AMP Limited Class Action: Issues, Involvement of Banking Royal Commission and Regulatory Bodies, and Possible Remedies

This article discusses the AMP Limited class action, the involvement of the Banking Royal Commission and regulatory bodies, and possible remedies. It also analyzes the issues associated with the company and the violations of the Corporation Act 2001 (Cth). The article explains the provisions of the Corporate Veil and the Salomon v A Salomon & Co Ltd case. It also describes the role of the Banking Royal Commission, ASIC, AUSTRAC, and APRA in the situation. The article concludes by discussing the possible remedies open in this situation.

Running head: BUSINESS LAW
Business law
Name of the Student
Name of the University
Author Note

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Introduction
A business can be carried out in Australia through the use of a various business
structures. One of such business structure is a corporation brings along with itself the provisions
of corporate veil. When business operations are carried out through the use of a company which
is a separate legal entity, the owners are provided with limited liability protection1. The
provisions of Corporate Veil had been discussed via the case of Salomon v A Salomon & Co Ltd
[1896] UKHL 12. In the case it was clarified by the court that the identity of the company and
the identity of the owners will be different when all legal procedures have been followed in
relation to the formation of the company. However this rule may sometimes be misused by the
owners to case detriments to the other stakeholders of the company3. The purpose of this
assignment is to review the situations of AMP limited which have been in the news for a
potential class action. The paper described the issues associated with the company, analyzes the
involvement of the Banking Royal Commission in the issue and other possible regulatory
investigations. The paper also discusses remedies which are open to the aggrieved parties in such
situations.
The issues with the company
On June 2018, a class action had been filed by Maurice Blackburn Lawyers in behalf of
the shareholders of the company AMP limited. The class action had been a result of the
1 DesJardins, Joseph R. An introduction to business ethics. (McGraw-Hill/Irwin, 2014)
2 Salomon v A Salomon & Co Ltd [1896] UKHL 1.
3 Allen, William T., and Reinier Kraakman. Commentaries and cases on the law of business organization. (Wolters
Kluwer law & business, 2016).

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revelations which the Banking Royal Commission had made with respect to the misconduct
being taking place at the company.
The following views have been taken into consideration with respect to the class action claim:
The company in context is an ASX listed company which indulges in providing financial advice
at personal level to clients. The company had been subjected to examination by the Royal
Commission from 16th April 2018. The Royal commission identified two serious misconducts on
the part of the company during the investigation process. The first alleged misconduct is that for
a few years, the company had been intentionally charging ongoing fees from the clients in
various contexts for no services provided. The fees in context had been charged pursuant to the
business policies and practices of the company, which included a policy which had been
approved by AMP management committee4. The approval had been granted even where the
committee had been provided advice that such fee can damage the reputation of the company
along with legal compliance issue. Further the Royal Commission had identified that since 27
May 2015, the company had misled ASIC on various occasions when they had been reporting to
the corporate regulator in relation to charging fees without providing any services. They had
provided about 20 misleading and false statements to the ASIC with respect to fees being
charged for no services. In providing such statements the company repeatedly made an
impression that the fees for no services were result of an administrative error rather than policy
of business. A document review by the company provided email chains from 2015 June
depicting that the employees of the organization had knowledge that the organization was
4 ABC News. (2018). Lawyers to 'win big' in 'record' AMP class action feeding frenzy. [online] Available at:
http://www.abc.net.au/news/2018-05-17/amp-under-siege-lawyers-class-action-shareholders-wait/9763940
[Accessed 13 Aug. 2018].

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breaching the condition imposed on its licence by charging fees for no services. The emails had
been duly escalated to the highest level of AMP which resulted in the commission5.
Since there has been this revelation from the Royal Commission the company has been
subjected to significant fall out. The share price of the company had fallen by approximately
11%. Two directors have resigned from the position along with both the CEO and the Chairman.
The actions which have been commenced by the law firm on behalf of the shareholders
has been in relation to the violation of the Corporation Act 2001 (Cth). It has been provided by
the provisions of section 1041H of the CA that an organization would be in the breach of this
section if they have indulged in a conduct which can be regarded as misleading and deceptive
conduct in relation to financial products. In addition the claim had been made in relation to the
breach of continuous disclosure obligations which are provided in the provisions of section 674
of the CA. It has been further alleged that if the organization would have indulged in the proper
disclosure about its actions it would affected the confidence of the potential investors to invest in
the company.
The role of the Banking Royal commission and other regulatory bodies with respect to the
issue
The Royal Commission carries out investigation in relation to misconduct in the Banking,
Superannuation and Financial Sector. The commission had been initiated on 14 December, 2017
by the Governor-General of the commonwealth of Australia with respect to the Royal
Commission Act 1902. The powers of the commission are set out in the same legislation. The
commission has the power to call a person to appear in front of the commission for a hearing or
5 Smh. [online] Available at: https://www.smh.com.au › Business › Banking & finance [Accessed 13 Aug. 2018].

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to produce any document which have been specified in the summon. It may require witness to
deliver testimony under oath. The person who has been summoned is said to make legal
compliance or is subjected to prosecution under an offence. In the situation of the company AMP
Limited misconduct has been reported. When any complaint is made to commission with respect
to misconduct in a banking or financial services sector it is the duty of the commission to
investigate into the complaint. Thus as a complaint had been made to the commission in relation
to the misconduct of the company providing financial services the commission got involved in
the situation6.
There are other organizations as well along with the commission which can have a
significant role to pay in the situation. One of such organizations is the Australian Securities and
Investment Commission which has been formed under the Australian Securities and Investment
Act 2001 and is provided with the responsibility of managing the provisions of the Corporation
Act 2001. The ASIC is a corporate regulator which ensures that all organization incorporated in
Australia has to comply with the provisions of the Corporation Act. The ASIC keeps regular
check on the functioning of organization and are quick to identify and address any breach by the
companies. The ASIC can file a proceeding before the court against a company for non
compliance and it has done so in various occasions. It also provides a platform for those who
want to make a complaint against the illegal operations of an organization7. AMP is an
Australian organization and also has been alleged to have violated the provisions of the CA
6 Beatty, Jeffrey F., Susan S. Samuelson, and Patricia Sánchez Abril. Business law and the legal environment.
(Cengage Learning, 2018).
7 Asic.gov.au. (2018). ASIC Home | ASIC - Australian Securities and Investments Commission. [online] Available
at: https://asic.gov.au/ [Accessed 13 Aug. 2018].

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which is governed by the ASIC. Thus in the given situation the involvement of the ASIC with
the issue is evident.
Australian Transaction Reports and Analysis Centre or better known as AUSTRAC is
also an organization which can be involved in the situation. This is an Australian agency which
is in place to address financial crime. Thus they may also be involved8.
The Australian Prudential Regulation Authority is an independent authority which has the
role of supervising the banking sector and ensures the stability of financial system in Australia.
Thus this organization may also be involved in the situation9
Possible remedies open in this situation
The primary issues which have been recognized in the situation are that of a breach of
Corporation Act 2001 (Cth). The actions which have been commenced by the law firm on behalf
of the shareholders have been in relation to the violation of the Corporation Act 2001 (Cth). It
has been provided by the provisions of section 1041H of the CA that an organization would be in
the breach of this section if they have indulged in a conduct which can be regarded as misleading
and deceptive conduct in relation to financial products. In addition the claim had been made in
relation to the breach of continuous disclosure obligations which are provided in the provisions
of section 674 of the CA. It has been further alleged that if the organization would have indulged
in the proper disclosure about its actions it would affected the confidence of the potential
investors to invest in the company. In the case of Australian Securities and Investments
Commission v Sino Australia Oil and Gas Limited (prov liq apptd) - [2016] FCA 42 it was stated
8 Mann, Richard A., and Barry S. Roberts. Business law and the regulation of business. (Nelson Education, 2015).
9 Apra.gov.au. (2018). APRA. [online] Available at: https://www.apra.gov.au/ [Accessed 13 Aug. 2018].

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by court that a director who had breached the provisions of section 1041H and 674 was
convicted of also contravening section 180(1) of the CA10. When these sections are violated by a
company both the company and the person who has been involved in such violates is liable under
the civil penalty provisions. The civil penalty provisions are provided in section 1317E. Under
this section pecuniary penalties may be imposed and the directors may be subjected to Ban from
management. Along with these penalties the court may order the lifting of Corporate Veil under
the CA. This is because it has been provided under section 1317H that the court may make a
compensation order against a company and the director to compensate for any loss which has
been caused to the shareholders or investors due to their actions. This means that the directors
have to pay the compensation in personal capacity. The court had imposed penalties on a
corporation and its directors for breach of the provisions of the CA. For instance Australian
Securities and Investments Commission v. Australian Investors Forum Pty Ltd (No 2) [2005]
NSWSC was able to get a compensation order with $300000 from the company under the
section11.
Conclusion
In conclusion, it can be stated that the identity of the company and the identity of the
owners will be different when all legal procedures have been followed in relation to the
formation of the company. However this rule may sometimes be misused by the owners to case
detriments to the other stakeholders of the company. AMP had been subjected to class action as
they had indulged in misconduct of charging fees for no services. The organization which can be
10 Australian Securities and Investments Commission v Sino Australia Oil and Gas Limited (prov liq apptd) - [2016]
FCA 42
11 Australian Securities and Investments Commission v. Australian Investors Forum Pty Ltd (No 2) [2005] NSWSC

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involved in the situation include the FSRC, ASIC, AUSTRAC and APRA as they have the role
of indulging in such issues. When the above discussed sections are violated by a company both
the company and the person who has been involved in such violate is liable under the civil
penalty provisions. The civil penalty provisions are provided in section 1317E. Under this
section pecuniary penalties may be imposed and the directors may be subjected to Ban from
management. Along with these penalties the court may order the lifting of Corporate Veil under
the CA. This is because it has been provided under section 1317H that the court may make a
compensation order against a company and the director to compensate for any loss which has
been caused to the shareholders or investors due to their actions.

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Bibliography
ABC News. (2018). Lawyers to 'win big' in 'record' AMP class action feeding frenzy. [online]
Available at: http://www.abc.net.au/news/2018-05-17/amp-under-siege-lawyers-class-action-
shareholders-wait/9763940 [Accessed 13 Aug. 2018].
Allen, William T., and Reinier Kraakman. Commentaries and cases on the law of business
organization. Wolters Kluwer law & business, 2016.
Apra.gov.au. (2018). APRA. [online] Available at: https://www.apra.gov.au/ [Accessed 13 Aug.
2018].
Asic.gov.au. (2018). ASIC Home | ASIC - Australian Securities and Investments Commission.
[online] Available at: https://asic.gov.au/ [Accessed 13 Aug. 2018].
Australian Securities and Investments Commission v Sino Australia Oil and Gas Limited (prov
liq apptd) - [2016] FCA 42
Australian Securities and Investments Commission v. Australian Investors Forum Pty Ltd (No 2)
[2005] NSWSC
Beatty, Jeffrey F., Susan S. Samuelson, and Patricia Sánchez Abril. Business law and the legal
environment. Cengage Learning, 2018.
DesJardins, Joseph R. An introduction to business ethics. McGraw-Hill/Irwin, 2014
Mann, Richard A., and Barry S. Roberts. Business law and the regulation of business. Nelson
Education, 2015.
Salomon v A Salomon & Co Ltd [1896] UKHL 1.

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Smh. [online] Available at: https://www.smh.com.au › Business › Banking & finance [Accessed
13 Aug. 2018].

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