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

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].