Representatives entitled to damages due to AMP’s ‘buyer of last resort’ policy amendments

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This was a class action on behalf of financial planners who were authorised representatives of the respondent (AMP), arising out of purported amendments by AMP to its ‘buyer of last resort’ (BOLR) policy. Although described as a ‘policy’, the BOLR policy had contractual force between AMP and the financial planners. In short, the BOLR policy enabled financial planners to sell their practice to AMP at a price calculated as 4x ongoing revenue. However, on 8 August 2019 AMP purported to amend the BOLR policy by reducing the multiple from 4x to 2.5x (8 August Amendment).

The BOLR policy could be amended by AMP by giving 13 months’ written notice of any changes (which was not given in this instance), or otherwise if “legislation, economic or product changes render any part of [the BOLR] policy inappropriate following consultation with the ampfpa [being the organisation which represents the financial planners]” (Amendment Term). The applicant contended, in summary, that the 8 August Amendment was ineffective because:

• AMP did not ‘consult’ with the ampfpa in relation to the purported amendment, as required by the Amendment Term;
• in any event, there were no relevant ‘legislation, economic or product changes’ within the meaning of the Amendment Term (or even if there were, they were not such as to render any part of the BOLR policy ‘inappropriate’ within the meaning of the Amendment Term); and
• alternatively, the 8 August Amendment was not reasonably necessary to address any such changes

The applicant further contended that AMP, in making the 8 August Amendment:

• acted in breach of a contractual obligation of good faith;
• engaged in unconscionable conduct; and/or
• engaged in misleading or deceptive conduct.

AMP denied the applicant’s claims. The claims of a sample class member were also determined at the trial of the proceeding, being a class member who AMP contended had granted to AMP a release in respect of the claims made in the proceeding.

Following a lengthy trial, Moshinsky J upheld the applicant’s (and sample class member’s) claims. His Honour’s reasons comprise 722 paragraphs, in which his Honour held:

• the requirement on AMP to ‘consult’ was a precondition to the effectiveness of the 8 August Amendment (and not just an obligation the breach of which sounded only in damages);
• AMP had failed to ‘consult’ within the meaning of the Amendment Term (having given the ampfpa notice of the proposed 8 August Amendment only 12 days before it became effective, being a manifestly insufficient period in the circumstances);
• AMP had also failed to establish that there was any ‘legislation, economic or product change’ which was such as would justify the 8 August Amendment;
• thus, the 8 August Amendment was ineffective (and it was therefore unnecessary to determine whether AMP breached a contractual obligation of good faith, or engaged in unconscionable or misleading or deceptive conduct); and
• in relation to the sample class member’s claim, although the release granted in favour of AMP was not an ‘unfair term’ under the Australian Consumer Law (ACL) (because it was not contained in a ‘standard form contract’ as defined in the ACL), it was nevertheless procured by conduct of AMP that was, in all of the circumstances, unconscionable, and was therefore void.

Consequently, both the applicant and the sample class member were entitled to damages (representing, in effect, the difference between the amount they would have received for the sale of their practice to AMP under the original 4x multiple of ongoing revenue, and the amount they had in fact received (or now stood to receive) under the amended 2.5x multiple).

Equity Financial Planners Pty Ltd v AMP Financial Planning Pty Ltd [2023] FCA 741 

Federal Court of Australia, Moshinsky J,
5 July 2023 

Applicant’s Solicitors: Corrs Chambers Westgarth
Respondent’s Solicitors: King & Wood Mallesons
Applicant’s Funder: Augusta

Austlii link

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