 transactions involving the purchase and/or sale of register rights (or similar rights to service financial planning clients). The records table includes P2P transactions (within the AMPFP, Charter and Hillross networks) and transactions whereby AMPFP on-sold register rights that it had acquired under the BOLR Policy (on-sell transactions). 444 In the Second Scott Affidavit, Mr Scott exhibited an Excel spreadsheet (labelled "All transactions") with the transaction data that was used to create the records table in the First Scott Affidavit. Mr Scott also exhibited an Excel spreadsheet (labelled "AMPFP buybacks") relating specifically to buy-back transactions. Mr Scott then set out a number of analyses that he had conducted, describing the methodology that he had adopted, and setting out the results of each analysis in a table and a corresponding graph. (In each case, the graph contains the same information as the table, but presented in graph format.) 445 Subsequently, in the Fourth Scott Affidavit, Mr Scott stated that he had identified some errors or inaccuracies in the data used to perform those analyses. Accordingly, he exhibited corrected versions of the two spreadsheets referred to in the preceding paragraph, and set out a revised table and graph for each of the analyses. 446 Putting to one side an analysis of the number of BOLR applications each year, the analyses set out in the Second Scott Affidavit, together with the original and revised tables/graphs, were as follows: (a) analysis of the number of P2P transactions (across the AMPFP, Charter and Hillross network) that settled in each quarter from 1 January 2017 to 30 June 2019 (Table 2/Graph 2, revised as Table 9/Graph 9); (b) analysis of the number of P2P transactions (in the AMPFP network) that settled in each quarter from 1 January 2017 to 30 June 2019 (Table 3/Graph 3, revised as Table 10/Graph 10); (c) analysis of average multiple for P2P transactions (across the AMPFP, Charter and Hillross networks) that settled in each quarter from 1 January 2017 to 30 June 2019 (Table 4/Graph 4, revised as Table 11/Graph 11); (d) the same analysis as (c), but excluding outliers (Table 5/Graph 5, revised as Table 12/Graph 12); (e) analysis of the average multiple for AMPFP on-sell and lease transactions that settled in each quarter from 1 January 2017 to 30 June 2019 (Table 6/Graph 6, revised as Table 13/Graph 13); (f) analysis of the weighted average multiple for P2P transactions (in the AMPFP network) and AMPFP on-sell and lease transactions that settled in each quarter from 1 January 2017 to 30 June 2019 (Table 7/Graph 7, revised as Table 14/Graph 14); and (g) the same analysis as (f), but excluding outliers (Table 8/Graph 8, revised as Table 15/Graph 15). 447 During cross-examination of Mr Scott on Day 15 of the hearing, senior counsel for Equity presented Mr Scott with a series of five aide-memoires that had been prepared by representatives of Equity. The first aide-memoire presented to Mr Scott was referred to as "aide-memoire 2". Mr Scott was then presented with aide-memoires 3, 4 and 5. The last aide-memoire he was presented with was referred to as "aide-memoire 1". The aide-memoires represented analyses conducted on the transaction data used by Mr Scott. The aide-memoires were said to represent the following analyses: (a) aide-memoire 1: the number of P2P transactions within the AMPFP network that settled each month during the period 1 January 2017 to 30 June 2019; (b) aide-memoire 2: the multiple of each P2P transaction in the AMPFP network that settled during the period 1 January 2017 to 30 June 2019 (excluding the transactions that Mr Scott excluded as described in paragraph 40 of the Second Scott Affidavit), together with a trendline; (c) aide-memoire 3: the same as aide-memoire 2, but with one further exclusion; (d) aide-memoire 4: the same as aide-memoire 2, but with two further exclusions; (e) aide-memoire 5: the same as aide-memoire 2, but with no exclusions. 448 In each case, Mr Scott was asked to review the aide-memoire overnight. When cross-examination resumed the next day, Mr Scott confirmed the accuracy of aide-memoires 2 to 5. These aide-memoires then went into evidence. In relation to aide-memoire 1, Mr Scott gave evidence that: he was comfortable with the underlying data that had been used and the calculations, but identified an issue that the bar chart did not show the months where there were no transactions. Mr Scott prepared a revised version of aide-memoire 1, which addressed this issue. That revised version of aide-memoire 1 then went into evidence. 449 During cross-examination, Mr Scott accepted that four transactions that were treated as P2P transactions within the AMPFP network in his analyses should not have been so classified. He accepted that they were included in error. It is unclear to what extent this affects the results produced by Mr Scott's analyses. My impression is that the adjustment required is unlikely to be material.

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Multiples for P2P transactions in the AMPFP network 450 The analyses performed by Mr Scott in the Second Scott Affidavit do not include an analysis of the average multiple for P2P transactions in the AMPFP network alone. Mr Scott only analysed the average multiple for P2P transactions across the AMPFP, Charter and Hillross networks. In my view, this is less useful for present purposes than an analysis of the P2P transactions in the AMPFP network alone. That gap was filled by aide-memoires 2 to 5 prepared by Equity's representatives as described above. 451 As noted above, aide-memoire 2 represents the multiple of each P2P transaction in the AMPFP network that settled during the period 1 January 2017 to 30 June 2019 (excluding the transactions that Mr Scott excluded as described in paragraph 40 of the Second Scott Affidavit), together with a trendline. The aide-memoire is as follows: 452 The trendline in the above graph shows a decline over the period from a multiple of 3.74x to a multiple of 3.27x, a decrease of 0.47x. This was confirmed by Mr Scott during cross-examination. I accept that the aide-memoire accurately represents the relevant transaction data, and that the trendline is accurate. 453 The analysis in aide-memoire 2 establishes that, for many P2P transactions in the AMPFP network in the period 1 January 2017 to 30 June 2019, the multiple was well in excess of 2.5x (the multiple adopted in the 8 August 2019 Changes). While the trendline shows that there was some reduction in the multiple for such transactions over the period, the reduction was relatively small (0.47x). 454 I note that, during cross-examination, Mr Scott expressed the opinion that the P2P transaction data was not the most obvious representation of the state of AMPFP's internal market and was not the best indication of the arm's length internal market value, because there were unique circumstances for different types of transactions. In re-examination, he gave an example of such circumstances. In my view, notwithstanding that opinion, the P2P transaction data is relevant and of assistance in considering whether there was a sustained and quantifiable decrease in the market value of register rights in the lead-up to the 8 August 2019 Changes. While there may have been exceptional circumstances in some transactions, the data as a whole is useful in considering the issue. I note that the Second Scott Affidavit does contain an analysis of the average multiple for P2P transactions, albeit across the AMPFP, Charter and Hillross networks.

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Average multiple for on-sell and lease transactions 455 One of the analyses conducted by Mr Scott and set out in the Second Scott Affidavit is of the average multiple for AMPFP on-sell and lease transactions that settled in each quarter from 1 January 2017 to 30 June 2019. 456 Mr Scott explains the methodology he adopted in paragraphs 43 to 49 and 51 of the Second Scott Affidavit. As he explains, he identified 167 transactions where AMPFP bought back the client register from an advice practice (under the BOLR Policy). Mr Scott then reviewed the files for these transactions to determine what AMPFP did with the client register after it completed the BOLR transaction. In paragraph 46 of that affidavit, Mr Scott identifies nine different types of transactions or arrangements involving such registers, namely: full lease; full sale; majority lease; majority sale; partial lease; partial sale; minimal sale; leaseback; and full internal transfer. Mr Scott categorised each of the transactions or arrangements involving the 167 registers that had been bought back. Having done so, Mr Scott excluded 98 transactions from the data on the basis that: (a) they were "full internal" transactions (70 transactions); (b) they were leaseback transactions (6 transactions); (c) they were minimal sale transactions (20 transactions); or (d) they settled after 1 July 2019 (2 transactions not already excluded). This process produced 69 AMPFP on-sell or lease transactions, which were the subject of analysis. 457 Mr Scott then conducted an analysis of average multiple for AMPFP on-sell and lease transactions for each quarter during the period 1 January 2017 to 30 June 2019. The results were presented in Table 6/Graph 6 (in the Second Scott Affidavit), which were then revised in Table 13/Graph 13 (in the Fourth Scott Affidavit). The revised table and graph are as follows: 458 I note that, in the graph, the number appearing immediately above each vertical bar is the number of transactions during the quarter (which corresponds with the number appearing under the heading "Number of Transactions" in the table). 459 The average multiples for the last four quarters considered in this analysis are low (1.8x, 2.6x, 2.0x and 2.2x) and, on their face, appear to be supportive of the multiple adopted in the 8 August 2019 Changes (2.5x). However, a number of matters need to be borne that limit the utility of the data relating to on-sell transactions: (a) First, from early 2018 (and through to August 2019), AMPFP's strategy of keeping (rather than on-selling) a portion of the registers it acquired under the BOLR Policy, and placing the clients with AMP Assist or AMP Advice, was fully operational. (b) Secondly, the strategy involved placing as many clients as possible with AMP Assist/AMP Advice, and only on-selling clients who could not be placed with AMP Assist/Advice or where there was some other reason for not placing them with AMP Assist/AMP Advice. (c) Thirdly, as Mr Scott said during cross-examination, the intention in holding client registers, rather than on-selling client registers, was to retain the revenue internally. (d) Fourthly, as Mr Scott accepted during cross-examination, from the commencement of 2018 onwards (until August 2019) the vast majority of on-sell transactions were partial on-sell transactions rather than full on-sell transactions.

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Mr Siolis's evidence 464 Mr Siolis, who was called by Equity, is a partner of RBB Economics, based in Melbourne. He joined RBB Economics in July 2009 and specialises in the application of economics to competition and regulatory issues across a range of industries, including telecommunications, retailing, agriculture, manufacturing, logistics and financial services. He holds a Bachelor of Economics (Honours) and a Masters of Law (Juris Doctor) from Monash University. 465 The questions that Mr Siolis was asked to address were set out in a letter from Equity's solicitors dated 19 August 2022 and were as follows: 1. Was there a sustained and quantifiable decrease in the market value of register rights in at least the 18 months preceding 8 August 2019, where: a. "register rights" has the meaning in paragraph 12(e) of the Further Amended Statement of Claim (FASOC); and b. the "market value of register rights" means the value those register rights can be sold for? 2. Please provide your opinion as to the economic function, if any, of the buyer of last resort facility provided for in the BOLR Policy (as defined in paragraph 11 of the FASOC)? In answering these questions, please address any aspect of the reports of Professor Frino and Professor Brimble which you consider relevant to your opinions. 466 Mr Siolis prepared a report dated 29 August 2022. Parts of the report were ruled inadmissible and not admitted. Of the parts that were ruled inadmissible, parts were received as a submission. 467 In paragraph 86 of his report, Mr Siolis states: I have been instructed to consider AMPFP register rights, and have been instructed that market value of register rights means the value that such register rights can be sold for. I interpret market value as representing the price that would be struck in a market in a commercial negotiation undertaken by two firms looking to maximise the benefit (or value) they receive and profit that they earn from the transaction. 468 As noted in paragraph 87 of his report, Mr Siolis was provided with transaction-level data from the period January 2017 to August 2019. He therefore examined that period in answering question 1. A summary of Mr Siolis's methodology and conclusions is provided in paragraphs 89 to 93 of his report: 89. In Section 3.1, I explain the conditions under which I could reliably infer from observed transaction multiples that a sustained and quantifiable decrease in the value that AMP register rights could be sold for had occurred. I explain that such inference would only be reliable if I could be satisfied that the transaction multiples were not confounded by: • changes in the subject matter of the register rights being transacted (such as the client fee types, ages or locations); • short term illiquidity (which would not reflect any sustained change); • transactions where register rights were sold at a price below their market value (because the seller was not solely seeking to maximise sale price); or • noise attributable to idiosyncratic features of a limited sample of transactions. 90. In Sections 3.2 and 3.3, I then consider whether I can reliably infer a sustained and quantifiable decrease in the value that AMPFP register rights could be sold for from the transaction data that has been provided to me. I first consider the cases in which AMPFP register rights were acquired through a practice to practice (P2P) transaction. I then consider the cases in which AMPFP register rights were onsold by AMP, having previously been acquired by AMP through a BOLR transaction. 91. I address these sets of transaction data separately because I consider them to have different inferential value and relevance to the question that I have been asked. Specifically, the datasets are affected by confounding factors in different ways, which reflect the different commercial context for each type of transaction. These differences are detailed in Sections 3.2 and 3.3 below. 92. Although I find that the data with which I have been provided shows a decrease in transaction multiples, I cannot reliably infer that such decrease was due to a sustained and quantifiable decrease in the value that AMPFP register rights could be sold for. 93. I explain that, because the transaction multiple data does not control for confounding factors such as subject matter changes, liquidity or seller incentives, I cannot reliably distinguish between a sustained and quantifiable decrease in the value that AMPFP register rights could be sold for, and those alternative explanations for a decrease in transaction multiples. 469 In relation to the P2P transaction data (dealt with in section 3.2 of the report), Mr Siolis sets out a summary of the transaction data in Figure 1. Mr Siolis observes in paragraph 121 that Figure 1 suggests that there was a slight decrease in transaction multiples, but does not suggest that any such decrease was uniform or significant in magnitude. The Figure includes a trendline or "line of best fit", which summarises the direction in which transaction multiples were changing over the course of the sample. This trendline shows that transaction multiples decreased over the course of the period, from a little over 3.5x to approximately 3.2x. 470 In the balance of section 3.2, Mr Siolis explains that there are a number of possible explanations for the decrease in the P2P transaction multiples. 471 In relation to BOLR on-sell transaction data (dealt with in section 3.3 of the report), Mr Siolis sets out a summary of the data in Figure 4. Mr Siolis observes in paragraph 169 that Figure 4 suggests that there was a decrease in observed register right transaction multiples after a date that corresponds roughly to the publication date of the Royal Commission interim report (September 2018). The trendline in Figure 4 shows that transaction multiples decreased over the course of the period, from approximately 4.25x to approximately 2.0x. 472 In the balance of Section 3.3, Mr Siolis expresses the view that, because of the range of confounding factors, he cannot reliably infer from the data that there was a sustained and quantifiable change in the value for which AMPFP register rights could be sold. 473 Mr Siolis was a good witness. He gave careful and precise answers to questions, and made concessions where appropriate. 474 The limitation of his opinion evidence is that he was provided with only limited data. In these circumstances, his report is essentially merely a summary of that data, together with an identification of issues about which he is unable to express an opinion (due to lack of data). This is not a criticism of Mr Siolis. However, in light of these matters, I attach little weight to his report and evidence. It does not provide me with any real assistance in deciding whether or not the first alternative "economic change" relied on by AMPFP occurred.

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Mr Neill's evidence 475 Mr Neill, who was called by Equity, is a Director at Seaview Consulting Pty Ltd, a Fellow of the Institute of Chartered Accountants Australia and New Zealand, holding a Business Valuations Specialist accreditation. 476 Mr Neill has been involved in the professional financial services sector since 1991. His role during this time has been to provide advice to participants in the sector, including business owners, boards of directors, institutions participating in the sector, legal advisers in litigation matters and professional and industry associations. The nature of the advice he has provided is corporate finance-related advice encompassing: (a) strategic planning for financial services businesses, directed at improving business performance, efficiency and profitability; (b) valuations of business assets and equity of financial services businesses, for a range of commercial reasons; (c) advising business owners on the sale or acquisition of financial services business assets or equity; and (d) succession planning, where the sale of equity was to existing members of the business's staff. 477 In the period 2010 until the present, Mr Neill's practice has conducted approximately 40 projects per year across the activities on which he advises. These were almost exclusively in the financial services sector, with the majority being valuation or merger and acquisition activity. 478 In his report, Mr Neill stated that, during the period 2010 until the present, almost all valuations and pricing of transactions of financial advice businesses in respect of which he was the primary adviser, adopted one of two methodologies: (a) multiple of ongoing revenue; or (b) capitalisation of maintainable earnings. 479 Mr Neill stated in his report that, under the multiple of ongoing revenue method, a determination is made of the quantum of "ongoing revenue" that the business derives or is likely to derive in the future; a multiple is applied to this amount and this determines the value of this "asset" to the business. 480 Mr Neill stated in his report that, under the second method (capitalisation of maintainable earnings), a determination is made of the likely maintainable earnings of the business; the maintainable earnings of the business are the earnings that the business is likely to make in the future after considering factors that may affect the business's profitability; examples of this are "one-off" revenue events that will not repeat, a change in the ongoing expenses of the business such as rent reduction, staff reduction (or staff increase), one-off government subsidies, changes in pricing models, or a change in operating models. Mr Neill stated that the maintainable earnings are capitalised by applying a multiple to them which is called the capitalisation rate; the appropriate capitalisation rate is determined by assessing the "growth prospects" of the business, the operating conditions in the sector in which it trades, the relative certainty surrounding the business's capacity to continue to operate at the same level and the risk management approach of the business. 481 Mr Neill stated in his report that the capitalisation of maintainable earnings method is distinguished from the multiple of ongoing revenue methodology as it has regard to the expenses of the business as well as the revenue; it is more generally applied to larger businesses and equity transfers between stakeholders, as in such cases it is most likely that an acquirer of the business would take on some or all of the costs and resources of the acquired business, in addition to the revenue-generating assets. 482 The essence of Mr Neill's report is an opinion that between January 2017 and August 2019, valuation multiples for financial planning businesses were steady and in the range of multiples set out in the report. Mr Neill's report does not deal with the AMPFP network. It relates to the general market for the sale and purchase of financial advice businesses. 483 Mr Neill gave evidence in a clear and straightforward way. He made concessions during cross-examination where appropriate. However, for the reasons set out below, there are significant limitations with his evidence. 484 In paragraphs 21 to 29 of his report, Mr Neill addressed general market conditions and expressed an opinion (in paragraph 22) that there were significantly more businesses looking to acquire businesses or assets than were available or coming to market throughout the period January 2017 to August 2019. This opinion was merely based on businesses contacting Mr Neill's office, conversations with his peers, interactions with other businesses and commentary in the marketplace. Mr Neil did not put forward any market research or data to support his view. In light of this, I place little weight on this opinion. 485 In paragraphs 30 to 38 of his report, Mr Neill expressed opinions relating to transaction multiples in the market for financial planning businesses in the period January 2017 to August 2019. The opinions expressed in this section were based on 12 transactions in which Mr Neill acted. Mr Neill's report stated in paragraphs 34 and 35: 34. The price range throughout this period for the larger businesses was: 34.1. 6.5 to 8.5 times EBIT 34.2. 2.75 to 3.2 times REV 35. The price range throughout this period for the smaller businesses was: 35.1. 2.3 to 3 times revenue Some details of these transactions were set out in Appendix D of the report. The multiples in paragraph 34.1 were based on the capitalisation of maintainable earnings method, while the other multiples were based on ongoing revenue. 486 During cross-examination, Mr Neill gave evidence that the multiples appearing in paragraphs 34 and 35 of his report all involved back-calculation of the multiple. Mr Neill accepted in cross-examination that his report did not provide any of the following details for the 12 transactions: the characteristics of the clients; the service offering of the business; the age and demographics of the client base; geographic location; level of fees paid by clients; and sources of revenue. During cross-examination, Mr Neill explained that paragraph 34.1 related to four businesses, and they were not the same businesses as those covered by paragraph 34.2. 487 In paragraph 38 of his report, Mr Neill expressed the following opinions: It is my view, on the basis of my experience, consultation with my peers, consultations with lenders and attendance at financial planning industry conferences and meetings, the values attributed to businesses where the businesses characteristics were similar did not change during the period in review. Any variance in transaction pricing was generally determined by the qualitative aspects of the business in question. Those variances meant that the multiples applied from transaction to transaction varied during the period, but those variations were confined within the ranges mentioned in paragraph 34 and 35 above. It was my experience that the way that multiples were applied to reflect different characteristics was generally consistent throughout the period. (Emphasis added.) 488 During cross-examination in relation to paragraph 38, Mr Neill said that "poorer businesses were getting more recognised and discounted significantly from a value point of view". Mr Neill accepted that poorer businesses "dropped in value" during the period January 2017 to August 2019. Mr Neil accepted that this was not what paragraph 38 said. In light of this significant concession, and the concessions made later in cross-examination (discussed below), I place very little weight on the opinion expressed in paragraph 38 of the report. 489 Paragraphs 39 to 44 of Mr Neill's report deal with valuations that he provided during the period January 2017 to August 2019. This section of the report related to nine valuations conducted by Mr Neill. Mr Neill said during cross-examination that the businesses referred to in this section of his report were a mix of accounting and financial planning practices. He accepted that the report did not say anything about the proportion of the businesses that comprised financial planning practices. Mr Neill was taken, during cross-examination, to some of the transactions where the proportion of the business that related to accounting was far greater than the proportion relating to financial planning. In light of these matters, I consider that very little weight can be given to this part of the report. 490 Paragraphs 45 to 49 of Mr Neill's report relate to valuations of businesses that were predominantly risk insurance businesses. Mr Neill accepted during cross-examination that these valuations did not involve financial planners. In light of this, I do not consider this part of the report to offer assistance for present purposes. 491 In paragraphs 50 to 53 of the report (parts of which were ruled inadmissible), Mr Neill expressed opinions based on data that he received from market participants. He stated that he was aware of the details of transactions through press, public announcements and "peer awareness". He referred to the "consistency of transaction pricing" that he was seeing in the market. Insofar as Mr Neill expressed an opinion regarding consistency of transaction pricing in these paragraphs of his report, this was based on second-hand information and the basis of the opinion was not described in any detail. I therefore place very little weight on this part of his report. 492 During cross-examination, Mr Neill was taken to an article in the Australian Financial Review dated 15 August 2019. The article was based on an interview with Mr Neill. In the article, Mr Neill was quoted as follows: "What we've seen is certainly valuations have come back, and in our view, they've come back down 20 to 25 per cent," said Seaview Consulting director Bob Neill. When cross-examined on the above passage, Mr Neill said that it was only an excerpt of the interview that he had given, and said that he was referring to poorer quality businesses coming back (i.e. reducing) 20 to 25 percent. Mr Neill accepted that this was not stated in his report. In my view, the statement made by Mr Neill in the interview, even if confined to poorer quality businesses, is inconsistent with the opinion expressed in paragraph 38 of his report. 493 Mr Neill was also taken during cross-examination to an article in the Australian Financial Review dated 14 October 2018 in which he was quoted as follows: "There is uncertainty around grandfathering and trailing commissions and that uncertainty of earnings is having an impact. If you don't have good quality information about your clients and can't prove what value you have been offering clients that will be reflected in the valuation," Mr Neil (sic) said. Mr Neill said during cross-examination that what he was conveying was that poorer quality practices that did not adapt were dropping in value. Mr Neill accepted that he should have included this in his report. 494 Later in the same article, Mr Neill was quoted as follows: "When a business is smaller it's [valued on] a multiple of revenue or recurrent revenue and that has been between 2.5 and 3 times but we see that coming back quite significantly and sometimes as low as one and a half times to 2.75 times," Mr Neil (sic) said. In relation to the above passage, Mr Neill said during cross-examination that he was expressing an opinion in relation to poor quality businesses that did not adapt or change. He accepted that the opinion expressed in that interview was at odds with his evidence to date and that he should have referred to it in his report.

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Professor Brimble's evidence 496 Professor Brimble, who was called by AMPFP, has worked in financial services and financial services education for 22 years and holds the position of Professor (Finance) in the Department of Accounting, Finance and Economics, and the role of Dean (Learning and Teaching) in the Griffith Business School. 497 Professor Brimble has a PhD on capital markets and active research interests in financial markets, sustainable finance, personal finance and finance education, with publications in various national and international journals. In recent years, he has led a research team working on the value of financial advice. The types of projects include financial adviser perspectives on the value of advice, the impact of superannuation switch decisions, the impact of the COVID-19 pandemic on advice, building a multi-factor model of the value of advice and the long-term impact of advice on clients. 498 Professor Brimble is a Fellow of CPA Australia, a Fellow of The Financial Services Institute of Australasia, a member of the Financial Planning Association of Australia and a member of the Australian Institute of Company Directors. He has served on various industry and regulatory committees/boards including being a foundation member of the Future Financial Planners Council in 1997, a foundation member of the Financial Planning Education Council and Chair from 2012-2017, and the Founding Co-Chair of the Financial Planning Academics Forum. He also served as a Director of FASEA from April 2017 to January 2022. He is also a foundation member of the GPS Wealth Investment Committee and the Co-Founding Editor of the Financial Planning Research Journal. 499 Professor Brimble disclosed in his report that Griffith University has had an education partnership with AMP for a number of years and he has played a leading role in establishing and managing this relationship. His role included proposing the relationship to Griffith University, participating in the governance of the relationship (sitting on the steering and governance committees) and being a member of the research team. The primary agreement underpinning this partnership ended at the end of 2021, prior to the engagement for, and writing of, the report. Professor Brimble states in his report that, in his view, the partnership does not impact on his ability to provide the report as an independent expert. 500 The executive summary to Professor Brimble's report contains the following summary of the questions he was asked to address and his opinions (omitting the passages that were "not read" by AMPFP): Describe the market conditions for the Australian financial advice industry in the period leading up to 8 August 2019. 2. The market conditions in the period leading up to 8 August 2019 were turbulent for the financial advice industry. This was a period of disruption which arose from advice and product scandals, persistent regulator action against poor quality and inappropriate advice, and a series of regulatory reform efforts which emerged over the preceding decade. There was also a growing sense of frustration and concern about the culture of the industry and a lack of progress in relation to standards across the financial services sector. There was a market expectation of mass adviser departures from the industry with estimates that up to half the industry's advisers would leave and with 15% actually leaving in the first 10 months of 2019 (Sharpe, 2020a). These factors coalesced during the period from November 2018 to February 2019 resulting in significant disruption and resultant economic consequences for financial advice practices at the time. Was there an economic change in the Australian financial advice industry during that period - as relied upon by AMPFP or otherwise - and, if so what was the nature of that change? 3. [Not read]. These changes and the consequences were exacerbated by advisers deciding to exit the industry in that period. What were the reasons for the change and the factors leading to it? 4. The reasons for the [not read] change and the factors leading to it were (1) a low and declining level of trust in the sector by the broader community, (2) the regulatory reform program, (3) changes to business models and disruption to the legacy structure of financial advice practices, and (4) deteriorating sentiment within the sector. What was the impact of the change on Australian financial advice practices and on the Australian financial advice industry, including the impact (if any) on: (a) the cost of providing financial advice services; (b) the profitability of financial advice practices; (c) the market for financial advice practices; and (d) the value of financial advice practices? 5. The impact of the [not read] change as described above, was materially adverse to the cost of providing financial advice services, the profitability of financial advice practices, the market for financial advice practices, and consequently, the value of financial advice practices. The factors described above coalesced and were particularly heightened in the period November 2018 through February 2019. In this period the economic and behavioural (sentiment) drivers contributed to a 'buyers' market' emerging for advice practices from that time. This particularly negatively impacted practice values at and from that time. 6. The [not read] change outlined above impacted advice practices in a number of ways, and particularly more so for those that had not adjusted their business and business practices over time. Some specific impacts included (1) a deterioration of revenue with the removal of grandfathered commissions; (2) increases in costs to comply with new standards and to transition businesses to the new way of doing business; (3) a resultant decrease in profitability; (4) a consequential decline in average practice value, exacerbated as advisers left the independent and sentiment deteriorated. The collective impact of these factors was to reduce the value of financial advice practices during this disrupted period - i.e., the lead up to 8 August 2019. 501 Professor Brimble's report does not specifically address the AMPFP network; it is concerned with the general market for the sale and purchase of financial planning practices. Professor Brimble does not express an opinion on whether there was a sustained and quantifiable decrease in the market value of register rights linked to ongoing revenue (i.e. the first alternative economic change relied on by AMPFP in this proceeding). 502 Professor Brimble gave clear answers to questions during cross-examination, in a way that was seeking to assist the Court. Insofar as the evidence of Professor Brimble was challenged on the basis that he lacked independence because of the professional relationship between AMP and Griffith University, in respect of which Professor Brimble played a leading role, I do not consider that Professor Brimble's evidence lacked independence. I consider that he expressed his opinions honestly and impartially. 503 Professor Brimble accepted in cross-examination that he has no experience in the valuation of financial advice businesses. He accepted that he was unable to provide an opinion as to what was, in fact, happening with the valuation of financial advice practices in the period leading up to August 2019. 504 In section 2.1 of his report, Professor Brimble described the market conditions for the Australian financial advice industry in the period leading up to 8 August 2019. In cross-examination, Professor Brimble said that he was addressing the period from the start of 2018 to August 2019. I accept the evidence in this section of the report. 505 In section 2.2 of his report, Professor Brimble addressed the question whether there was an economic change in the Australian financial advice industry during the period from the start of 2018 to August 2019 (as relied on by AMPFP or otherwise). A substantial part of this section was not read. 506 In section 2.3, Professor Brimble addressed the question "What was the nature of that change?" He expressed the following opinions at paragraphs 28 and 29: 28. In my opinion the change during this period of time had the following characteristics: a. Business revenue and costs were impacted by removing most forms of commissions including grandfathered commission and the changed compliance requirements and caps on some superannuation fees (paragraph 85); b. Impacts on business models by regulated changes to revenue models, licencing and disclosure requirements (paragraph 85), and human capital requirements (education requirements) (paragraphs 77 78); c. The departure of advisers from industry (Adviser Ratings, 2019; Sharpe, 2020a); d. Impacts on the nature of the client-professional relationship with changes to require regular renewals of ongoing fee arrangements (annual opt-in); e. Sentiment towards the sector with the rise in negative sentiment and deterioration of trust; f. Sentiment within the sector with some advisers questioning their future in the industry while others engaged in activities to resist the implementation of reforms. Further, the discourse in the trade press at this time (2018 and 2019) commonly portrayed the industry as being under attack. This was also supported by Griffin (2021) who concluded in a review of regulatory reform over the 2009-2020 period that the process of reform has also been problematic and divisive, and lobbying during the process of establishing reforms may have escalated the negative sentiment within (and towards) the financial advice sector. 29. [Not read]. I conclude that these various changes coalesced during the period of late 2018 through early 2019. 507 In section 2.4, Professor Brimble addressed the question "What were the reasons for the change and the factors leading to it?" In this section he identified and dealt with four reasons: (a) a low and declining level of trust in the sector by the broader community (paragraphs 32 to 34); (b) the regulatory reform program (paragraphs 35 to 41); (c) changes to business models and disruption to the legacy structure of financial advice practices (paragraphs 42 to 44); and (d) deteriorating sentiment within the sector (paragraphs 45 to 48). 508 In relation to the first reason (low and declining level of trust), Professor Brimble accepted during cross-examination that the only sources he relied on for the proposition that there was a deterioration in trust between 2017 and 2021 were Roy Morgan surveys. He accepted that the decline in percentage points was 8 percent. It was put to him that the average percentage point decline across all professions was 8.60 percentage points. It was put to him that the decline in trust in financial planners was consistent with the average. Professor Brimble accepted this, but maintained there was a decline in trust in the sector. 509 In relation to the third reason (changes to business models and disruption to the legacy structure of financial advice practices), Professor Brimble stated in paragraphs 43 and 44 of his report: 43. The relevant pressures in the period leading up to 8 August 2019 included: a. A need for an increased minimum and average scale of operation to underpin the sustainability of the practice. This has led to a shift on average to larger businesses from the historical 'one-man band' model, to enable growth and efficiencies to emerge (Tynan, 2022). For example, in reference to an industry white paper, an article by Griffiths (2021: para. 3), noted that "the industry is going through a transformational phase and advice businesses, which have traditionally struggled to grow beyond a certain point, let's say, $2 million to $3 million in revenue, will need to get much bigger." b. Calls for succession planning with comparisons drawn to the US market where the average age of advisers was over 50 and a quarter of advisers were planning to retire within 2 years (Williams, 2017). c. For smaller practices (revenue less than $1 million) to "shift towards a higher standard of professionalism with remuneration for advice based on fee for service" (IFA, 2014, para. 9). IFA (2014: para. 12) went on to claim that value in the future will be judged on "the client value proposition, the client service experience and the value clients place on the advice they receive". During the relevant period, these pressures applied to a greater extent to advice businesses that had not adjusted their business and business practices over time. 44. In my view, these pressures were difficult for some practices to manage as a consequence of their existing structures and level of preparedness for change and became even more challenging during the period of heightened reform activity as summarised above in 2018-2019. These pressures are also demonstrated in the adviser activity in Figure 3 and discussed below. 510 During cross-examination, Professor Brimble was taken to the sources he cited in paragraph 43(a). He confirmed that the second article (referred to as Griffiths (2021)) was written by Paul Tynan, who was the chief executive of Connect Financial Service Brokers, and that the article was in the nature of an "op ed" or opinion piece. 511 In relation to paragraph 43(b), Professor Brimble was taken during cross-examination to the publication he cited. He accepted it was a financial industry publication as distinct from a peer-reviewed article. The article was published in October 2017 and relied on a report released "a couple of years ago". The article stated that that report painted a stark picture of the US adviser market, "one we think closely resembles the Australian one". The article does not set out a basis for that statement. 512 In relation to the fourth reason (deteriorating sentiment within the sector), Professor Brimble was taken in cross-examination to the source he cited, a working paper prepared by Eliana Loy and others, including Professor Brimble. He accepted that the survey referred to in the paper ran from November 2019 to June 2020. It was put to him that the survey was irrelevant to the cause of any economic change experienced in the period leading up to August 2019. He rejected this, and said that survey participants were asked about their experiences focussing on the recent period of time. Professor Brimble accepted that the study was not longitudinal (in the sense that it did not compare how survey participants responded at different points in time) and that such a survey "would have strengthened the argument". 513 In sections 2.5 to 2.9 of his report (paragraphs 50 to 66), Professor Brimble addressed the question "What was the impact of the change on Australian financial advice practices and on the Australian financial advice industry", including the impact (if any) on: (a) the cost of providing financial advice services; (b) the profitability of financial advice practices; (c) the market for financial advice practices; and (d) the value of financial advice practices. 514 In paragraph 52, Professor Brimble expressed the view that the change described above did lead to increasing costs for practices and identified four types of increased costs. During cross-examination, Professor Brimble accepted that he did not identify any source or reference for these propositions. He also accepted that he could not say by how much the costs increased. 515 Insofar as Professor Brimble expressed a view (at paragraph 55) that revenue and profitability of financial advice practices were negatively impacted, Professor Brimble accepted during cross-examination that he had not looked at the financial information of any financial advice practice in formulating that opinion. It was put to Professor Brimble that he had based his opinion on the online articles cited in his report, rather than on his professional experience. He accepted that he had not referred to his professional experience in paragraphs 55 to 58, but said he took the position that the whole report was based on his experience. In relation to an article cited in paragraph 58(b) of the report (Cormican, 2022), Professor Brimble accepted during cross-examination that, insofar as profitability is concerned, the article is concerned exclusively with matters that post-date August 2019. 516 In relation to paragraphs 59 and 60 of the report, in which Professor Brimble expressed the view that the impact of the changes was "to depress the market and tip the balance of supply and demand of practices towards supply, thus creating a 'buyer's market'", Professor Brimble accepted in cross-examination that the only sources he cited were the online articles referred to in paragraph 60. He was taken to one of the articles he cited (Sharpe, 2018) and it was put to him that he had quoted selectively from the article, on the basis that he had not referred to observations of Mr Prendeville quoted in the article that the state of the market was "only temporary" and that he believed that, as soon as the recommendations of the Royal Commission were known, "the market will once against come back". These words appears immediately after the second quotation in paragraph 60(b) of Professor Brimble's report. Professor Brimble could not provide an explanation for why the words of qualification were not quoted in his report. 517 In paragraph 61 of his report, Professor Brimble expressed the opinion that the factors discussed in the three preceding sections (i.e. cost, profitability and the market for advice practices) "can be expected to collectively have an adverse impact on the value of advice practices". Reasoning in support of that opinion was set out in paragraphs 61 to 66 of the report. 518 In my view, a difficulty with sections 2.2 to 2.9 of Professor Brimble's report is that much of it is based on online articles that appear to be anecdotal in nature. Further, as examined in cross-examination and summarised above, some of the sources do not provide proper support for the opinions expressed. While I accept that the opinions in the report are also based to some extent on Professor Brimble's professional experience, the report does not explain how that experience provides a basis for the opinions that are expressed. In light of these matters, I consider that little weight is to be attached to the opinions in those sections of the report.

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Professor Frino's evidence 519 Professor Frino, who was called by AMPFP, is Professor of Economics and Senior Deputy Vice-Chancellor at Wollongong University and a Director of Financial Markets Consulting Pty Ltd. 520 Professor Frino was previously Chair of Finance at the University of Sydney, where he held a position in the finance discipline for over 20 years. He holds a PhD in Finance from Sydney University and an MPhil in Finance from Cambridge University and his speciality is the organisation of financial markets, including the organisation and impact on markets of rules, regulations, technology, information and participants as well as the valuation of assets. He has written a large number of research papers which have been published in leading scholarly journals and as book chapters, including work on how assets are valued and priced. He has been teaching economics and finance at university level for more than 30 years, including the valuation and pricing of assets and businesses. 521 Professor Frino was instructed to answer the following questions: (a) Describe the market conditions for the Australian financial advice industry in the period leading up to 8 August 2019. (b) Was there an economic change in the Australian financial advice industry during that period - as relied upon by AMPFP or otherwise - and, if so: (i) what was the nature of that change: (ii) what were the reasons for the change and the factors leading to it, and (iii) what was the impact of the change on Australian financial advice practices and on the Australian financial advice industry, including the impact (if any) on, (a) the cost of providing financial advice services; (b) the profitability of financial advice practices; (c) the market for financial advice practices; and (d) the value of financial advice practices? 522 In relation to questions (a) and (b)(i) and (ii), the executive summary to the report provides the following summary of Professor Frino's opinions: 7. In my opinion, the Australian financial advice industry can be conceptualised as a market for financial advice services made up of suppliers of financial advice services willing to provide a certain volume of these services at different prices, and demanders or consumers of these services. I take an economic change to be a change in the supply of, or the demand for, financial advice services. Over the period 1 June 2017 to 8 August 2019 there were a number of factors which changed the supply and demand for services in the Australian financial advice industry. 8. The relevant influences that caused the first economic change I discuss - a change in supply - were factors which lead to changes in the costs of supplying financial advice and reductions in the number of advisors. The relevant influences that caused the second economic change I discuss - a change in demand - were predominantly centred on the Hayne Royal Commission. 9. I am asked to consider the period leading up to 8 August 2019. I have not been provided with a definition of the period that I should consider. Accordingly, for the purposes of providing my opinion, I have taken the period leading up to 8 August 2019 to be the period from 1 June 2017 to 8 August 2019, which are the dates that the 2017 BOLR Policy and the 2019 BOLR Policy (see briefing letter dated 15 December 2021 in Appendix 2) were dated, respectively. 10. In my opinion, the supply of financial advice services decreased as the costs and expected future costs of providing financial advice increased significantly including increases in (i) unit labour cost (wages and salaries) associated with financial advisors, (ii) the unit cost of leasing premises (rent) as well as (iii) regulatory and compliance costs associated with the provision of financial services from 1 June 2017 to 8 August 2019. The unit labour cost increase and expected future increase were caused by reductions and expected reductions in the number of advisors as a result of changes in education and training requirements for financial advisors and the failure of financial advisors to pass exams or to prefer to exit from the industry rather than take exams or meet the new educational requirements. This meant that firms who hired advisors needed (and would need) to pay higher salaries and bonuses in order to attract or retain scarcer numbers of financial advisors. The rise in the cost of renting premises were driven by increases in the price of real estate and the consequent increase in rent as owners of real estate attempt to maintain yields. Financial advice firms also experienced increases in current and future compliance and regulatory costs including those associated with anticipatory pre-emptive action in responding to the findings, recommendations and potential legislation and regulatory changes associated with the Hayne Royal Commission which unfolded between 14 December 2017 and 4 February 2019. 11. The supply of financial advice services also contracted as a result of the contraction and future expected contraction in the labour market associated with financial advice firms (advisors) which naturally placed a capacity limit on the supply of financial advice services. 12. The second set of economic changes were changes in the demand for financial services. The demand for financial services fell outright and/or became more elastic (ie. sensitive to increases in the price of financial services) predominantly because of the findings and recommendations of the Hayne Royal Commission (and associated negative publicity) which influenced the willingness of consumers to tolerate increases in the price of financial advice or their willingness to acquire financial services. 523 In relation to question (b)(iii), the executive summary to the report provides the following summary of Professor Frino's opinions: 14. Drawing on the first part of the report, I opine that the cost of providing financial advice services increased after 1 June 2017 and before 8 August 2019. 15. I also opine that the increase in costs (and future increases) as well as the reduction in revenues (and future reductions) caused by the fall in supply and demand for financial advice services resulted in a contraction in profit margins (and future contractions) of financial advice firms. 16. Based on standard corporate finance valuation theory and practice, in the second part of the report I demonstrate that the value of financial advice practices is a function of (1) the profit margin or "cashflow margin" and future margins of financial advice firms (m), (2) the future expected growth in revenues and cashflows of financial advice firms (g) and (3) the cost of capital of financial advice Finns which is influenced by the riskiness of the future cashflows of those firms (r). 17. In the second part of the report I opine that the profit margin and future profit margin (m) was contracting unexpectedly and the future growth rates (g) of revenues and cashflows of financial advice firms were falling unexpectedly, and on this basis the value of financial advice practices were falling after 1 June 2017 and before 8 August 2019. 18. I also examine the change in the riskiness of the future cashflows of financial advice firms, which can be measured through a statistical parameter called beta (β) which measures the sensitivity of the stock price of listed firms to market index returns. Using a sample of financial advice firms traded on the ASX, I construct a portfolio of such firms whose price movement is primarily driven by changes in the financial advice industry and demonstrate that β increased significantly and unexpectedly after 1 June 2017 and before 8 August 2019. Consequently the cost of capital (r) of financial advice films increased. On this basis, I opine that the value of financial advice practices was also falling due to increased risk associated with operating in the financial advice sector after 1 June 2017 and before 8 August 2019. 19. Given that the value of a financial advice firm can be interpreted as a function of m, g and r, and that all of these variables changed after I June 2017 and before 8 August 2019 in such a way as to reduce the value of financial advice films, I opine that the value of financial advice firms fell significantly after 1 June 2017 and before 8 August 2019. 20. Finally, in my opinion, the fall in the value of financial advice firms after 1 June 2017 and before 8 August 2019 would have caused the price paid for these businesses to fall. Using the sample of financial advice firms listed on the ASX, in my opinion, the price paid for financial advice businesses traded on the ASX fell sharply after 1 June 2017 and before 8 August 2019. Furthermore, based on the analysis of this sample the bulk of the fall in the price paid for financial advice businesses traded on the ASX occurred in 2018. 524 Professor Frino's report does not address the AMPFP network specifically. Professor Frino does not express any opinion on whether there was a sustained and quantifiable decrease in the market value of register rights linked to ongoing revenue. 525 The three economic changes identified by Professor Frino in Part 1 of his report are: a decrease in the supply of financial advice services; a decrease in the demand for financial advice services; and an increase in the elasticity of demand for financial advice services. He does not express an opinion about the supply of, or demand for, financial advice practices. 526 Professor Frino provided clear and helpful answers to questions during cross-examination. He made sensible concessions, where appropriate. 527 Professor Frino accepted during cross-examination, that while he had done some work in, and analysed data from, the financial advice industry, it was not the major part of his work. He accepted that he had not worked in the financial advice sector. He accepted that he had no experience in evaluation of financial advice practices.

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Part 1 of the report 528 In Part 1 of the report, Professor Frino addressed questions (a) and (b)(i) and (ii). Professor Frino discussed the Australian financial advice industry and economic framework (paragraphs 21 to 26). He then discussed the Australian financial advice industry from 1 June 2017 to 8 August 2019 and, in particular, market conditions, economic changes and their impact on market conditions, and the reasons for the economic changes. In this section, he described: (a) the supply of financial advice (paragraphs 28 to 51); and (b) the demand for financial advice and interaction of supply and demand (paragraphs 52 to 55). 529 In relation to the supply of financial advice, Professor Frino accepted during cross-examination that nowhere in his report does he point to any direct evidence of the supply of financial advice services in fact decreasing in the period leading up to August 2019. He said that he reached his conclusion by inference and by observing what was happening to revenues. Professor Frino accepted that nowhere in his report did he quantify the extent to which the supply of financial advice services decreased. 530 The first factor relied on in the report to support the proposition that the supply of financial advice services decreased was an increase in the forecast cost of wages and salaries. This part of the report relied on data from IBISWorld. Professor Frino based his analysis on a comparison between the IBISWorld data from 2017 and the IBISWorld data from 2019 in relation to forecast average increases in wages. He accepted during cross-examination that, in order for financial advice firms to reduce the quantity of services being supplied, the firms would need to be aware of the increase in forecast wage growth. He accepted that IBISWorld is a subscription-only service and hence, not publicly available. During cross-examination, Professor Frino was taken to the IBISWorld reports for financial planning and investment advice in Australia prepared in January 2017 (AMP.5800.0250.0045) and April 2019 (AMP.5800.0250.0044). He was taken to the "key statistics" page in each document (pages 29 and 31 respectively). The historical wage figures (above the shaded row) in each document are strikingly different. Professor Frino explained during cross-examination that the reports were prepared from different datasets and he had had multiple conversations with IBISWorld about the data. Professor Frino accepted that to compare the two reports reliably, a prerequisite was that one was comparing like with like. However, he explained that he had not compared the wages in one report with the wages in the other; he had compared what an analyst had extrapolated from one dataset with what an analyst had extrapolated from the other dataset, and he did not believe the comparison was inappropriate. I have some difficulty with the comparison given that the datasets were different. 531 Another factor relied on by Professor Frino in his report, in relation to reduction in supply, was compliance costs. In paragraph 45 of his report, Professor Frino expressed an opinion on the basis of his "experience on the board of an Australian deposit-taking institution (ADI)". During cross-examination, Professor Frino confirmed that the ADI was the Illawarra Credit Union. He accepted that it does not provide financial advice. Professor Frino conceded that the opinion that he expressed on that basis "may not apply to financial advice firms". 532 In Table 4 in the report, Professor Frino set out a summary of the findings and recommendations of the Royal Commission and his opinion on the impact of the recommendations on financial advice providers (for example, increased costs and risks, reduced revenue). Professor Frino said during cross-examination that these opinions were based on economic logic and a straightforward statement about what the recommendation did. He accepted that he had not set out the actual cost consequences of the recommendations. Professor Frino accepted that he had not sought to quantify the extent to which costs were projected to increase. 533 In paragraph 50 of his report, Professor Frino expressed the opinion that many advisers would simply have chosen to leave the sector as a consequence of the Royal Commission and associated negative publicity. Professor Frino accepted that he had not identified the basis for that opinion in his report. He said that at the time of the Royal Commission he was doing research with BT Financial Group, and he had many interactions with people that worked in the marketplace in the course of that work; the opinion was based on concerns they voiced. This does not appear to be a rigorous basis for the opinion. 534 In paragraph 51 of his report, Professor Frino referred to data about the number of financial advisers registered with ASIC and the expected growth in the number of advisers over the next five years sourced from an independent forecaster. In the last sentence of paragraph 51 of the report, Professor Frino referred to an expected contraction in the number of advisers between 2019 and 2023. It was put to Professor Frino that, in order for a contraction in supply to be caused by a reduction in the number of advisers, he needed to confine himself to the period leading up to 8 August 2019. Professor Frino responded that a financial advice practice that thought it was going to experience a reduction in staff "might take action immediately rather than wait for [its] staff to leave and then dismiss the relationship with [its] clients". Professor Frino maintained that an expected staff reduction was relevant in forming an opinion that, as at 8 August 2019, the supply of financial advice services had reduced. Professor Frino accepted that, in order to form that conclusion, the forecast would need to have been made and available as at 8 August 2019, and that the forecast relied on in paragraph 51 and Diagram 2 of his report was from 2020. These matters raised in cross-examination do appear to be weaknesses in this aspect of the analysis. 535 The matters raised during cross-examination as set out above diminish the weight that can be attached to the opinion that in the period 1 June 2017 to 8 August 2019 there was a decrease in the supply of financial advice services. 536 In paragraph 52, Professor Frino expresses the opinion that the findings of the Royal Commission would have caused a contraction in demand for financial advice services and also increased the elasticity of demand for financial advice services over the period that it was conducted and reported (i.e. from December 2017 to February 2019). During cross-examination, Professor Frino accepted that this opinion was about what he expected would have happened, rather than what in fact happened. Professor Frino accepted that his opinion (about what he expected would have happened to demand) was based on an analogy with a product harm crisis. He accepted that the three articles he relied on in this regard were from the discipline of marketing. He accepted that the focus of the articles was defective products, not services. Professor Frino accepted in cross-examination that the findings of the Royal Commission in relation to financial advice were "fundamentally different" to the product harm crises discussed in the articles, but he stated that he did not consider it unreasonable to draw an inference based on the articles. He accepted that the analogy was the "main lens" through which he looked at the issue. In light of these matters, I give little weight to these aspects of the report.

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Part 2 of the report 537 In Part 2 of the report, Professor Frino addressed question (b)(iii). That question has four parts, labelled (a), (b), (c) and (d). Professor Frino discussed these in the following order: (a), (b), (d), (c). 538 Professor Frino accepted during cross-examination that the analysis in Part 2 of his report depended on the establishment of the economic changes he identified in Part 1. 539 In relation to issue (d) (the impact of the change on the value of financial advice practices) (paragraphs 68-95), Professor Frino started by explaining in theoretical terms how factors such as costs and profits are related to the value of financial advice practices. The theoretical framework also identified another factor relevant to valuing financial advice practices - the riskiness of cash flows generated by financial advice firms and thereby the cost of capital (or discount rate) used to value such firms. Having set out the theoretical model, Professor Frino opined on the impact of the economic changes identified in Part 1 of the report on the value of financial advice businesses. He expressed the opinion that, fundamentally, the value of financial advice businesses changed after 1 June 2017 and before 8 August 2019 as a result of unexpected changes in (1) the "profit margin" (m), (2) the expected growth in net future cash flows (g) and (3) the cost of capital (r). 540 In paragraph 89 of his report (which relates to the cost of capital), Professor Frino stated: In Appendix 4 I identify a sample of companies listed on the Australian Securities Exchange whose revenues and cashflows are at least partly exposed to the risks of the financial advice industry. For my purposes here, it is not important that all of the revenues and cashflows of each of the firms sampled are exposed to the financial advice industry, but the method I adopt requires only some part of each business and the cashflows generated by that business to be exposed to the risks of operating a financial advice business. As described in Appendix 5, I calculate the weekly change in the value of a portfolio made up of these companies. According to basic portfolio diversification concepts (see Frino et.al 2010, page 172-175), the change in the value of such a portfolio will be purged (or diversified away) of the idiosyncratic influences on the price movements of each underlying stocks in the portfolio and reflect price movements of factors which are common to each stock in the portfolio. Since the stocks identified in Appendix 4 have been selected on the basis of having some exposure to the financial advice industry, then the portfolio of these stocks, and the changes in the price of the portfolio made up of these stocks will reflect the risks of operating in the financial advice industry. According to portfolio theory, influences on their price movements caused by other parts of their businesses will be diversified away. Therefore, by calculating how the beta of the portfolio changed from before 1 June 2017 to after 1 June 2017 it is possible to estimate the effects of changes in the financial advice industry on the perceived risk of future cashflows generated by the financial advice industry. (Emphasis in original; footnote omitted.) 541 During cross-examination, Professor Frino was taken to Appendix 4 to his report, which identifies 10 stocks. He accepted that, if these companies do other things, and those things are common across multiple companies within the sample set, then those other things will not be diversified away. He accepted that if six of the companies did that other thing, that would create "noise" and make it difficult to diversify away other businesses. Professor Frino indicated that he had not undertaken analysis of whether the companies have businesses in common other than financial advice services. He accepted that if six out of 10 companies had businesses in common (other than financial advice) it would "impact" his conclusions, but not "dominate". Equity has assembled documents that demonstrate that six out of the 10 companies in Professor Frino's sample deal in financial products and six out of the 10 provide platforms and other services to external financial advice practices. The absence of consideration of this matter does tend to weaken Professor Frino's analysis. 542 In paragraph 91 and Table 7 of his report, Professor Frino set out the change in risk (beta) of the financial advice industry. For the period 1 June 2015 to 31 May 2017, the beta was expressed as 0.65, and for the period 1 June 2017 to 7 August 2019 the beta was 0.83. During cross-examination, Professor Frino accepted that the point he was seeking to make by the reference to those numbers was that the risk of future cash flows for the entities that he sampled increased. He was taken to Diagram 3 in his report, which sets out a two-year rolling beta. Professor Frino accepted that if one looks at the period from 19 February 2018 to 19 October 2018, which broadly coincides with the time when the Royal Commission hearings took place, the beta is approximately 0.4, which is less than the beta in Table 7 for the period 1 June 2015 to 31 May 2017. Professor Frino accepted that the Royal Commission was the principal reason he advanced in this section of his report for the proposition that risk or uncertainty in relation to future cash flows would have increased. In my view, these matters do tend to weaken this aspect of Professor Frino's analysis. 543 In relation to issue (c) (the impact of the change on the market for financial advice practices) (paragraphs 96-99), Professor Frino expressed the opinion that the fall in the value of financial advice practices in the period after 1 June 2017 and before 8 August 2019 would also have caused the price of financial advice practices to fall during the same time period. Professor Frino's reasoning was as follows: 97. In this section, using the sample of companies listed on the ASX and which are identified in Appendix 4 as operating in the financial advice industry, demonstrate that the price at which financial advice businesses traded in the market for financial advice practices (which includes shares in financial advice businesses bought and sold on ASX) in fact did fall after 1 June 2017 and before 8 August 2019. For the reasons provided in paragraph 89 it is not necessary that the companies are homogeneous or that all of their cashflows are derived from financial advice, but that some component of their cashflows are derived from the financial advice sector so as to be able to draw conclusions about the financial advice market. 98. Diagram 4 below sets out the movement in the price of a portfolio of the 10 stocks listed on the ASX which operate, at least in part, in the financial advice industry. The diagram also describes the movements in the ASX 200 index which is a broad based index listed on the ASX. Abnormal price movements describe the average movement in die index after removing that component of price movement correlated with the ASX 200. 99. Diagram 4 above demonstrates that during the period 1 June 2017 to 8 August 2019, the ASX 200 increased by 30 percent - and therefore 1 dollar invested in the market index would have yielded $1.30 by 8 August 2019. In contrast, $1 invested in a portfolio of the 10 financial advice companies fell significantly, and would have lost approximately 20 percent of its value. This implies that the average price of the 10 financial advice stocks on the ASX began falling sharply in February 2018 and continued falling until December 2018 - the year during which most of the information related to the Hayne Royal Commission was released - including information released during the public hearings and the interim report of the Royal Commission. In my opinion, the decline in 2018 is consistent with the manifestation of the impact of the economic factors described earlier in this report on the traded prices of financial advice stocks. (Footnote omitted.) 544 Professor Frino was not cross-examined specifically on paragraphs 96-99 of his report. However, the opinion in relation to price is predicated on the opinion in relation to value. As set out above, there are weaknesses with that analysis that were exposed during cross-examination. 545 Further and in any event, Professor Frino did not quantify the reduction in the price of financial advice practices during the period 1 June 2017 to 8 August 2019. If and to the extent that he may be taken to suggest that the reduction was comparable to the reduction in the price of the stocks considered in Diagram 4, I note that the reduction in the price of those stocks was 20%. This is significantly less than the reduction to the multiple effected by the 8 August 2019 Changes.

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Onus of proof 549 There is a dispute between the parties as to which party bears the onus of proof in relation to whether or not the LEP Provision was satisfied in relation to the 8 August 2019 Changes. Equity contends that, properly construed, the LEP Provision is an exception to, or "carve out" from, the primary promise, which is to give 13 months' notice of a change to the valuation methodology for registers and any other change having a materially adverse financial or other significant effect on a practice (the first paragraph in the amendment term set out at [6] above). On this basis, Equity submits that, once it has established that the 8 August 2019 Changes were changes to the valuation methodology for registers or changes having a materially adverse financial or other significant effect on practices, and that AMPFP failed to give 13 months' notice of the changes, the onus is on AMPFP to demonstrate that the LEP Provision was engaged. 550 In response, AMPFP submits that, properly analysed, the primary promise regarding amendment of the practice documents (including the BOLR Policy) is contained in cl 3.2(b) of the Master Terms (see [76] above); amendments having adverse financial or other significant effect on practices are dealt with in cl 3.2(c); the LEP Provision and the 13 months' notice provision provide further detail about the exercise of the amendment power in cl 3.2 specific to the amendment of the BOLR Policy; the 13 months' notice period conditions the primary promise in cl 3.2(c) by requiring a period of notice, but that condition does not apply to circumstances falling within the LEP Provision. Accordingly, AMPFP submits, it is for the party challenging the effectiveness of the exercise of the power in cl 3.2 of the Master Terms and alleging breach, to establish that there was not an economic or legislation change, such that 13 months' notice was required. 551 I do not consider it necessary to resolve this issue. In the circumstances of this case, where there is evidence before the Court on whether there was an economic change that rendered part of the BOLR Policy inappropriate, I am in a position to make findings on the issue, and those findings do not depend on which party bears the onus of proof. However, I consider the better view to be that the onus lies on AMPFP (once Equity has established the matters that it accepts it must establish). I accept that the overarching amendment power is contained in cl 3.2 of the Master Terms and that the amendment term in the BOLR Policy contains further detail about the exercise of the amendment power specific to amendment of the BOLR Policy. However, I consider that the amendment term in the BOLR Policy should be read as a whole and that, once this is done, the LEP Provision is to be characterised as a particular exception to the first paragraph in the amendment term. I acknowledge that it is not expressed as an exception, but in substance it is a particular exception. Further, AMPFP, as the party making the change to the BOLR Policy, is likely to be better placed to adduce evidence as to whether there is an economic change that renders the policy inappropriate. 552 In AMPFP's written closing submissions, at paragraphs 19-20, it submits that, if Equity is wrong in its submissions on onus, then it had to affirmatively plead and prove that there was not a sustained and quantifiable decrease in the market value of register rights linked to ongoing revenue that rendered part of the BOLR Policy inappropriate. AMPFP submits that Equity has not done so, nor has it done these things in relation to the alternative economic change on which AMPFP relies in this proceeding. (Equity's statement of claim, at paragraph 32, alleges that on the proper construction of each authorised representative agreement, each of the alleged "economic changes" upon which AMPFP relies was not an "economic change" for the purposes of the amendment term and/or was not an economic change that rendered any part of the BOLR Policy "inappropriate"; the pleading does not in terms allege that the "economic changes" relied on by AMPFP did not occur or that they did not render any part of the BOLR Policy inappropriate.) AMPFP submits that the Court should therefore proceed on the basis that there was an economic change rendering a part of the BOLR Policy inappropriate. I do not accept these submissions. It is clear that the case as run by Equity included the contentions that there was no economic change within the meaning of the LEP Provision and that there was no economic change that rendered the BOLR Policy inappropriate (see paragraphs 131-147 of Equity's outline of opening submissions).

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Construction issues 553 A number of construction issues arise in relation to the LEP Provision. There is no dispute between the parties as to the applicable principles of construction. It is sufficient for present purposes to identify the following principles, drawn from Equity's submissions. The rights and liabilities of parties under a provision of a contract are to be determined objectively by reference to its text, context and purpose: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 256 CLR 104 (Mount Bruce) at [46] per French CJ, Nettle and Gordon JJ. It is "necessary to ask what a reasonable businessperson would have understood" a term in a contract to mean: Mount Bruce at [47]. This inquiry requires "consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract": Mount Bruce at [47]. 554 I start with a consideration of the term "economic change". The term is not defined in the 2017 BOLR Policy. In my view, the term as used in the LEP Provision is a broad and general one. The ordinary meaning of the term "economic" includes "relating to the production, distribution, and use of income and wealth": Macquarie Dictionary (online), "economic". Other meanings include "relating to pecuniary position": Shorter Oxford English Dictionary (6th ed, Oxford University Press, 2007) "economic". The context in which the term "economic change" appears is also of assistance. The term is used in the context of the words, "render any part of this policy inappropriate". This suggests that an economic change within the meaning of the LEP Provision is something which by its nature may bear upon the appropriate operation of the BOLR Policy. Further, on the proper construction of the LEP Provision, the requisite economic change is one that is beyond the control of AMPFP, as the parties would not have objectively intended to confer on AMPFP a right to amend the BOLR Policy that was susceptible to manipulation. (This last proposition is accepted by AMPFP and embraced by Equity.) 555 I note Equity's submission that the term "economic change" should be read more narrowly, in the sense of "pertaining to an economy". I do not accept that submission. It is true that the word "financial" appears in the first paragraph of the amendment term ("materially adverse financial … effect"). However, I do not consider this to provide a basis for reading "economic change" as meaning pertaining to an economy. The parties have simply used different words in each paragraph; this does not suggest that the word "economic" should be read as not encompassing financial matters. It is also true that the LEP Provision refers to "legislation, economic or product" changes and that each of these words should be given work to do. However, I do not consider that the broad and general construction indicated above would render the words "legislation" or "product" otiose. 556 I acknowledge that the context includes the fact that the LEP Provision gives AMPFP the ability to make changes with immediate effect (that is, without the 13 months' notice that would otherwise be required for changes to the valuation methodology or changes having a materially adverse financial or other significant effect on a practice) and that this could have drastic consequences for a practice. However, I nevertheless consider that the parties intended (objectively) the word "economic" to have its ordinary meaning. I note that there are other aspects of the provision that constrain AMPFP's ability to make amendments with immediate effect, such as the requirement that the economic change render a part of the policy inappropriate, and the requirement for consultation with ampfpa. 557 For these reasons, I consider that the term "economic change" is a broad and general one, with the word "economic" having its ordinary meaning as set out above. 558 The next term I consider is "legislation change". I note that the word used is "legislation" rather than "legislative", which would read more naturally. However, I do not consider anything turns on this. The issue that arises is whether the term "legislation change" can encompass anticipated as well as actual legislation. AMPFP submits that it can, relying on the example in the second sentence of the LEP Provision ("where AMPFP believes that any provision contained in this policy will, or may, cause it to breach or be subject to a penalty under any laws"). AMPFP submits that, using that example, it is not necessary for AMPFP to wait until the enactment of the law before it can amend the BOLR Policy with immediate effect. Further, AMPFP submits that it would be objectively contrary to the purpose and functioning of the BOLR Policy to conclude that AMPFP would only be entitled to use the LEP Provision from the time of actual enactment or commencement of a legislative instrument, and not earlier when it was established that such enactment was imminent. In my view, the word "legislation" in this context means a statute or delegated legislation that has been enacted or made. It does not encompass anticipated legislation, such as a bill that has been introduced into Parliament or a bill that has been passed by only one House of the Commonwealth Parliament. This flows from the ordinary meaning of the word "legislation". It is also supported by the context of the LEP Provision, including the potential for an amendment under the LEP Provision to have a materially adverse effect on practices. I do not consider the example in the LEP Provision to be inconsistent with this - the words "will, or may" do not necessarily refer to anticipated legislation. Further, I do not consider the construction I prefer to be inconsistent with the purpose or functioning of the BOLR Policy. 559 Another relevant term in the LEP Provision is "inappropriate". This term is not defined in the 2017 BOLR Policy. The ordinary meaning of the term includes "not appropriate": Macquarie Dictionary (online) "inappropriate". "Appropriate", in turn, has a meaning including "suitable or fitting for a particular purpose": Macquarie Dictionary (online) "appropriate". The context in which the term "inappropriate" appears supports the adoption of this ordinary meaning: the provision provides AMPFP with the power to amend the BOLR Policy in circumstances where there has been some effect on the way in which the policy operates. The relevant effect must be such as to impede or otherwise undermine the proper operation of the BOLR Policy. 560 There is an issue between the parties as to whether any change to the policy must be "reasonably necessary to address" or merely "responsive to" the economic change or a legislation change. Equity's position is that the changes to the policy had to be reasonably necessary to make the BOLR Policy appropriate in light of the economic or legislation change. Equity adopts this position as a matter of construction of the LEP Provision. AMPFP accepts that any proposed changes to the BOLR Policy had to be responsive to the economic or legislation change, this being inherent in the power given by the LEP Provision. However, it submits that the requirement that Equity contends for goes further and lacks a basis in the text, context or purpose of the LEP Provision or the BOLR Policy as a whole. In my view, the relevant requirement is that any changes to the policy must be proportionate to the economic or legislation change that renders the policy (or a part of it) inappropriate. This follows from the text and context of the LEP Provision. The text of the provision refers to legislation, economic or product changes that render any part of the policy "inappropriate". In these circumstances, AMPFP is permitted to make changes to the policy with immediate effect (rather than with 13 months' notice). Such changes can have materially adverse effects on practices. Having regard to these matters, in my view, to be permitted by the LEP Provision, any changes to the policy must be proportionate to the economic or legislation change that rendered any part of the policy inappropriate. 561 Another construction (and implied term) issue is whether there was a requirement for AMPFP to identify the economic or legislation change to practices and/or ampfpa. Equity contends that, in order to validly exercise the power to amend by invoking the LEP Provision, AMPFP was required to identify to practices and/or ampfpa the economic or legislation change in response to which the power to amend the BOLR Policy was being exercised. Equity submits that that requirement arises on the proper construction of the BOLR Policy or, alternatively, as an implied term in circumstances where (it submits) such a term was reasonable and equitable, necessary to give business efficacy to the BOLR Policy, so obvious that "it goes without saying", capable of clear expression, and did not contradict any express term. AMPFP contends that neither the 2017 BOLR Policy nor the Master Terms imposed such an obligation vis-à-vis either practices or ampfpa. 562 In my view, subject to the requirements of consultation set out in cl 1.4 of the Master Terms, the BOLR Policy did not require AMPFP to identify to practices and/or ampfpa the economic or legislation change in response to which the power to amend the BOLR Policy was being exercised, whether the issue is considered as a matter of construction or implied term. There is no express requirement to this effect in the BOLR Policy. Further, the issue needs to be considered in the context of the other relevant contractual documents, including the Master Terms. Clause 1.4 of the Master Terms contains a detailed and prescriptive treatment of the concept of "consult" as between AMPFP and ampfpa. It is common ground that this clause applies to changes to the BOLR Policy such as those under present consideration. One of the requirements of that clause is that AMPFP "explain why [AMPFP] considers that those changes are required" (cl 1.4(c)). This may, depending on the circumstances, require AMPFP to identify the economic or legislation change that it contends renders any part of the BOLR Policy inappropriate. It would be inconsistent with the presence of that specific provision, dealing with a similar subject matter, to construe the BOLR Policy as requiring (or to imply a term in the BOLR Policy requiring) AMPFP to identify to practices and/or ampfpa the economic or legislation change in response to which the power to amend the BOLR Policy was being exercised. Accordingly, subject to the requirements of cl 1.4 of the Master Terms, AMPFP is able to rely in this proceeding on an "economic change" or a "legislation change" that it did not notify at the time of the changes to the BOLR Policy.

[75]

AMPFP's first alternative "economic change" contention 567 AMPFP's first submission in support of this contention is that the evidence shows that the average multiple paid for P2P transactions (in the AMPFP network) and AMPFP on-sell transactions fell over the period Q1 2017 to Q2 2019, particularly from mid-2018, after the Advice round hearings of the Financial Services Royal Commission. In support of this submission, AMPFP relies on Graphs 14 and 15 in the Fourth Scott Affidavit. These Graphs are set out in AMPFP's written closing submissions, with some revisions to take account of evidence that was given during the hearing. The revisions are relatively minor and it is sufficient to refer to the graphs as they appear in the Fourth Scott Affidavit. 568 I note that both Graph 14 and Graph 15 are representations of the weighted average multiple for P2P transactions (in the AMPFP network) and AMPFP on-sell and lease transactions that settled in each quarter for the period from 1 January 2017 to 30 June 2019. The difference between the two graphs is that Graph 14 includes all transactions meeting that description, while Graph 15 excludes transactions considered by Mr Scott to be outliers. The two graphs are broadly similar. Graph 15 is slightly more helpful to AMPFP's case. Graph 15 is set out at [460] above. 569 Next, AMPFP submits that the same trend can be seen, and in fact is more pronounced, looking at the AMPFP on-sell and lease data as set out in Table 13/Graph 13 of the Fourth Scott Affidavit (set out at [457] above). AMPFP submits that that data shows that after Q2 2018 there was only one transaction which proceeded at a multiple of 4.0x, and none at that multiple in 2019. 570 AMPFP notes that Equity criticises the on-sell data on the basis that the observed drop in value may be due to a change in the composition of the register rights being transacted, as a result of AMPFP's decision to retain more (or parts of) registers internally. In response, AMPFP submits that this criticism misses the point that the change in the composition of the registers was itself a reflection of the structural economic change taking place in the industry. AMPFP submits that, by mid-2018, it was apparent to industry participants that grandfathered commission revenues had a useful life of less than four years, and were therefore no longer worth 4.0x annual revenue; and the imminent cessation of grandfathered commission revenues caused a structural change in practice economics for the significant number of AMPFP practices for whom such revenues comprised a material source of income. AMPFP relies on the evidence of Mr Byrne in relation to the change in composition of practice revenue, with the result that registers became less attractive for sale. Further, AMPFP relies on evidence in the Sixth Scott Affidavit that the vast majority of AMPFP on-sell transactions that were entered into in 2017, which were almost entirely sales of full registers (including grandfathered commission revenue) based on a purchase price calculated at a 4.0x multiple, were subsequently renegotiated at the instigation of the buying practice to a multiple lower than 4.0x. AMPFP submits that the Court can infer from this evidence that, even if AMPFP had not been retaining some registers and revenues, the internal market would not have been willing to pay a multiple of 4.0x in 2018. 571 AMPFP relies on Mr Byrne's evidence that, in his view, an economic change had occurred within the meaning of the BOLR Policy prior to the 8 August 2019 Changes and that this was evidenced by a number of factors, including the decrease in the valuation of grandfathered commission policies and OFA policies that comprise practices' register rights (based on paragraphs 103-115 of Mr Byrne's affidavit). AMPFP submits that this was occurring in a period when AMPFP was receiving an unprecedented number of BOLR notifications, and was habitually writing off the increasing difference between what it was required to pay under the BOLR Policy and the price for which some or all of these register rights could be on-sold within its internal market. 572 AMPFP submits that "one of the inputs that demonstrated the change in the value of register rights during this period was the analysis of AMPFP's internal market conducted by Mr Scott, Mr Cappe and Mr Byrne in May 2019 for the purpose of preparing the Economic Change Memo, which ultimately evolved into the Revaluation Memo that went to the AMPFP Board on 7 August 2019" (footnotes omitted). In a footnote to the words "Economic Change Memo", the submission refers to paragraph 75(2) of Mr Byrne's affidavit and document AMP.5900.0048.1567 (the Economic Change Memo). It is apparent from paragraph 75(2) of Mr Byrne's affidavit that this document was in fact prepared in the lead-up to a meeting on 29 January 2019, in a context where AMPFP was considering changes to the multiple for grandfathered commissions under the BOLR Policy. This is also evident from the discussion of the Economic Change Memo at paragraphs 103-115 of Mr Byrne's affidavit. The document referred to in AMPFP's submission as the "Revaluation Memo" is the document referred to in these reasons as the Revaluation of Register Rights Paper (see [270] and [279]-[290] above). 573 AMPFP submits that the analysis of AMPFP's internal market conducted by Mr Scott, Mr Cappe and Mr Byrne for the purpose of preparing those papers demonstrated that there was a sustained and quantifiable decrease in the value of AMPFP register rights. AMPFP submits that other inputs that supported the conclusion there had been an economic change were set out in the Economic Change Memo and the Revaluation of Register Rights Paper, including practice impact modelling (propensity modelling), statistics from AMPFP's buy-back and termination pipeline and settlements data, and analysis of transaction multiples in the Charter and Hillross markets and the external market, the latter of which was sourced from various analyst reports and industry press. 574 AMPFP submits that: its first alternative economic change was an "economic change" within the meaning of the LEP Provision; the decrease in the market value of register rights had the effect of rendering the operation of the BOLR Policy using a 4.0x multiple unsustainable, and was a material alteration of an economic nature that was beyond AMPFP's control. 575 AMPFP submits that its first alternative economic change rendered the BOLR Policy "inappropriate" within the meaning of the LEP Provision. AMPFP refers to the rationale of the BOLR Policy (as set out in the BOLR Policy itself) (see [79(d)] above). AMPFP submits that: the purpose of the policy was to establish a means by which a payment, of an appropriate amount, could be obtained by a departing practice where it had not been able to sell its register rights to another practice in the AMPFP network; the fact that a value is ascribed to the register based on a multiple of revenue indicates that what is sought to be achieved is a measure that reflects the value of the register; this is reinforced by the protections in the policy that require the practice to refrain from taking steps that might negatively impact that value. It follows, AMPFP submits, that an economic change that materially altered the value of a register vis-à-vis the valuation methodology set out in the BOLR Policy was a change that rendered part of the BOLR Policy "inappropriate", namely the valuation multiple. 576 AMPFP submits that: the decrease in the market value of register rights rendered the valuation multiple in the BOLR Policy inappropriate; the decline in the value of register rights required AMPFP to pay materially more than it could recover when it subsequently sold those rights. 577 Further, AMPFP submits that: the industry changes (imminent cessation of grandfathered commission revenue, impending educational requirements, increasing compliance requirements, declining profitability, etc.) were driving exits in the industry, including in the AMPFP network; the evidence shows that exiting practices were increasingly preferring BOLR to P2P transactions, which the Court should infer was due to the increasing difference between the BOLR valuation and the price achievable in the P2P market; this was the "BOLR run" that AMPFP was critically concerned about - a significant increase in the number of practices leaving the AMPFP network via a BOLR transaction in a short period of time; the problem was a compounding one - as more practices sold back their register rights to AMPFP via BOLR, it became more likely that AMPFP would not have the capacity to service the registers internally and more likely that registers would need either to be sold at a substantial loss or the fees otherwise switched off; as a result, an increasing amount of capital had to be available to fund BOLR transactions and increasing write-offs were being incurred, which were not sustainable. 578 AMPFP submits that the 8 August 2019 Changes were responsive to (or, if relevant, reasonably necessary to address) the first alternative economic change. AMPFP submits that: the part of the BOLR Policy that the economic change rendered inappropriate was the valuation multiple (as it applied to grandfathered commission revenue and other ongoing revenue); by reducing the valuation multiple in relation to each of grandfathered commission revenue and other ongoing revenue, the 8 August 2019 Changes redressed that part of the policy; the changes were therefore reasonably necessary to make the policy appropriate. AMPFP also submits that the choice of a valuation multiple of 2.5x should be assessed in light of the evidence of the average multiple for on-sell transactions after the 8 August 2019 Changes were made: the average multiple for 73 transactions that settled in 2020 was 2.03x (based on the Sixth Scott Affidavit), indicating that 2.5x was, as AMPFP had estimated, within the upper market range of valuations of client registers. 579 In my view, the 8 August 2019 Changes were not authorised by the LEP Provision on the basis of AMPFP's first alternative economic change contention. The steps in my reasoning are as follows. 580 First, I consider that there was 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. Further, I find that the amount of that decrease was between approximately 0.5x and approximately 1.0x ongoing revenue. My reasons are as follows. (a) The best evidence of whether there was a decrease in the value of register rights is the evidence given by Mr Scott in this proceeding. (b) I consider that evidence of transaction multiples in P2P transactions in the AMPFP network to be relevant as these were, I infer, generally transactions between arm's length parties. I acknowledge that some of the transactions may have been affected by particular circumstances, but I nevertheless consider that the data as a whole provides a reliable overall view. Mr Scott accepted the accuracy of Equity's aide-memoire 2 (set out at [451] above), which plots the multiples for P2P transactions in the AMPFP network during the period 1 January 2017 to 30 June 2019 and provides a trendline. The trendline shows a decline over the period from a multiple of 3.74x to a multiple of 3.27x, a decline of 0.47x. This provides an indication of the overall trend for such transactions during the period. (c) Next, I refer to the analysis of AMPFP on-sell and lease transactions carried out by Mr Scott and reflected in Table 13/Graph 13 (set out at [457] above). While this data, on its face, suggests a reduction in the multiple from around 4.0x early in the period covered to around 2.0x to 2.6x towards the end of the period, there are a number of matters that limit the utility of this data, as referred to at [459] above. In my view, due to these matters, less weight should be given to the on-sell and lease transactions compared with the P2P transactions in assessing the market value of register rights linked to ongoing revenue. In summary, in circumstances where AMPFP was seeking to place as many clients as possible with AMP Assist/AMP Advice, and only on-selling clients who could not be placed with AMP Assist/AMP Advice or where there was some other reason for not placing them with AMP Assist/AMP Advice, the on-sell transaction data is skewed or distorted, such that less weight should be given to this data. (d) I refer also to Mr Scott's analysis of the weighted average multiple for P2P transactions (in the AMPFP network) and AMPFP on-sell and lease transactions that settled in each quarter from 1 January 2017 to 30 June 2019, as reflected in Table 15/Graph 15 (set out at [460] above). The trendline in this graph shows a decline in the multiple from approximately 4.0x to approximately 3.0x. I note that the limitations regarding the on-sell transaction data, discussed above, also affect this analysis. (e) I do not consider the other material relied on by AMPFP in its submissions to assist the analysis of the amount of any decrease in the market value of register rights linked to ongoing revenue. Insofar as AMPFP seeks to rely on material contained in the Economic Change Memo or the Revaluation of Register Rights Paper, the data used by Mr Scott for the purposes of this proceeding was of superior quality to the data used in those papers. Further, the quality of the analysis carried out by Mr Scott for the purposes of the proceeding was much more careful and precise than the work carried out for the purposes of those papers. (f) Having regard to the above, I find that there was 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, and the decrease was between approximately 0.5x and approximately 1.0x ongoing revenue. 581 Secondly, I consider that the sustained and quantifiable decrease in the market value of register rights linked to ongoing revenue was an "economic change" within the meaning of the LEP Provision. I have considered the correct construction of "economic change" at [554]-[557] above. The decrease in the market value of register rights was a material change of an economic nature. 582 Thirdly, I do not consider that the sustained and quantifiable decrease in the market value of register rights linked to ongoing revenue rendered any part of the BOLR Policy "inappropriate". In particular, I do not consider that it rendered the multiple in the BOLR Policy inappropriate. I have considered the construction of "inappropriate" at [559] above. The multiple payable under the BOLR Policy was not expressly or impliedly linked to the market value of register rights. It was simply the basis for calculating an amount that AMPFP agreed to pay to practices in prescribed circumstances. Practices had entered the AMPFP network (and in many cases borrowed substantial amounts of money) on the faith of that contractual commitment. The fact that the contractual bargain may have become less attractive - or even unattractive - for AMPFP is not to the point. The multiple set out in the BOLR Policy continued to fulfil its purpose (of being an integer in calculating the amount to be paid by AMPFP) notwithstanding the decrease in the market value of register rights. Insofar as AMPFP contends that the decrease in the market value of register rights led to the risk of a "BOLR run" and the BOLR Policy becoming "economically unsustainable", the evidence did not examine in any detail the financial standing of AMPFP and its capacity to pay BOLR benefits if there were a dramatic increase in BOLR applications. In these circumstances, I do not accept the proposition that the reduction in the market value of register rights created a risk that the BOLR Policy would become "economically unsustainable". 583 Fourthly, and in any event, the 8 August 2019 Changes were not proportionate to the sustained and quantifiable decrease in the market value of register rights linked to ongoing revenue. For the reasons set out at [560] above, to be authorised by the LEP Provision, any changes to the BOLR Policy must be proportionate to the economic change that rendered any part of the policy inappropriate. Here, the amount of the decrease in the market value of register rights was between approximately 0.5x and approximately 1.0x. However, the 8 August 2019 Changes reduced the multiple for ongoing revenue (apart from grandfathered commission revenue) from 4.0x to 2.5x, a reduction of 1.5x, and reduced the multiple for grandfathered commission revenue to the glide path. This went too far. It was not proportionate to the decrease in the market value of register rights. (The question is whether the change to the policy was proportionate to the actual decrease in the market value of register rights - as found in these reasons - not whether the change to the policy was proportionate to the decrease in the market value of register rights perceived by AMPFP at the time the changes were made. However, even on the material before the AMPFP Board on 7 August 2019, it is difficult to justify a reduction in the multiple to 2.5x: see the observations at [284] above.) I note for completeness that I would reach the same result if the relevant requirement were that the change to the policy must be "responsive to" the economic change. The reduction in the multiple was not responsive to the decrease in the market value of register rights; it went far beyond it. 584 Further, insofar as AMPFP submits that the choice of a valuation multiple of 2.5x should be assessed in light of the evidence of the average multiple for on-sell transactions after the 8 August 2019 Changes were made, I consider that evidence to be of only limited assistance. The amount that practices were prepared to pay to acquire register rights after 8 August 2019 is likely to have been influenced by the purported change to the multiple under the BOLR Policy to 2.5x. It therefore provides only limited assistance in determining the market value of register rights before 8 August 2019 and the proportionality of the 8 August 2019 Changes.

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AMPFP's second alternative "economic change" contention 585 AMPFP submits that: the decrease in the market value of register rights was itself a result of changes in the external market for financial advice services more broadly, and that those changes took the form of a material change in the supply of and demand for financial advice services and financial advice practices (which is the second alternative economic change relied on by AMPFP). In relation to the second alternative economic change, AMPFP relies on the expert reports of Professors Frino and Brimble. 586 AMPFP submits that: Professor Brimble's report provides the industry context for the period leading up to 8 August 2019; he describes the significant turbulence in the industry in late 2018 and early 2019, as a number of factors coalesced around that time; those disruptive factors included regulatory reform efforts (particularly the Financial Services Royal Commission recommendations and the introduction of stricter educational and professional standards following the establishment of FASEA), mass exodus from the industry, with 15% of advisers leaving in the first 10 months of 2019, changes to business models and a disruption to the legacy structure of practices, declining levels of trust in the sector by the community, and deteriorating sentiment within the sector, which was aggravated by the Royal Commission findings and sustained negative commentary in relation to professional standards for financial advisers. These matters are based on section 2.1 of Professor Brimble's report, which I have accepted. 587 AMPFP submits that Professor Frino's report provides a compelling economic analysis of how, between 1 June 2017 and 8 August 2019, these circumstances would give rise to a change in the supply of, and the demand for, financial advice services. AMPFP submits, on the basis of Professor Frino's evidence, that, in the period leading up to 8 August 2019, the cost of providing financial advice services increased; the increase in costs and the reduction in revenues caused by the fall in supply of, and demand for, financial advice services resulted in a contraction in profit margins of financial advice practices; and the value of financial advice practices fell significantly. 588 AMPFP submits that, as Professor Frino explained in cross-examination, the value of an asset is a function of the expected future revenues and the expected future costs associated with exploiting the asset, and if the expectations in relation to either change, the value of the business will change. AMPFP submits that, given that the interim and final reports of the Royal Commission changed expectations about both future revenues and costs for financial advice practices, the logical result is that the Royal Commission led to a drop in the value of financial advice businesses. 589 AMPFP submits that: that conclusion is consistent with the experience of the applicant and WealthStone, and with views held by ampfpa and its members, in that the fact of, and recommendations made by, the Royal Commission prompted concerns about future costs and revenues, and saw drops in client numbers. AMPFP submits that, similarly, Mr Neill agreed in cross-examination that the period of 2017 to 2019 was one of heightened disruption and unusual challenge in the financial planning industry; that FASEA requirements were a looming problem and disrupting force; that the Royal Commission led to a crisis of trust and confidence for some sectors of the industry; that 2018/2019 saw an increase in regulatory oversight and compliance requirements, and an increase in costs; and that taken together these factors meant it was a period of unprecedented change and difficulty for the sector. 590 AMPFP submits that the change in the supply of and demand for financial advice services and practices was a material alteration of an economic nature that was beyond AMPFP's control, and therefore an "economic change" within the meaning of the LEP Provision. 591 AMPFP submits that the change in the supply of and demand for financial advice services and practices rendered the valuation multiple in the BOLR Policy "inappropriate" because the change required AMPFP to pay materially more than it could recover when it subsequently sold those rights. 592 AMPFP submits that the 8 August 2019 Changes were responsive to (or, if relevant, reasonably necessary to address) the second alternative economic change. AMPFP submits that: the part of the BOLR Policy that the economic change rendered inappropriate was the valuation multiple (as it applied to grandfathered commission revenue and other ongoing revenue); by reducing the valuation multiple in relation to each of grandfathered commission revenue and other ongoing revenue, the 8 August 2019 Changes redressed that part of the policy; the changes were therefore reasonably necessary to make the policy appropriate. AMPFP submits that: the valuation multiple of 2.5x was responsive to (and reasonably necessary to address) the inappropriateness of the BOLR Policy; it reflected the reduction in value of financial advice businesses in the external market (and thereby aligned the BOLR Policy with the external market). AMPFP also makes the same submission as set out at [578] above relating to transactions that took place after 8 August 2019 (which I have considered at [584] above). 593 In my view, the 8 August 2019 Changes were not authorised by the LEP Provision on the basis of AMPFP's second alternative economic change contention. The steps in my reasoning are as follows. 594 First, I am prepared to assume that there was a material reduction in the supply of financial advice services and a material reduction in the demand for financial advice services in the period 1 June 2017 to 8 August 2019 (the period considered in the report of Professor Frino). However, I do not make a finding to this effect, given the limitations in the evidence of Professors Brimble and Frino referred to above. Further, I do not make any finding or assumption that there was a material change in the supply of or demand for financial advice practices, as Professor Frino did not express an opinion to this effect and the evidence of Professor Brimble (to the extent that he may be taken to have expressed an opinion on this) is subject to the limitations discussed above. 595 Secondly, assuming that there was a reduction in the supply of financial advice services and a reduction in the demand for financial advice services during the period 1 June 2017 to 8 August 2019, I consider that these were "economic changes" within the meaning of the LEP Provision. I have considered the construction of "economic change" at [554]-[557] above. The reductions were material changes of an economic nature and therefore "economic changes" within the meaning of the LEP Provision. 596 Thirdly, assuming that there was a reduction in the supply of financial advice services and a reduction in the demand for financial advice services during the period 1 June 2017 to 8 August 2019, I do not consider that either or both of these reductions rendered any part of the BOLR Policy "inappropriate". In particular, I do not consider that either economic change (or both of them) rendered the multiple in the BOLR Policy inappropriate. I have considered the construction of "inappropriate" at [559] above. The multiple payable under the BOLR Policy was not expressly or impliedly linked to the supply of or the demand for financial advice services (or to any consequent fall in the value of financial advice practices). It was simply the basis for calculating an amount that AMPFP agreed to pay to practices in prescribed circumstances. As set out above in relation to the first alternative economic change, the fact that the contractual bargain may have become less attractive - or even unattractive - for AMPFP is not to the point. The multiple set out in the BOLR Policy continued to fulfil its purpose (of being an integer in calculating the amount to be paid by AMPFP) notwithstanding the reduction in the supply of financial advice services and the reduction in the demand for financial advice services (and any consequent fall in the value of financial advice practices). 597 Fourthly, assuming that there was a reduction in the supply of financial advice services and a reduction in the demand for financial advice services during the period 1 June 2017 to 8 August 2019, the 8 August 2019 Changes were not proportionate to those economic changes. For the reasons set out at [560] above, to be authorised by the LEP Provision, any changes to the BOLR Policy must be proportionate to the economic change that rendered any part of the policy inappropriate. The evidence of Professor Frino did not quantify the extent to which there was a reduction in the supply of financial advice services or a reduction in the demand for financial advice services. Nor did it quantify the opinion that one of the impacts of these changes was a fall in the value of financial advice practices. In the absence of quantification of these matters, the changes to the multiple were not proportionate to the economic changes. I do not accept AMPFP's submission that the reduction in the BOLR multiple "reflected the reduction in value of financial advice businesses in the external market (and thereby aligned the BOLR Policy with the external market)" in circumstances where the evidence of Professor Frino does not quantify the reduction in the value of financial advice practices in the external market, and there is no other cogent evidence that quantifies the reduction in value of financial advice practices in the external market. I note for completeness that I would reach the same result if the relevant requirement were that the change to the policy must be "responsive to" the economic changes. In the absence of any quantification of the matters referred to above, the reduction in the multiple (from 4.0x to 2.5x) was not responsive to the economic changes.

[77]

The legislation change issue 598 AMPFP submits that, if the Court were to find (contrary to AMPFP's submissions) that there was no economic change within the meaning of the BOLR Policy, there was nevertheless a legislative change that rendered the valuation multiple in the BOLR Policy inappropriate in respect of grandfathered commission revenue. AMPFP submits that there were three key developments in this regard: (a) on 4 February 2019, the Commonwealth Government issued its response to the Financial Services Royal Commission final report, undertaking to end grandfathering of conflicted remuneration effective 1 January 2021; (b) on 22 February 2019, the Commonwealth Treasury released the exposure draft of the legislation that banned grandfathered commission revenue; the exposure draft foreshadowed the removal of grandfathering arrangements for conflicted remuneration and other banned remuneration from 1 January 2021; and (c) on 1 August 2019, the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 (Cth) was introduced into the House of Representatives, and received a first reading. 599 As AMPFP acknowledges, it did not expressly rely upon a "legislation change" at the time of announcing the changes to the multiple for grandfathered commission revenue (which were part of the 8 August 2019 Changes). 600 For the reasons set out at [558] above, in my view the term "legislation change" applies only to a statute or delegated legislation that had been enacted or made; it does not apply to anticipated legislation. Accordingly, in my view, the matters relied on by AMPFP in support of this contention do not constitute a "legislation change". 601 I therefore conclude that the changes to the multiple for grandfathered commission revenue (which were part of the 8 August 2019 Changes) cannot be supported on the basis of a "legislation change". 602 It follows from my conclusions in relation to the economic change issue and the legislation change issue that the 8 August 2019 Changes (with immediate effect) were not authorised by the LEP Provision.

[79]

The effect of any failure to consult 607 AMPFP submits that, having regard to the text, context and purpose of the authorised representative agreements, the Court should not construe the requirement to consult as a necessary condition for a valid exercise of the power given to AMPFP by the LEP Provision (or, for that matter, of the power to amend the valuation methodology on 13 months' notice); it is properly to be seen as a separate obligation that applies to AMPFP, but not one the satisfaction of which is a necessary condition of the power arising. 608 AMPFP submits that there are five key factors supporting its construction. AMPFP submits, in summary, as follows: (a) First, the authorised representative agreements are silent as to the consequences of a failure to comply with the obligation to consult. All that the text reveals is that such consultation with ampfpa is an obligation that arises where AMPFP exercises its right to amend the BOLR Policy in certain scenarios, including pursuant to the LEP Provision. Dealing with the LEP Provision, the text in no way requires or supports a reading under which compliance with the consultation obligation is a condition of the power being enlivened. (b) Secondly, for a breach of the obligation to bring about the serious consequence of invalidating an exercise of the power to amend the BOLR Policy, a reasonable businessperson would have included an express provision to that effect. That is particularly so in circumstances where other provisions in the BOLR Policy, and other documents that comprise the authorised representative agreements, prescribe the consequences that flow from the contravention of certain obligations. AMPFP sets out a number of examples in its written closing submissions. (c) Thirdly, the nature and purpose of the consultation obligation is to give ampfpa an opportunity to hear from AMPFP about the proposed changes and to provide any responses, options or alternatives about the changes. AMPFP has no obligation to accept any such responses, options or alternatives, and cl 1.4 of the Master Terms makes it explicit that "there is no obligation on [AMPFP] to reach any agreement with the ampfpa". It would be anomalous, especially in the absence of an express provision to the contrary, for the deprivation of an opportunity to proffer views that need have no impact on proposed changes to the BOLR Policy to result in the invalidity of those changes. A more coherent remedial response, considering the nature and purpose of this consultation obligation, would be damages for loss of opportunity. (d) Fourthly, a construction of the consultation obligation under which its breach leads to invalidity risks producing commercially absurd results. Take, for example, a situation in which AMPFP was required to make urgent changes to the BOLR Policy to respond to a legislation change that would render an aspect of the BOLR Policy in breach of the law, a scenario expressly contemplated by the LEP Provision. If AMPFP's consultation process was later held by a court to be defective and the changes invalid, the BOLR Policy would have been in a form that contravened the law for a potentially significant period of time, exposing AMPFP to a risk of penalty. Such a result defies commercial common sense and cannot reflect the objective intent of the parties. The significance of this consideration is all the stronger given the evident scope for differences of understanding about what is required in order to satisfy the consultation obligation. (e) Fifthly, contrary to Equity's case, any concern that AMPFP's construction of the consultation obligation would allow AMPFP unilaterally to dispense with consultation and make far-reaching and wide-ranging changes to the BOLR Policy is unrealistic and unfounded. AMPFP's power to amend the BOLR Policy is not left unconstrained. There are the constraints in the first paragraph of the amendment term (13 months' notice) and the constraints in the LEP Provision (the occurrence of an economic, legislative or policy change that renders a part of the BOLR Policy inappropriate). 609 As set out above, I consider that the overarching amendment power is contained in cl 3.2 of the Master Terms and that the amendment term in the BOLR Policy contains further detail about the exercise of the amendment power specific to amendment of the BOLR Policy. Clause 3.2(c) of the Master Terms (see [76] above) provides that "[p]rior to any change to any Practice Documents … that, in the reasonable opinion of [AMPFP], will have an adverse financial or other significant effect on the Representative, [AMPFP] will Consult with ampfpa about the changes … but there is no obligation on [AMPFP] to reach any agreement with ampfpa in connection with the changes …". Additionally, the LEP Provision (see [6] above) provides that AMPFP has the right to make any changes to this policy should legislation, economic or product changes render any part of this policy inappropriate "following consultation with the ampfpa". 610 In my view, the preferable construction of these provisions is that the requirement to consult (within the meaning of cl 1.4 of the Master Terms) is a precondition to the effectiveness of the change. In other words, I do not accept AMPFP's submission that a failure to consult (within the meaning of cl 1.4) merely sounds in damages. 611 The amendment provisions (both cl 3.2(c) of the Master Terms and the LEP Provision) authorise AMPFP to make changes that can have a materially adverse effect on practices. One of the conditions that is built into those provisions - by way of protection of practices (I infer) - is that there must be consultation with ampfpa. Having regard to the text, context and purpose of the provision, I consider it more likely that the parties intended (objectively) that a failure to consult would result in the ineffectiveness of the change. If the requirement to consult merely sounds in damages (which will be nominal damages), it will not serve the purpose of providing protection to practices in relation to changes that can materially adversely affect them. 612 It is true that, on this construction, a change to the BOLR Policy may be held to be ineffective some time after the change was made, and this may have significant practical consequences. However, I think a more significant contextual consideration is that the LEP Provision authorises AMPFP to make changes to the BOLR Policy that can materially adversely affect practices with immediate effect (rather than with 13 months' notice). 613 I accept that the requirement to consult does not impose any obligation on AMPFP to reach agreement with ampfpa. That is expressly stated in cl 1.4 of the Master Terms, and reinforced in cl 3.2 of the Master Terms. However, I do not consider this to weaken the argument that the consequence of a failure to consult is that the changes are ineffective. The process of consultation (with the elements prescribed by cl 1.4) nevertheless offers an important protection for practices, because it provides an opportunity for ampfpa to give responses, options and alternatives to AMPFP about the proposed changes, with the potential that the proposed changes will be improved or ameliorated; even though AMPFP is not obliged to reach agreement with ampfpa, the requirement to consult is important and valuable. 614 It is true that the contractual documents are silent on the consequences of a failure to consult, and this may be contrasted with other provisions of the documents that set out a consequence for a failure to do something that is required. However, I do not consider this to be a particularly weighty factor in the construction exercise. It places too much weight on drafting differences within the document. 615 For these reasons, I consider that consultation (within the meaning of cl 1.4 of the Master Terms) is a precondition to the effective exercise of the power to amend under the LEP Provision.

[80]

Whether AMPFP breached the obligation to consult 616 The obligations imposed on AMPFP as regards consultation are set out in cl 1.4 of the Master Terms (see [74] above). The issue is whether AMPFP satisfied those requirements in relation to the 8 August 2019 Changes. 617 I note at the outset that Equity seeks to rely on guiding principles that were agreed between AMPFP and ampfpa in early 2018 as to how the two entities would engage with each other. However, it is not clear that they were incorporated into the contracts, and therefore I prefer to consider the issue without reference to that document. 618 I will first consider the issue whether RemCo was the appropriate body for consultation. Then I will consider whether AMPFP satisfied its obligations under cl 1.4 of the Master Terms. 619 Equity contends that AMPFP failed to satisfy its consultation obligations because it communicated only with RemCo rather than with the Board of ampfpa. Equity notes that the opening line of the amendment term in the BOLR Policy refers to "The AMP Financial Planners Association Ltd Board (ampfpa)", such that the subsequent references to ampfpa in the LEP Provision are to the Board of ampfpa. Equity submits that the governing body of ampfpa is its Board and it had not delegated the power to conduct consultation to RemCo. 620 The findings relevant to this issue include my finding about the conversation between Mr Macdonald and Mr George on 24 July 2019 (see [202]-[204] above) and my finding that the matter was not raised at the 25 July 2019 meeting (see [211] above). Also relevant are the emails and letters sent by or on behalf of RemCo to AMPFP in the period 25 July to 8 August 2019 as referred to above. Those emails and letters made many complaints about the process AMPFP had adopted, but the correct body for consultation does not appear to have been one of them; or at least, it was not prominently raised. Further evidence relating to the issue is summarised at [297]-[298] above. 621 In my view, there is a degree of artificiality about the contention that AMPFP failed to satisfy its consultation obligations because it communicated only with RemCo, in circumstances where this issue was not prominently raised at the time. Given that in past consultations ampfpa had put forward RemCo to interact with AMPFP, I consider that it was open to AMPFP to communicate (at least in the first instance) with RemCo. Had RemCo insisted that AMPFP communicate with the Board of ampfpa rather than with RemCo, and had AMPFP refused to do so, there may well have been a defective consultation process on the basis that the communications were with the wrong body. However, nothing like this occurred. Accordingly, I do not accept the contention that AMPFP failed to consult because it communicated with RemCo rather than with the Board of ampfpa. 622 I now turn to consider cl 1.4 of the Master Terms. 623 Clause 1.4(a) imposes an obligation on AMPFP to "give the ampfpa reasonable prior notice about the proposed changes having regard to the urgency with which the changes must be made". The proposed changes to the BOLR Policy were first described at the meeting on 25 July 2019 and feedback was requested by 6 August 2019. The changes were to be announced on 8 August 2019. Thus the period allowed for consultation was only 12 days (or eight business days). I will treat this as the period of prior notice that AMPFP gave ampfpa for the purposes of assessing whether there was a failure to comply with cl 1.4(a). The issue is whether this was a reasonable period having regard to the urgency with which the changes needed to be made. 624 In considering this issue, I will assume (contrary to my conclusions earlier in these reasons) that the economic changes relied on by AMPFP in this proceeding rendered a part of the BOLR Policy "inappropriate" and that the proposed changes were proportionate to the economic changes. In other words, I will assume that the proposed changes could be made. 625 I consider the following facts and matters to be of particular relevance in considering whether AMPFP complied with its obligations in cl 1.4(a). 626 First, I consider that there was some urgency in relation to the changes, but they did not need to be made on 8 August 2019 and a longer period of consultation (eg, six weeks) could have been allowed. Insofar as the proposed change to the multiple for grandfathered commission revenue is concerned, the changes had been proposed in February 2019 and a decision had been taken not to proceed with them in mid-March 2019. The decision not to proceed with these changes at that time suggests that they were not considered particularly urgent at that time. To the extent that there was a pressing need by July 2019 to make the changes, this was a problem of AMPFP's own making, by reason of having decided not to proceed with such changes in mid-March 2019. 627 Insofar as the proposed change to the multiple for other ongoing revenue is concerned, the economic changes upon which AMPFP relies in this proceeding took place over an extended period of time. The first alternative economic change took place over the period 1 January 2017 to 30 June 2019. (That is the period covered by Mr Scott's evidence in support of this change.) The second alternative economic change, if it occurred, took place over the period 1 June 2017 to 8 August 2019. (That is the period covered by Professor Frino's evidence.) The extended period of these economic changes suggests that the proposed changes to the BOLR Policy did not need to be made by 8 August 2019 and a longer period could have been provided for consultation. 628 In its outline of written closing submissions, at paragraph 107, AMPFP submits that the 8 August 2019 changes were "pressing and urgent" and that "[b]y mid-2019, BOLR notices were increasing, a BOLR run was underway, and AMP's Advice business was in a crisis position". In relation to the proposition that "BOLR notices were increasing", the submission cites Mr Akers's first affidavit at paragraph 145 and documents AMP.5800.0048.2427 and AMP.5800.0048.2428. That paragraph of the affidavit refers to an email Mr Akers received from Mr Cappe on 19 February 2019 referring to a large number of BOLR applications that month. The documents cited are the email and the attachment to the email. That evidence does not relate to the position in mid-2019, and does not show the trend between February and July 2019. (I accept that the number of BOLR applications in the period 1 January 2019 to 8 August 2019 was significantly more than in previous years, as seen in Table 1 to the Second Scott Affidavit.) In relation to the proposition that "a BOLR run was underway", the submission cites Mr Akers's first affidavit at paragraph 146(b)-(c) and document AMP.5800.0017.1700. Paragraph 146(b)-(c) of that affidavit refers to meetings involving Mr Akers on 13 March and 8 April 2019. The paragraph does not state that a BOLR run was underway; it refers to planned actions to mitigate the risk or severity of a BOLR run. The document cited is a memorandum prepared by Mr Cappe dated 12 March 2019 describing the actions being undertaken by AMPFP to help mitigate the risk or severity of a BOLR Run. Thus the references do not establish that a BOLR run was underway. In relation to the proposition that "AMP's Advice business was in a crisis position", the submission cites Mr Akers's second affidavit at paragraph 36. The relevant part of the paragraph is subject to a limited use ruling, limiting its use to a statement of Mr Akers's opinion. It expresses Mr Akers's opinion that, given the "crisis position that the business was in and the internal and external forces at hand, the option of making incremental changes to the business model over a long period of time was not available". It also states that the "8 August 2019 Changes were one element of this strategy". This evidence indicates there were business reasons for not making the changes "over a long period of time", but it does not provide any detail as to how soon the changes needed to be made. 629 Secondly, the members of RemCo were very familiar with the industry, the AMPFP network and the BOLR Policy. They had been involved in earlier consultations. They had the background of the February 2019 proposed changes, which included a glide path for grandfathered commission revenue. Thus the RemCo members could readily understand the changes conceptually. 630 Thirdly, the proposed changes to the BOLR Policy were very significant and would have a materially adverse effect on the majority of practices in the AMPFP network. The impact of the proposed changes was summarised in a table included in the Akers July 2019 Memorandum: see [246] above. The table showed that 73% of practices by number would experience a reduction in the value of their register rights of more than 50%. In the email from Mr Jordan to Mr Akers of 28 July 2019 (set out at [253] above), Mr Jordan stated: Now that we've received the documents and have had an opportunity to review them over the weekend, Remco views the content within them as the most serious sequence of changes that will impact our members (including their clients) in the history of our relationship with AMP. That sentence aptly describes the magnitude of the proposed changes. 631 The extent of the impact of the proposed changes is relevant in considering how much work ampfpa would need to undertake in order to properly consider and provide feedback on the changes on behalf of its members. In this regard, I note that cl 1.4(d) of the Master Terms refers to ampfpa providing "responses, options or alternatives … about [the proposed] changes". This gives an indication of the type of feedback envisaged by the clause. It is substantive feedback including "options" and "alternatives". I accept the evidence of Mr Macdonald set out at [301] above as to the steps he would have caused ampfpa to take if more time had been allowed. Mr Macdonald has extensive experience with ampfpa and was involved in earlier consultations. He is well placed to identify the steps that ampfpa would have undertaken if there had been more time. 632 I note Mr Akers's description of the contractual changes as "simple" in nature (see [306] above). I understood Mr Akers to be conveying that the proposed changes could be readily understood by the RemCo members, given their familiarity with the industry, the AMPFP network and the BOLR Policy. I accept that. However, it does not follow that only a limited period of time was required to consider and provide feedback on the changes. One of the areas where a significant body of work was required was to consider the impacts of the proposed changes on particular cohorts of practices, in order to consider options and alternatives. For example, it was necessary to consider and provide feedback on the impact of the proposed changes on practices in the pipeline. At the 25 July 2019 meeting, AMPFP floated two categories of practices in the pipeline that could be exempted from the changes. Subsequently, AMPFP indicated that it would exempt those two categories. However, it was necessary and appropriate for ampfpa to consider and provide feedback on whether there were other categories of practices in the pipeline that should be exempted from the changes and on whether the changes should apply to practices in the pipeline at all. 633 Fourthly, I note the period of time that it took AMPFP to develop the proposed changes. The change to the multiple relating to grandfathered commission revenue was developed over a period of months leading up to February 2019. The change to the multiple for other ongoing revenue was the subject of development from about early May 2019 to mid-July 2019, a period of about two-and-a-half months. While considering and providing feedback on the proposed changes may be expected to be quicker, it does give some indication of the work involved. 634 Having regard to the above facts and matters (including the urgency with which the changes needed to be made), and the circumstances generally, and subject to the issue considered in the next paragraph, I do not consider that a reasonable period of notice was provided of the proposed changes. In the circumstances, I consider that a period of at least six weeks was required in order to provide reasonable notice. I acknowledge that this is less than the period of 12 weeks that Mr Macdonald said was needed to undertake the steps that he outlined. However, I have also had regard to other matters, in particular those discussed above. 635 In AMPFP's written closing submissions, it presents an alternative argument as follows. AMPFP submits that, if the Court concludes that AMPFP did not provide ampfpa with reasonable prior notice of the 8 August 2019 Changes insofar as they involved the reduction in the valuation multiple for non-grandfathered commission revenue, the Court should nevertheless find that AMPFP provided ampfpa with reasonable prior notice of the change to the multiple for grandfathered commission revenue. AMPFP submits that, in this regard, the period given in July 2019 for consultation was reasonable notice of the changes proposed to grandfathered commissions, in light of the RemCo members' familiarity with the industry, the AMPFP network and the BOLR Policy and their knowledge that changes of this nature were under development and discussion. I do not accept these submissions. The proposed changes to the BOLR Policy presented at the meeting on 25 July 2019 were a package. In order to consider and provide responses, options and alternatives on the proposed changes it was necessary to consider the package as a whole. This included consideration of the impacts of the changes on different cohorts of practices, an issue that required consideration of the package as a whole. 636 I therefore conclude that AMPFP failed to comply with the obligation in cl 1.4(a) of the Master Terms. 637 Clause 1.4(b) required AMPFP to "advise the ampfpa about the proposed timetable for when those changes will come into effect". I consider that AMPFP complied with this obligation. 638 Clause 1.4(c) required AMPFP to "explain why AMP Financial Planning considers that those changes are required and their implications for Representatives as a whole". I consider that AMPFP complied with this obligation insofar as it relied (and relies) on the first alternative economic change. AMPFP did not, however, refer clearly to the second alternative economic change, either in the meeting on 25 July 2019 or in the materials provided on 26 July 2019 (or in other communications). In the circumstances, I consider that cl 1.4(c) required AMPFP to explain why it considered there to have been an economic change that rendered a part of the policy inappropriate. This was an aspect of why the changes to the policy were required. While AMPFP gave such an explanation in relation to the first alternative economic change, it did not do so for the second alternative economic change. To that extent, AMPFP failed to comply with cl 1.4(c). 639 Clause 1.4(d) required AMPFP to "consider, but not necessarily accept, any responses, options or alternatives offered by the ampfpa about those changes provided always that such responses, options or alternatives are provided to [AMPFP] promptly having regard to [AMPFP's] timetable for when those changes will come into effect". As set out above, RemCo/apmfpa did not provide any feedback on the proposed changes between the end of the 25 July 2019 meeting and 6 August 2019. Insofar as the RemCo members made comments during the meeting on 25 July 2019, I consider that these were merely initial reactions to what was being presented; they did not constitute responses, options or alternatives for the purposes of the clause. In circumstances where ampfpa did not provide any responses, options or alternatives, there was nothing for AMPFP to consider. Accordingly, AMPFP did not fail to comply with cl 1.4(d). 640 In addition to the matters considered above, Equity contends that AMPFP failed to consult as required by the contractual provisions because it did not have an open mind in relation to the proposed changes; in other words, it was not prepared to make any amendments to the proposed changes in light of responses, options or alternatives it received. While there is an evidentiary basis for this submission, it is difficult to reach a concluded view in circumstances where ampfpa did not provide any feedback to AMPFP. In light of the conclusions I have already reached, it is unnecessary to resolve this issue. 641 Equity also contends that the non-disclosure agreements that AMPFP required the members of RemCo to sign precluded proper consultation (because RemCo members could not discuss the proposed changes with the ampfpa Board as a whole and/or members of ampfpa). In light of the above conclusions, it is unnecessary to resolve this issue. 642 It follows from the above that AMPFP failed to consult as required by cl 3.2(c) of the Master Terms and the LEP Provision. It further follows that the 8 August 2019 Changes (with immediate effect) were ineffective on this basis.

[83]

WHETHER THE 8 AUGUST 2019 CHANGES WERE EFFECTIVE 13 MONTHS LATER 645 AMPFP submits in the alternative that the 8 August 2019 Changes were effective from 8 September 2020 on the basis that AMPFP had the right to make changes upon 13 months' notice and the announcement of the changes on 8 August 2019 constituted such notice. AMPFP submits that, as the 2017 BOLR Policy provided that the terms of the policy that apply are those in effect at the exercise date, no breach of contract would then arise for group members with an exercise date after 8 September 2020. 646 AMPFP submits that: the 8 August 2019 Changes were not the only changes to the 2017 BOLR Policy announced on that date; there were additional changes, made on 13 months' notice, which came into effect on 8 September 2020; no challenge is made by Equity to the effectiveness of those changes; if the announcement of the 8 August 2019 Changes could not be regarded as giving notice of them for the purposes of the 13 months' notice provision, it would lead to the commercially absurd result that the other changes announced with 13 months' notice on 8 August 2019 took effect on 8 September 2020 but the 8 August 2019 Changes did not, and still have not taken effect, notwithstanding a large number of transactions having taken place pursuant to the BOLR Policy in the intervening period; the requirement for certainty of contractual terms strongly favours the 8 August 2019 Changes being effective on 13 months' notice, if (contrary to AMPFP's submission) not validly made pursuant to the LEP Provision. 647 I do not accept these submissions. The 8 August 2019 Changes were announced as changes made under the LEP Provision with immediate effect: see the "Questions and answers" document at [294] above. There was no suggestion that AMPFP was giving 13 months' notice of these changes and they would come in effect on 8 September 2020. In these circumstances, I do not accept AMPFP's contention that it gave 13 months' notice of the 8 August 2019 Changes, such that they came into effect on 8 September 2020.

[85]

MISLEADING OR DECEPTIVE CONDUCT 649 Equity claims that AMPFP engaged in misleading or deceptive conduct, or conduct likely to mislead or deceive, by representing that: (a) an economic change had occurred that had rendered the BOLR Policy inappropriate; (b) AMPFP had a contractual right to change the terms of each authorised representative agreement by introducing the 8 August 2019 Changes without providing 13 months' notice; and (c) the 8 August 2019 Changes were effective from 8 August 2019, (together, the Representations). 650 Equity's primary position is that the Representations were statements of facts. In the alternative, Equity contends that, if the Representations (or any of them) were representations of opinion, AMPFP made a separate representation that it had reasonable grounds making the Representations. 651 Equity alleges in paragraph 57 of the statement of claim that some group members are likely to suffer loss or damage caused by AMPFP's conduct in making the Representations. In the particulars to this allegation, Equity states that AMPFP's conduct in making the Representations caused: (a) some group members who would otherwise have lodged a BOLR application, not to lodge a BOLR application; and (b) some group members who had lodged a BOLR application, to withdraw the application. It appears that the misleading or deceptive conduct claim is made on behalf of these categories of group members. Both Equity and WealthStone lodged BOLR applications. Neither Equity nor WealthStone withdrew their BOLR application. Accordingly, neither Equity nor WealthStone is in the categories on behalf of whom the misleading or deceptive conduct claim is made. 652 AMPFP admits that it made the Representations. It contends, in summary, that: they were representations of an opinion; AMPFP genuinely held such an opinion; and it had reasonable grounds for that opinion. 653 In circumstances where it is not necessary to resolve the misleading or deceptive conduct claim in order to determine the individual claims of Equity or WealthStone, I do not consider it necessary to consider this part of Equity's claim at this stage. While it may be possible to resolve some of the issues identified above, I would prefer to resolve these issues in the context of a claim by a group member who is said to have suffered loss or damage by reason of the allegedly misleading or deceptive conduct. The fuller factual context presented by such a case may assist in resolving whether or not the conduct was misleading or deceptive.

[86]

EQUITY'S CLAIM 654 The facts relating to Equity have been set out at [315]-[385] above. 655 I have concluded, above, that the 8 August 2019 Changes were ineffective. It follows that, by offering buy-back agreements or register valuations calculated pursuant to the 2019 version of the BOLR Policy (which incorporated the 8 August 2019 Changes), AMPFP breached its contract with Equity. There is no issue between the parties about this. 656 The additional issues that need to be considered in relation to Equity's claim relate to loss or damage. 657 The parties are agreed that, in the event that none of the 8 August 2019 Changes were effective as at 8 August 2019, the counterfactual amount that Equity would have been offered as its adjusted BOLR value (or register valuation) is $986,931 (excluding GST). I note that in paragraph 49 of Mr Tappe's affidavit, he suggests that this figure should be adjusted upwards by $1,384.76, but the parties have not made that adjustment. I will return to this matter below. 658 Equity submits that its loss is to be evaluated based on the difference between (a) the amount Equity would have received had AMPFP performed its obligations under the BOLR Policy (i.e. $986,931); and (b) the current value of Equity's register rights: Clark v Macourt [2013] HCA 56; 253 CLR 1 at [7] per Hayne J; Robinson v Harman (1848) 1 Ex 850 at 855. Equity submits, in summary, that the current value of its register rights is approximately $173,371 (excluding GST), using the October 2021 valuation as a proxy. This produces a damages figure of $813,560. 659 AMPFP submits that $173,371 does not represent the current value of Equity's register rights. AMPFP submits that, in any event, the maximum amount that Equity can recover is $573,294 (excluding GST) on the basis that Equity failed to mitigate its loss. In this regard, AMPFP contends that Equity failed to mitigate its loss by failing to accept the November 2019 valuation of $413,637.67 (excluding GST). Accordingly, AMPFP contends, the maximum amount that Equity can recover is the difference between the counterfactual amount of $986,931 and $413,637, producing a maximum damages amount of $573,294. 660 A subsidiary issue in this part of the case is whether Equity's BOLR application is still on foot. Equity's position as set out in its closing written submissions (paragraph 316) is that its BOLR application is still extant. AMPFP's position is that Equity's BOLR application has lapsed (paragraph 159 of its closing written submissions). AMPFP submits that the BOLR application has lapsed either: (a) because Equity failed to accept a register valuation (a necessary step in the BOLR process) (referring to the "Buyer of last resort process" effective 1 June 2017 (AMP.5800.0170.0004 at _0012)); or (b) pursuant to the term of the BOLR Policy that provides that "[i]f the other parties to the BOLR Licensee Buy-Back Agreement refuse to sign that Agreement after AMPFP has given those parties at least 7 days to do so, the entitlement to a Buyer of last resort payment will lapse". In this regard, AMPFP relies on Equity's refusal to sign within seven days a buy-back agreement that AMPFP provided to Equity on 10 May 2021 as part of a without prejudice offer to settle the proceeding. A redacted copy of the offer of settlement and the enclosed buy-back agreement are in evidence. It is common ground that Equity did not sign it within seven days. 661 I am not persuaded that Equity's BOLR application lapsed on either of these bases. In relation to (a), the document cited does not appear to state (at least, at the page cited) that a BOLR application will lapse if a practice fails to accept a register valuation. Indeed, it states that "[i]f there are significant delays in accepting the valuation, there may be a need to update the valuation with more recent data". In relation to (b), the buy-back agreement proffered on 10 May 2021 was prepared on the basis that the 8 August 2019 Changes were effective, which was incorrect. It is difficult to see how such a document can constitute a "BOLR Licensee Buy-Back Agreement" for the purposes of the clause in the BOLR Policy relied on by AMPFP. 662 Nevertheless, a considerable amount of time has elapsed since Equity lodged its BOLR application. Although the second further amended originating application seeks, in paragraph 2, an order that "the respondent, in its dealings with the applicant and with group members, be restrained from relying on, or giving effect to, the purported changes to the buyer of last resort multiple announced by the respondent on 8 August 2019", Equity has not sought specific performance of the BOLR application, which would have been the obvious form of relief if Equity was wanting to pursue its BOLR application. While Equity in its closing written submissions submits that the BOLR application is still extant, it also makes submissions about loss or damage on the alternative basis that the Court concludes that its BOLR application is no longer extant. Having regard to these matters, I propose to consider the loss or damage issues on the basis that Equity does not press for its BOLR application to be given effect. 663 I will first consider the issue whether Equity failed to mitigate its loss, and then consider the quantum of Equity's loss or damage.

[87]

Whether Equity failed to mitigate its loss 664 As noted above, AMPFP contends that Equity failed to mitigate its loss by failing to accept the November 2019 valuation of $413,637.67 (excluding GST). In support of that contention, AMPFP submits, in summary, as follows: (a) Had Equity accepted the November 2019 valuation, it would have received a buy-back agreement locking in a value of $413,637 for its register rights. If it considered this valuation to have been performed in breach of contract, it could have then commenced proceedings against AMPFP to recover the difference between what it considered it should have received for its register rights and that figure. Instead, Equity has allowed the value of its register rights to dwindle to $173,371 (on its case), exacerbating its loss. (b) The evidence shows that, by 5 February 2020, AMP Bank had communicated to Equity that it was willing to enter into a deed of forgiveness in respect of Equity's outstanding debt on its practice finance loan. However, this willingness was conditional on Equity finalising the BOLR valuation and crystallising the shortfall between the amount it would receive for its register rights under a buy-back agreement with AMPFP and the outstanding debt on its practice finance loan. Accordingly, even if Equity's initial failure to accept the November 2019 valuation was not unreasonable, when acceptance of that valuation formed part of an offer to forgive the debt outstanding under the practice finance loan in February 2020, continued rejection became unreasonable. (c) Acceptance of the November 2019 valuation and entry into a deed of forgiveness with AMP Bank would have likely preserved Equity's solvency. By contrast, its chosen path has produced, at best, a damages award of $813,560 (before accounting for litigation funder fees) and a debt of over $1.2 million to AMP Bank, and a materially worse financial position. 665 In support of the above, AMPFP submits that the case law makes plain that a claimant should not reject a reasonable offer from a defendant by continuing to insist on performance of the contract: Castle Constructions Pty Ltd v Fekala Pty Ltd [2006] NSWCA 133; 65 NSWLR 648 at [79]-[80], [82]-[83] citing Payzu Ltd v Saunders [1919] 2 KB 581; Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty Ltd [2009] FCA 1220; 261 ALR 501 at [456]. AMPFP submits that that is particularly so in the commercial context where a claimant is expected to behave as a reasonable businessperson and to evaluate an offer from the defendant dispassionately and without resentment. 666 I do not accept the submissions summarised in [664] above. 667 In relation to (a), the difficulty with this submission is that the draft buy-back agreement that AMPFP had provided to Equity (in June 2019 - see [334] above), which would have formed the basis for any buy-back agreement entered into by Equity in or about November 2019, contained a release of all claims against AMPFP (cl 5). Unless AMPFP was prepared to remove that clause, Equity could not enter into the buy-back agreement (based on the November 2019 valuation of $413,637) and sue AMPFP for the difference between that amount and an amount calculated on the basis of a 4.0x multiple. In response to this issue, AMPFP submits that: although the draft buy-back agreement contained a release of claims, Equity could have sought to vary it; the evidence shows that some practices did so, and that Equity itself was successful in negotiating variations to the restraint clause. However, I am not prepared to infer that, had Equity sought removal of the release clause, AMPFP would have agreed to remove it (or "carve out" a proceeding challenging the 8 August 2019 Changes). I note that, in WealthStone's case, Mr Finch sought removal of the release clause and this was refused by AMPFP. There is no direct evidence from AMPFP that it would have agreed to remove the release clause if Equity had sought this. In these circumstances, I consider that there is a reasonable explanation for Equity not entering into a buy-back agreement based on the November 2019 valuation: doing so would have meant giving up its right to sue AMPFP for the difference between the November valuation of $413,637 and an amount calculated on the basis of a 4.0x multiple. 668 In relation to (b), the same difficulty applies. Further, in relation to Mr Ortmann's proposal of 5 February 2020 (see [351] above), Ms Braschey provided a number of reasons why she did not pursue that proposal (see [352] above). In light of those reasons and the difficulty set out in the preceding paragraph, there is a reasonable explanation for Equity not entering into a buy-back agreement based on the November 2019 valuation in early 2020. 669 In relation to (c), I consider that these matters are extraneous to the issue of whether Equity failed to mitigate its loss. Equity is not seeking to recover damages in relation to its overall solvency position or its debt to AMP Bank. It is seeking to recover damages for loss or damage on the basis set out above. The issue of failure to mitigate is focussed on that loss or damage. 670 Accordingly, I reject the contention that Equity failed to mitigate its loss.

[88]

The amount of Equity's loss or damage 671 As set out above, Equity submits that its loss is to be evaluated based on the difference between (a) the amount Equity would have received had AMPFP performed its obligations under the BOLR Policy (i.e. $986,931); and (b) the current value of Equity's register rights. I accept that this is the appropriate conceptual framework with which to approach the quantification of loss or damage in the circumstances of this case. 672 The issue between the parties concerns the current value of Equity's register rights. As noted above, Equity submits that this is approximately $173,371 (excluding GST), using the October 2021 valuation as a proxy. AMPFP submits that the figure does not represent the current value of Equity's register rights. AMPFP submits that: as Mr Tappe explains, that figure is a valuation of Equity's register rights as at 31 October 2021 using the valuation methodology in the 2020 version of the BOLR Policy; as the BOLR Policy is no longer in operation, the current value of Equity's register rights cannot be determined by the application of the BOLR Policy valuation methodology. AMPFP submits that it is for the applicant to prove its loss, and there is no evidence of the current value of Equity's register rights; Ms Braschey said she did not know what their value would be on the open market (see [375]-[376] above). 673 It is well established that when it comes to assessing the amount of any damages award "mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them" and that "[w]here precise evidence is not available the court must do the best it can": Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 at 83 per Mason CJ and Dawson J. 674 While not ideal, I consider that the October 2021 valuation provides a sufficiently reliable estimate of the current value of Equity's register rights; if anything, the current value of those register rights is likely to be less than the figure in that valuation ($173,371.17) and therefore the adoption of that figure favours AMPFP. The basis of the valuation is explained in Mr Tappe's affidavit at paragraphs 37-40. The valuation was performed on the basis of the 2020 version of the BOLR Policy, therefore a 2.5x multiple was applied to ongoing revenue. The ongoing revenue did not include any grandfathered commission revenue, as this had ceased by that time. An audit discount of 30% was applied, but no notice period reduction discount was applied. There is evidence in the case 2.5x was roughly the multiple applicable in the external market as at August 2019. While there is no clear evidence as to the current multiple for the external market generally, it is unlikely that the appropriate multiple to value Equity's register rights now would be any higher than 2.5x. If anything, the appropriate multiple is likely to be lower than 2.5x, having regard to the geographical location and demographics of the client base. Equity's revenue remained relatively stable as between October 2021 and the time of trial, and the business continued to be operated in broadly the same way over that period. The audit discount applied in the October 2021 valuation is likely to reflect deficiencies in the quality of the client files and other compliance issues, which (it may be inferred) are equally applicable to the current value of the register rights. Having regard to these matters, I consider that the October 2021 valuation provides a sufficiently reliable estimate of the current value of Equity's register rights. 675 Accordingly, I accept Equity's quantification of its loss or damage. Subject to two possible adjustments, it is entitled to be awarded damages of $813,560 for breach of contract. The first possible adjustment is the amount of $1,384.76 referred to in Mr Tappe's affidavit at paragraph 49. The second possible adjustment relates to whether the appropriate damages figure is the "exclusive of GST" figure agreed by the parties or an "inclusive of GST" figure. These matters should be addressed by the parties in their submissions on the orders to be made following these reasons.

[90]

Whether the condition precedent to the operation of the release has been satisfied 683 Clause 5 of the WealthStone Buy-Back Agreement, which contains the release, has been set out above, but for ease of reference it is set out again here: On payment by AMPFP of the BOLR Benefit to the Practice, each of the Relevant Parties hereby releases AMPFP from all and any present or future claims, proceedings, suits and Liabilities arising out of or in connection with the facts or circumstances giving rise to the BOLR Benefit. (Emphasis added.) 684 It is apparent that the release is conditional upon payment by AMPFP of the "BOLR Benefit" to the practice. The expression "BOLR Benefit" was defined in the WealthStone Buy-Back Agreement as meaning: $176,121.41 (excl GST), being the Register Value calculated by AMPFP. (Emphasis added.) 685 The expression "Register Value" was defined in cl 20.2 as follows: The value of the Register Rights calculated in accordance with the buyer of last resort valuation methodology as set out in the BOLR Policy (as amended from time to time) and as determined by AMPFP to be applicable to the Practice and in this regard, the determination by AMPFP shall be final in the absence of manifest error. (Emphasis added.) 686 The applicant notes that AMPFP calculated the value of register rights in accordance with a valuation methodology that included the 8 August 2019 Changes. The applicant submits, in summary, that the adoption of that valuation methodology constituted a "manifest error" because the 8 August 2019 Changes were ineffective. Accordingly, the applicant submits that the Register Value was not determined and the BOLR Benefit was not paid, and the condition precedent to the operation of the release has not been satisfied. 687 I do not accept those submissions. The applicant's construction falls foul of a plain reading of the definition of "BOLR Benefit", being a specific sum of money. The text that follows - "being the Register Value calculated by AMPFP" - is descriptive in nature and does not derogate from what the agreement stipulates as the amount that constitutes the BOLR Benefit. It is a phrase by way of explanation which alludes to the way in which the specified sum was calculated. It does not change the definition of BOLR Benefit from being a specified sum. Accordingly, the BOLR Benefit was paid, and the condition precedent to the release was satisfied. 688 I therefore reject the applicant's contention.

[91]

Whether the release is void under s 23 of the Australian Consumer Law 689 Section 23(1) of the Australian Consumer Law relevantly provides: 23 Unfair terms of consumer contracts and small business contracts (1) A term of a consumer contract or small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract. … (4) A contract is a small business contract if: (a) the contract is for a supply of goods or services, or a sale or grant of an interest in land; and (b) at the time the contract is entered into, at least one party to the contract is a business that employs fewer than 20 persons; and (c) either of the following applies: (i) the upfront price payable under the contract does not exceed $300,000; (ii) the contract has a duration of more than 12 months and the upfront price payable under the contract does not exceed $1,000,000. 690 The Australian Consumer Law defines "services" broadly to include "any rights …, benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce" (s 2). The word "supply" is defined as including (in relation to services) "provide, grant or confer". 691 The term "unfair" is defined in s 24. Examples of unfair terms are given in s 25. 692 Section 26 provides: 26 Terms that define main subject matter of consumer contracts or small business contracts etc. are unaffected (1) Section 23 does not apply to a term of a consumer contract or small business contract to the extent, but only to the extent, that the term: (a) defines the main subject matter of the contract; or (b) sets the upfront price payable under the contract; or (c) is a term required, or expressly permitted, by a law of the Commonwealth, a State or a Territory. (2) The upfront price payable under a contract is the consideration that: (a) is provided, or is to be provided, for the supply, sale or grant under the contract; and (b) is disclosed at or before the time the contract is entered into; but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event. 693 Section 27 provides: 27 Standard form contracts (1) If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise. (2) In determining whether a contract is a standard form contract, a court may take into account such matters as it thinks relevant, but must take into account the following: (a) whether one of the parties has all or most of the bargaining power relating to the transaction; (b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties; (c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented; (d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1); (e) whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction; (f) any other matter prescribed by the regulations. 694 The applicant contends that the WealthStone Buy-Back Agreement is a small business contract, a term of the contract (the release) is unfair, and the agreement is a standard form contract. Accordingly, the applicant contends, the release is void pursuant to s 23(1). 695 I will start by considering whether the WealthStone Buy-Back Agreement is a "small business contract" as defined in s 23(4) and consider each element in turn. (a) The applicant submits that the agreement is a contract for the supply of services, namely the payment of the BOLR Benefit by AMPFP to WealthStone. AMPFP disputes this. In my view, the agreement is a contract for the supply of services, but I would analyse this differently from the applicant's submissions. I consider the supply of services to be the surrender of register rights by WealthStone to AMPFP. The word "services" is defined to includes "rights" and "benefits" that are, or are to be, provided, granted or conferred in trade or commerce. This is sufficiently broad to include the register rights, as described earlier in these reasons. The word "supply" is relevantly defined to include "provide, grant or confer". Clause 2.1 of the WealthStone Buy-Back Agreement provides that the practice, as beneficial owner of the register rights, agrees to surrender the register rights to AMPFP in exchange for payment of the BOLR Benefit, free from any encumbrances, and with effect from the Completion. Clause 8 deals with risk, title and liabilities. The clause provides in part that, on and from the Completion Date, all Remuneration earned or receivable or otherwise payable belongs to AMPFP. Having regard to these clauses, in particular, in my view, the transaction involves WealthStone providing the register rights to AMPFP, as the ubiquitous language of "buy-back" indicates. While the language of "surrender" perhaps tends in the opposite direction, the contract refers to WealthStone as the beneficial owner of the register rights, indicating that it is giving up (providing) something. (b) The next element of the definition of "small business contract" is that, at the time the contract was entered into, at least one party employed less than 20 people. This is satisfied in the case of WealthStone. (c) The next element is set out in s 23(4)(c). In the present case, both of the alternatives are satisfied. (i) In relation to s 23(4)(c)(i), I consider the "upfront price" for the purposes of this provision to be the BOLR Benefit ($176,121.41). Under s 26(2), the "upfront price" is the consideration that "(a) is provided, or is to be provided, for the supply, sale or grant under the contract; and (b) is disclosed at or before the time the contract is entered into; but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event". The BOLR Benefit satisfies the criteria referred to in paragraphs (a) and (b) of s 26(2). An issue arises whether the Deferred Payment falls within the words at the end of s 26(2) ("but does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event") (the concluding words). (While this issue does not have any practical effect in WealthStone's case, it may be relevant for the cases of other group members.) If the Deferred Payment falls within the concluding words, then it does not form part of the upfront price. In my view, the Deferred Payment does not fall within the concluding words. While the amount of the Deferred Payment can be adjusted, liability to pay the Deferred Payment is not contingent. Further, the Deferred Payment does not fall within the words "other consideration". Accordingly, the upfront price is the BOLR Benefit. As the BOLR Benefit does not exceed $300,000, this alternative is satisfied. (ii) In relation to s 23(4)(c)(ii), the agreement has a duration of more than 12 months, because the Deferred Payment Date is effectively 21 February 2021 (12 months after the Completion Date) and this is more than 12 months after the date of the agreement (4 February 2020). Further, the upfront price does not exceed $1 million. 696 Accordingly, the WealthStone Buy-Back Agreement is a small business contract. 697 I will consider next whether the agreement is a "standard form contract". The Australian Consumer Law does not define "standard form contract". As set out above, s 27(1) provides that if a party to a proceeding alleges that a contract is a standard from contract, it is presumed to be a standard form contract unless another party proves otherwise. In determining whether a contract is a standard form contract, a court may take into account such matters as it thinks relevant, but must take into account the matters set out in s 27(2). I will consider each of those in turn: (a) Whether one of the parties has all or most of the bargaining power relating to the transaction - The transaction for present purposes is the buy-back of WealthStone's register rights and the payment of a BOLR benefit to WealthStone that culminated in the WealthStone Buy-Back Agreement. The transaction was triggered by WealthStone submitting a BOLR application; this was a choice that WealthStone made. However, once the BOLR application had been lodged, AMPFP had a significantly greater degree of bargaining power than WealthStone relating to the transaction, because WealthStone could not withdraw its BOLR application unless AMPFP consented. Further, because of AMPFP's delay in finalising the transaction, Mr Finch was under financial pressure. I infer that, because of the dealings between AMPFP personnel and Mr Finch, AMPFP was aware of Mr Finch's need (in January and early February 2020) to finalise the transaction as soon as possible. (b) Whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties - Discussion relating to the transaction started shortly after WealthStone submitted its BOLR application (in December 2018). Before that time, AMPFP had prepared a template buy-back agreement. (This is apparent from the template buy-back agreement that was provided by AMPFP to Equity in June 2019 - that document has the words "FINAL DRAFT - 2 May 2018" on the front page, indicating when it was prepared.) However, the draft buy-back agreement provided by AMPFP to WealthStone on 31 January 2020 had not been prepared before December 2018. While quite similar to the template referred to above, the draft buy-back agreement included details referable to the transaction with WealthStone, such as party details, dollar amounts, and adjustments to the template to reflect the arrangement regarding remediation costs. (c) Whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented - WealthStone was able to negotiate some changes to the terms of the draft buy-back agreement, as evidenced by the changes to the lookback review clause (cl 3.4). Thus, WealthStone was not required either to accept or reject the terms as a whole. However, Wealth Stone was, in effect, required to accept the release clause or reject the terms of the contract. Mr Finch sought removal of the release and this was rejected by AMPFP (see [424] above). Mr Finch raised his concerns about the release with Mr Stone and was told "you can sign the deed of release and leave, or not" (see [427] above). (d) Whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1) - WealthStone was able to negotiate some changes to the terms of the draft buy-back agreement, as evidenced by the changes to the lookback review clause (cl 3.4). However, it was not given an effective opportunity to negotiate the release. As noted above, Mr Finch sought removal of the release and this was rejected by AMPFP. Mr Finch raised his concerns about the release with Mr Stone and was told "you can sign the deed of release and leave, or not". Insofar as AMPFP relies on the communications between WealthStone and AMPFP in relation to the audit discount and the remediation costs, these communications largely concerned the upfront price, being a term referred to in s 26(1). (e) Whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction - The contract contains some terms that are specific to the transaction with WealthStone (eg, cl 3.4). (f) Any other matter prescribed by the regulations - there are no such matters. 698 The Court is empowered to look at other relevant matters. However, I consider that the observations set out above sufficiently cover the relevant matters in this case. Although a number of the factors identified in s 27(2) are present, they are not all present, and some are only present in a qualified way. On balance, I consider that AMPFP has proved that the WealthStone Buy-Back Agreement is not a "standard form contract". While the contract is largely based on a template agreement prepared before any discussion relating to the particular transaction occurred, the draft buy-back agreement that was provided by AMPFP on 31 January 2020 contained some specific details and provisions relating to the transaction with WealthStone, and there was an effective opportunity to negotiate some of the terms of the agreement (albeit there was not an effective opportunity to negotiate the release). 699 In light of that conclusion, it is unnecessary to consider whether the release was an unfair term. 700 For these reasons, I reject the applicant's contention based on s 23 of the Australian Consumer Law.

[92]

Whether AMPFP's conduct in procuring the release was unconscionable 701 Section 21 of the Australian Consumer Law relevantly provides: 21 Unconscionable conduct in connection with goods or services (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person; or (b) the acquisition or possible acquisition of goods or services from a person; engage in conduct that is, in all the circumstances, unconscionable. … (3) For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. 702 I have concluded, at [695(a)] above, that the WealthStone Buy-Back Agreement was a contract for the supply of services by WealthStone to AMPFP. It follows that it was a contract for the acquisition of services by AMPFP from WealthStone. Accordingly, AMPFP's conduct in procuring the release was in connection with the acquisition of services. There is no issue that the conduct was in trade or commerce. 703 Section 22 of the Australian Consumer Law sets out matters the court may have regard to for the purposes of s 21. Section 22(2) provides in part: (2) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier), the court may have regard to: (a) the relative strengths of the bargaining positions of the acquirer and the supplier; and (b) whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and … (f) the extent to which the acquirer's conduct towards the supplier was consistent with the acquirer's conduct in similar transactions between the acquirer and other like suppliers; … 704 Sections 21 and 22 of the Australian Consumer Law, and corresponding provisions in other statutes, have been considered in a number of cases in recent years. 705 The following principles, drawn from the applicant's submissions, are established. The scope of statutory unconscionability is not limited by the equitable doctrine of unconscionability: s 21(4)(a) (set out above). Rather, the Court is required to evaluate the relevant conduct against the standard of good conscience in the sense that it falls short of societal norms: Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liq) (No 2) [2017] FCA 709; [2017] ATPR ¶42-548 (Get Qualified) at [60] per Beach J. This involves "[s]tanding back and looking at the whole episode" in all the circumstances: Get Qualified at [61] quoting Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90; [2013] ATPR ¶42-447 at [44]. 706 The principles applicable to determining whether conduct contravenes s 21 were recently elucidated by the Full Court of this Court in Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; 285 FCR 133 (Quantum Housing) (Allsop CJ, Besanko and McKerracher JJ). Relevantly, the Full Court held that, while some form of exploitation of or predation on some vulnerability or disadvantage of people will often be a feature of unconscionable conduct under s 21, this is "not a necessary feature of the conception or a necessary essence in the embodied meaning of the statutory phrase": Quantum Housing at [4]. 707 As to the meaning of "unconscionable", the Full Court stated at [87]-[88]: 87 The word, "unconscionable", was, however, chosen by Parliament. As the Full Court said in National Exchange 148 FCR 132 at [33], unconscionable conduct "on its ordinary and natural interpretation, means doing what should not be done in good conscience". The words "unconscionable" and "conscionable" may not be frequently used in everyday parlance, but they have an ordinary meaning, derived from the inner human sense of doing right. At least some of the human values that inform an Australian business conscience were set out in Paciocco 236 FCR 199 at [296]. Some of these, and not limited to protection of the vulnerable from victimisation or predation, were adopted by Kiefel CJ and Bell J in Kobelt 267 CLR 1 at [14]. 88 As the Full Court said in Unique 266 FCR 631 at [155], an allegation of unconscionability is a serious allegation. It is sufficient to warrant censure for the purpose of deterrence by the imposition of a civil penalty. Being penal in character tends against too loose or diffuse a construction: Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193 at [45]; Paciocco 236 FCR 199 at [300]. That assists in recognising an element of seriousness of the finding and the quality of the departure from the relevant standards of conduct that is required. As the Full Court said in Unique at [155]: … To behave unconscionably should be seen, as part of its essential conception, as serious, often involving dishonesty, predation, exploitation, sharp practice, unfairness of a significant order, a lack of good faith, or the exercise of economic power in a way [worthy] of criticism. None of these terms is definitional. The Shorter Oxford Dictionary on Historical Principles (1973) gives various definitions including "having no conscience, irreconcilable with what is right or reasonable". The Macquarie Dictionary (1985) gives the definition "unreasonably excessive; not in accordance with what is just or reasonable". (The search for an easy aphorism to substitute for the words chosen by Parliament (unconscionable conduct) should not, however, be encouraged: see Paciocco at [262]). These are descriptions and expressions of the kinds of behaviour that, viewed in all the circumstances, may lead to an articulated evaluation (and criticism) of unconscionability. It is a serious conclusion to be drawn about the conduct of a business person or enterprise. It is a conclusion that does the subject of the evaluation no credit. This is because he, she or it has, in a human sense, acted against conscience. The level of seriousness and the gravity of the matters alleged will depend on the circumstances. Courts are generally aware of the character of a finding of unconscionable conduct and take that into account in determining whether an applicant has discharged its civil burden on proof. (Emphasis added by Full Court in Quantum Housing.) 708 The issue whether AMPFP's conduct in procuring the release was unconscionable is to be assessed on the basis of what AMPFP knew at the time that the relevant conduct occurred, that is, in late January and early February 2020, when AMPFP put forward the draft buy-back agreement including a release and then refused WealthStone's requests to have the release removed from the draft agreement. Thus, I do not take into account that (as I have concluded in these reasons) the 8 August 2019 Changes were ineffective. 709 I consider the following facts and matters to be relevant and significant. 710 First, the issue of the release needs to be seen in the context of the 8 August 2019 Changes, which had been announced several months before AMPFP sent WealthStone the draft buy-back agreement (on 31 January 2020). The 8 August 2019 Changes involved drastic changes to the multiple applicable to practices under the BOLR Policy, from 4.0x to 2.5x for ongoing revenue other than grandfathered commission revenue. The changes materially adversely affected practices, including WealthStone. As Mr Jordan, on behalf of ampfpa, wrote to Mr Akers on 28 July 2019: "Remco views the content within [the formal consultation materials] as the most serious sequence of changes that will impact our members (including their clients) in the history of our relationship with AMP". Subject to certain exceptions, the changes applied to practices in the pipeline, that is, practices (such as WealthStone) that had submitted a BOLR application before 8 August 2019 with an exercise date after 8 August 2019, even though those practices could not withdraw their BOLR application (unless AMPFP consented). The application of the 8 August 2019 Changes to practices in the pipeline was, in my opinion, unfair and unreasonable. 711 Secondly, the question whether the 8 August 2019 Changes were authorised by the LEP Provision (and therefore whether the changes were effective) was contestable and (I infer) known by AMPFP to be contestable. By 31 January 2020, the time when it proffered the draft buy-back agreement to WealthStone, AMPFP knew that it was possible that a class action would be commenced against it, challenging the validity of the 8 August 2019 Changes. This is apparent, for example, from Mr Stone's reference to "the class action" in the conversation between Mr Finch and Mr Stone in early February 2020 (see [427] above). 712 Thirdly, there was a significant imbalance in bargaining power as between AMPFP and WealthStone in connection with the buy-back agreement. AMPFP was a substantial company, the subsidiary of a listed company and member of a large corporate group. WealthStone was essentially a one-person company. While it was WealthStone's choice to lodge a BOLR application, once it had done so, it could not withdraw the BOLR application unless AMPFP consented. Further, as stated above, because of AMPFP's delay in finalising the transaction, Mr Finch was under financial pressure. I infer that, because of the dealings between AMPFP personnel and Mr Finch, AMPFP was aware of Mr Finch's need (in January and early February 2020) to finalise the transaction as soon as possible. 713 Fourthly, Mr Finch specifically sought removal of the release clause, but this was rejected by AMPFP. The request to remove the release was raised by Mr Finch in the context of his concern about the BOLR multiple having been reduced by 1.5x. This occurred during the conversation between Mr Finch and Mr Stone set out at [427] above. The position adopted by AMPFP (both in the conversation and in the email set out at [424]) was that they would not agree to remove the release. 714 Fifthly, the release was not reasonably necessary to protect the legitimate interests of AMPFP. The legitimate interests of AMPFP in relation to the buy-back transaction did not include preventing WealthStone from bringing a legal proceeding against AMPFP challenging the effectiveness of the 8 August 2019 Changes. If the 8 August 2019 Changes were not authorised by the LEP Provision, then AMPFP had no legal entitlement to calculate the BOLR Benefit on the basis of the 8 August 2019 Changes. The effect of the release would therefore be to prevent WealthStone bringing a claim against AMPFP for the BOLR Benefit that it was legally entitled to receive. 715 Sixthly, the position adopted by AMPFP in respect of WealthStone was inconsistent with the position it adopted for some other practices in a comparable position. While the majority of buy-back agreements that AMPFP entered into in the period after 8 August 2019 contained a release (not necessarily in the same terms as cl 5 of the WealthStone Buy-Back Agreement), in a small number of cases AMPFP was prepared not to include a release. As well as being unfairly inconsistent treatment, this further demonstrates that the release was not reasonably necessary to protect the legitimate interests of AMPFP. 716 Having regard to the above facts and matters, I consider that AMPFP's conduct in including the release in the draft buy-back agreement, and rejecting WealthStone's requests that the release be removed from the draft agreement, was against good conscience. It was conduct that, in my opinion, fell well below accepted standards of commercial conduct. It is aptly described as exploitative behaviour; AMPFP exploited its superior bargaining position to obtain a benefit (release from a potential claim challenging the 8 August 2019 Changes) that it had no legitimate interest in obtaining in the buy-back transaction. 717 I therefore accept the applicant's contention that AMPFP's conduct in procuring the release was, in all the circumstances, unconscionable within the meaning of s 21 of the Australian Consumer Law. 718 In the points of claim, WealthStone seeks an order pursuant to s 237 declaring the release in the WealthStone Buy-Back Agreement void. Section 237(1) of the Australian Consumer Law relevantly provides that the court may, on the application of a person who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that contravened Ch 2 of the Australian Consumer Law (which includes s 21), make such order or orders as the court thinks appropriate against the person who engaged in the conduct. Section 237(2) provides that the order must be an order that the court considers will: (a) compensate the person in whole or in part for the loss or damage; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person. In the circumstances of this case, unless an order is made declaring the release void (or void to the necessary extent), WealthStone will suffer loss or damage by reason of the contravening conduct, in that it will not be able to recover damages for breach of contract. The order sought by WealthStone will prevent that loss or damage arising. I consider it appropriate in the circumstances to make an order declaring cl 5 of the WealthStone Buy-Back Agreement void to the extent that it precludes the claims made by WealthStone in this proceeding.

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