Green v AMP Financial Planning Pty Ltd - [2008] NSWSC 1164

No judgment structure available for this case.

CITATION: Gary Sydney Green & Anor v AMP Financial Planning Pty Ltd & Ors [2008] NSWSC 1164
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 4,5,6,7,10,13,14 November 2008

JUDGMENT DATE :
5 December 2008

JUDGMENT OF: Hammerschlag J

DECISION: Plaintiffs’ claim against the defendants dismissed with costs. Judgment for the second cross-claimant against the first cross-defendant for $102,100 plus interest at the rate of 14 per cent per annum from 5 April 2002. First cross-defendant to pay the second cross-claimant’s costs of the cross-claim.

CATCHWORDS: TRADE AND COMMERCE – Trade Practices Act 1974 (Cth) and related legislation – consumer protection – whether certain conduct misleading or deceptive or likely to mislead or deceive under s 52 of the Trade Practices Act 1974 – plaintiffs invested in funds managed by the third defendant, including a fund described as the Global Technology Fund (“GTF”) – second and third defendants also held units in GTF, a fact known to the plaintiffs – in February 2001, third defendant decided to (“the decision”) and subsequently did redeem its units in GTF – the third defendant did not disclose to the plaintiffs either the fact of the decision (“the conduct complained of”) or its redemption – from late 2000 to late 2001 value of units in GTF deteriorated significantly – plaintiffs allege that by the conduct complained of the third defendant engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and that had the third defendant disclosed the decision to the plaintiffs they would have redeemed their units in GTF and invested all of the proceeds in other funds – held that the conduct complained of was not misleading or deceptive or likely to mislead or deceive and accordingly that the plaintiffs’ claim fails – whether non disclosure of information must be “deliberate” to be liable to be conduct that is misleading or deceptive or likely to mislead or deceive – held that it need not be deliberate, following the decision of the Victorian Court of Appeal in CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd (2005) ATPR 42-042 - DAMAGES – whether plaintiffs would have redeemed their units in GTF had they been told of the decision – objective features of the plaintiffs’ behaviour and attitude at the relevant time does not support plaintiffs’ oral evidence that they would have redeemed their units – held that even had plaintiffs been told of the decision, they would not have redeemed – whether if the plaintiffs had been told of the decision and had redeemed, they would have invested all of the proceeds into other funds or whether they would have firstly used the proceeds to discharge margin loans – held that the plaintiffs would have firstly used the proceeds to discharge margin loans

LEGISLATION CITED: Corporations Law (Cth)
Corporations Act 2001 (Cth)
Trade Practices Act 1974 (Cth)
Australian Securities and Investments Commission Act 1989 (Cth)

CATEGORY: Principal judgment

CASES CITED: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84
Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054
Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452
Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd & Anor (1998) 155 ALR 714
Johnson Tiles Pty Ltd & Ors v Esso Australia Ltd & Anor (1999) ATPR 41-696
CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd (2005) ATPR 42-042
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Tillman v Attorney-General (NSW) (2007) 178 A Crim R 133
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Rosenberg v Percival (2001) 205 CLR 434
Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Chappel v Hart (1998) 195 CLR 232
Ellis v Wallsend District Hospital (1989) 17 NSWLR 553

PARTIES: Gary Sydney Green
Gary Green Pty Ltd (ABN 26 010 415 639)
AMP Financial Planning Pty Ltd (ABN 89 051 208 327)
AMP Life Limited (ABN 84 079 300 379)
AMP Capital Investors Limited (ACN 001 777 591)

FILE NUMBER(S): SC 50060/2005

COUNSEL: L.S. Einstein with G.W. Pulsford and D.C. Stewart(Plaintiffs)
J.W.J. Stevenson SC with B.L. Jones (Defendants)

SOLICITORS: Lexington Law Group (Plaintiffs)
Mallesons Stephen Jacques (Defendants)

- 66 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

HAMMERSCHLAG J

5 DECEMBER 2008

50060/2005 GARY SYDNEY GREEN & ANOR -v- AMP FINANCIAL PLANNING PTY LTD (ABN 89 051 208 327) AND 2 ORS

JUDGMENT

BACKGROUND

1 HIS HONOUR: Investments on the stock market, whether direct or derivative do not, as this case shows, always turn out well.

Establishment of the funds

2 In March 2000 the third defendant (“AMP Capital”) established two investment schemes, in the form of unit trusts.

3 It called one the Global Technology Fund (“GTF”) and the other the Global Growth Opportunities Fund (“GGOF”). I shall refer to them collectively as “the funds”.

4 Each of the funds had an intended focus on investing in “growing sectors around the world”. At the time, and until early 2001, information and other technology sectors were growing. The funds invested in shares in Australian and international companies operating in those sectors.

5 The funds were regulated managed investment schemes under the provisions of the Corporations Law (Cth), which applied until 15 July 2001 when the Corporations Act 2001 (Cth) took its place. The funds are now regulated under the latter Act. For present purposes there is no difference between the two enactments.

6 A managed investment scheme is one into which people contribute money or money’s worth to acquire rights to benefits (interests) produced by the scheme, contributions are to be pooled or used in a common enterprise to produce benefits for the members of the scheme, and the members do not have day to day control over its operation. Each such scheme must have a responsible entity which must be a public company which holds a dealer’s licence authorising it to operate such a scheme. The responsible entity holds scheme property on trust for scheme members and has statutory duties including duties to act honestly and in the best interests of the members.

7 AMP Capital has always been the responsible entity of both funds.

8 AMP Capital “seeded” GTF by making an initial investment of $6 million, in return for 5,889,879 units (at $1.01 per unit).

9 The second defendant (“AMP Life”), is a life insurance company. It seeded GGOF by investing approximately $31 million in it.

10 AMP Life also invested $20,700,000 in GTF.

11 By a prospectus (“the prospectus”) which it issued on 6 March 2000, AMP Capital offered units in the funds to the public.

12 At the time of the prospectus AMP Capital was known as AMP Asset Management Australia Ltd. Thereafter it changed its name to AMP Henderson Global Investors Ltd and later took its present name.

13 Units in each fund were offered at a price (termed “the Entry Price”) determined directly by reference to the funds’ net asset value with a small allowance for transaction costs. The net asset value of the fund was any cash, plus the value of shares held by it. The value at any time of a unit was its proportion of the aggregate value of all units on issue.

14 A unit holder could redeem the investment at any time at a price (termed “the Exit Price”) valued in the same way as the Entry Price at the relevant time.

15 If the net asset value of the fund increased so would the Entry and Exit Prices, and if it decreased so would they.

16 Apart from functioning as the responsible entity (from which activity it derives income), AMP Capital has its own shareholders’ funds to invest, which it did in acquiring its GTF units.

More about the prospectus

17 The prospectus was open from 6 March 2000 to 5 March 2001.

18 It stated that the funds aimed to provide high returns over the long term, while accepting high levels of volatility in returns. It stated that the investor should consider risk along with a “recommended minimum time frame to invest for”, which was seven to ten years in the case of GTF and five to seven years in the case of GGOF.

19 It stated that:

“By purchasing units in one of these Funds you harness the buying power of pooled funds and take advantage of professional investment expertise.”

20 It stated that:

“AMP Asset Management’s London based associate, Henderson Investors, has been appointed by us as the sub-manager of both Funds and is responsible for implementing the investment policy for each Fund.”

21 It stated that Henderson Investors was one of the largest European specialist managers of technology funds and had pioneered a truly global perspective on technology investment. It stated that: “The team at Henderson Investors has contacts around the world, not solely in their domestic market”.

22 It gave as examples of high-growth sectors the areas of computer software and hardware, communication technologies and healthcare.

23 The prospectus identified AMP Capital as the responsible entity and provided additional information about its role and responsibilities including its statutory duties.

24 The prospectus disclosed that:

“At any time, the responsible entity or its Directors, or other companies in the AMP group may invest in any Fund on normal commercial terms.”

The plaintiffs’ relationship with the defendants

25 The first defendant (“AMP Financial Planning”) is a financial planning organisation which offers, amongst others, financial planning and superannuation advice.

26 Each of the defendants is a subsidiary of AMP Limited. Where it is not necessary to distinguish between various AMP entities I shall refer to the defendants’ interests simply as AMP.

27 The first plaintiff (“Mr Green”) first became associated with AMP in 1976 when he commenced work with the organisation as a life and general insurance agent.

28 His formal education was limited to schooling until the age of 15, and a Trade Certificate received on the completion of a cabinet-making apprenticeship.

29 In 1982 Mr Green established the second plaintiff (“the Company”) and thenceforth carried on his occupation as a financial planner through it. He operated from Mt Gravatt in the State of Queensland.

30 AMP Financial Planning appointed the Company as its agent and authorised Mr Green to act as its representative for the purpose of providing investment advice, and AMP Life appointed the Company to be its agent to sell AMP products.

31 By 2000 Mr Green had been successfully associated with AMP for over 20 years, and he had about 700 clients.

32 The relationship between AMP Financial Planning and the plaintiffs and AMP Life and the plaintiffs was governed by a number of instruments including one described as Master Insurance Agency Terms which incorporated another instrument entitled AMP Code of Conduct (“the Code of Conduct”).

33 The Code of Conduct requires agents to conduct themselves with absolute honesty and integrity in the pursuit of their business objectives while representing AMP. It requires agents to adopt the highest standards of business and professional conduct and to disclose to the client every appropriate fact about a product accurately and honestly.

34 There were also various AMP internal guidelines which regulated Mr Green’s financial advice activities. One such guideline specified that “gearing” (that is, borrowing to invest) should be recommended only to clients whose risk profile was “Aggressive/Moderately Aggressive”. Another required all gearing plans to be “Pre Vetted” by another adviser before being presented to the client.

The plaintiffs invest in the funds

35 There is little doubt that throughout 2000 and well into 2001 Mr Green was enthusiastic about the funds.

36 His enthusiasm was undoubtedly fuelled by AMP’s internal marketing activities which included a PowerPoint presentation about GTF extolling the “dedicated global technology team” at Henderson Investors, and a March 2000 internal publication called “Asset Management” which referred to the fact that “Since its launch in October 1984, the Henderson Investors’ Global Technology Fund had achieved an average annual growth rate of 34.1% (before tax and fees)”.

37 Although the funds were designated as high risk, his enthusiasm for them was translated into investment by him and the Company (his description was heavily) in them. They invested as follows (borrowing in respect of two of the investments a total of $1.4 million under margin loans to do so):

Date	Units acquired	Amount invested	Source of investment funds	Approximate Exit Price
21 Mar 2000	79,836.96	$80,000	Mr Green	0.99
11 Apr 2000	35,143.46	$35,000	Mr Green	0.98
12 Sep 2000	8,980.40	$10,000	Mr Green	1.10
11 Oct 2000	870,372.79	$900,000	BT margin loan	1.02
2 Mar 2001	57,495.31	$35,000	Mr Green	0.60
TOTAL	1,051,828.92	$1,060,000

Date	Units acquired	Amount invested	Source of investment funds	Approximate Exit Price
10 Apr 2000	28,420.79	$30,000	the Company	1.04
22 Nov 2000	67,755.78	$60,000	the Company	0.87
24 Nov 2000	586,928.66	$500,001	Colonial margin loan	0.84
TOTAL	683,105.23	$590,001

Date	Units acquired	Amount invested	Source of investment funds	Approximate Exit Price
21 Mar 2000	78,212.45	$80,000	Mr Green	1.01
11 Apr 2000	20,165.53	$20,000	Mr Green	0.98
12 Sep 2000	22,184.71	$20,000	Mr Green	0.89
TOTAL	120,562.69	$120,000

Date	Units acquired	Amount invested	Source of investment funds	Approximate Exit Price
29 Mar 2000	184,627.47	$194,783.83	Investment switch of 187,346.19 units held in AMP Listed Property Trusts to units in GGOF	1.03

38 As at 28 February 2001:

a Mr Green held 994,333 units in GTF;

b the Company held 683,105 units in GTF;

c Mr Green held 120,562 units in GGOF;

d Mr Green through his superannuation fund held 213,542 units in GGOF.

The plaintiffs’ clients invest in the funds

39 A number of Mr Green’s clients, on his advice, invested in the funds.

40 He had attended seminars given by margin lending institutions Colonial and BT at Mt Gravatt and also in Sydney. Some of his clients, on his advice, borrowed under margin loans to invest.

41 Usually, Mr Green interviewed the clients in the presence of his secretary Ms Glindemann. A form termed “Personal Financial and Fact Finder” was filled in by Ms Glindemann during the interview. One section of that form was directed to ascertaining the client’s attitude to investment risk and sought to classify the client’s attitude as conservative, moderately conservative, balanced, moderately aggressive or aggressive. The form contained examples of each category. “Balanced” was described as: “Seeks moderate capital growth. Accepts lower short term capital stability. Investment period 5 years”. “Moderately aggressive” was described as: “Seeks higher capital growth. Accepts higher short term volatility. Investment period 5 – 7 years”. “Aggressive” was described as: “Seeks higher longer term capital growth. Accepts higher short to medium term volatility. Investment period 5 – 7 years”.

42 Because of the risk attendant with investing in the funds, they were not appropriate investments for clients who were not properly characterised as moderately aggressive or aggressive.

43 At least in some cases Mr Green assessed clients as moderately aggressive or aggressive when they were better classified as balanced or moderately conservative. No doubt this was a reflection of his enthusiasm for the funds.

44 So too was his advice to some clients to take out margin loans to invest, which may, if the units had performed well, have resulted in increased gains but also increased their risk.

45 Amongst the clients who invested on Mr Green’s advice were Mr Don Whittaker, Mr Allen and Mrs Susan Gothmann, Mrs Pat Truesdale, Mr Chris and Mrs Rea Joosten, Dr Robin Tuffley and Mr Hugo Fitz-Herbert.

Mr Whittaker

46 In 2000 Mr Whittaker sold a commercial building in Brisbane. In about August of that year, on Mr Green’s advice Mr Whittaker invested $500,000 of the proceeds in GTF and $100,000 in GGOF.

47 He was classified by Mr Green as an investor who was between moderately aggressive and aggressive.

48 In October 2000 Mr Green suggested to Mr Whittaker that he borrow $500,000 to invest further in the funds and Mr Whittaker took out a margin loan to do so.

49 On 5 December 2000 Mr Green wrote a letter to Mr Whittaker in which he said the following:

“I enclose some information which is relevant to the technology market as under:

The Fund Managers addressed the agents last Monday, and they expressed great confidence in the Technology stocks, and had been cashed up and are now buying rapidly to take advantage of this market. Some of the large technology companies have dropped by about 40% through no other reason than market reaction to such things as the US Presidential election. I also enclose a “Technology Comment” by the Fund Manager.

With the prices being as low as at present, I have invested all that I can possibly scrape up, and it would be an ideal time for Barry to consider perhaps borrowing $40,000 to invest. He could pay monthly interest to Colonial instead of investing the $800 each month as he is doing at present. Interest would be approx. $300 per month, and he would then invest $500 per month.

I hope that the information included is of use to you.”

50 The reference to Barry was a reference to Mr Whittaker’s son. He, apparently, also invested.

Mr and Mrs Gothmann

51 Mr and Mrs Gothmann invested $700,000 in GTF. On Mr Green’s advice they took out a margin loan to do so.

52 On 13 December 2000 Mr Green sent Mr Gothmann a letter enclosing an article from the Financial Review newspaper about GTF. The letter which includes a handwritten postscript read as follows:

“Further to an article in the Financial Review this week, where it was quoted that AMP was to lose a key technology investment trust, I enclose some information from AMP with regard to the Global Technology Fund.

It is important to point out that AMP Hendersons have six global technology funds operating in the UK, with over $8 billion invested in these six funds. The fund that they are talking about has no bearing on the AMP Technology Fund that we, in Australia, are invested into. AMP Hendersons manage over $277 billion globally in all types of funds.

Some questions asked of AMP management regarding this newpaper [sic] article, brought forward the following points:

1. Hendersons manage $8 billion in Technology funds

2. There are 6 funds that are managed, one of which is the UK unit trust

3. We are losing 1 fund (value $1.7 billion)

4. We always knew that we would lose that fund.

5. This will not affect any investors.

6. The AMP Global Technology Fund in Australia is a totally separate fund.

7. This will not affect the returns.

8. It just means that the new fund managers will have less money to manage.

9. It also means that AMP will lose some of it’s [sic] management fees, but AMP was aware of this from the beginning.

10. The trustees of the UK unit trust that is moving to new management were required to give 12 months notice of the move, and this will not happen until September next year. In this period, they may change their mind, and stay with the AMP Hendersons fund because the two new investment managers that have taken over from the two that have left (article enclosed) have come from Scottish Equitable. This fund has made the highest returns of the technology funds in the last five years.

It is also important to know that this UK trust that we may be losing is not the fund that has averaged over 30% since 1984. This high averaging fund is the fund that the Australian Global Technology Fund is duplicating the investment strategies.

I have also enclosed an article from the “Courier Mail” of Saturday, 9th December, 2000 which mentions the AMP Global Technology Fund in Australia which we are invested in, and which has been operating since March.

I hope this information is of interest to you.

P.S You should seriously consider investing as much as you can while the prices are low to take advantage of dollar cost averaging.

53 On 6 March 2001 Mr Green wrote to Mr and Mrs Gothmann as follows:

“Further to our telephone conversation, I advise that I have checked with AMP Investment Funds and you have the facility to ring them and have the amount you want to invest transferred from your Westpac bank account.

I can do a three way conversation with you and AMP Investment Funds in order to make sure that you do not pay an entry fee.

I mentioned to you about transferring out of the Tech Fund to make a capital loss to offset against any capital gains. Of course, if you have not made any capital gains this financial year, the only possibility of a capital gain in the next three months would be if you sold your AMP shares, which are currently at a high of about $20.50 at the moment.

This would be a good time to sell those AMP shares and perhaps invest this money into the Tech Fund. If you did this, you would have to sell enough of the Tech Fund, and buy back at the lower price, to effectively wipe out the capital gain on the AMP Shares.

Another alternative would be to reduce your buying price of the Tech Fund from $1.09 to .87 cents. To do that you would have to invest another $700,000 at the current price of say .65 cents. Then this would average the buy in price to .87 cents. Therefore you would only have to wait until the fund went from .65 cents to .87 cents to break even. You could then consider if you wanted to transfer all or part of this into the High Growth Fund, which is less volatile.

Of course, any amount you invest at this lower price will effectively reduce your original price, and then if you invested more than the original amount, it would take even less time to break even.

This is something that you and Susan should seriously consider, as the Tech Fund has only invested money in the top companies in the world, so they are not going to disappear, and at the moment the share prices are at rock bottom.”

54 On 12 March 2001 Mr Gothmann made a further investment of $8,000 in GTF.

Mrs Truesdale

55 In 2000 Mrs Truesdale was 76 years old.

56 On 4 September 2000 she invested $10,416 in GTF units. She invested a further amount of $15,000 on 30 October 2000.

57 On 7 December 2000 Mr Green wrote her a letter which included the following:

“With the prices being as low as at present, I have invested all that I can possibly scrape up, and it would be an ideal time for you to invest any more cash you have available.

Last Wednesday saw a 10.5% increase of the Nasdaq in the one day, but the thing is you should always focus on the long term goals. With any of the illustrations on page 2, if anyone had hopped out while it was on the downturn (and some would have), you can see they would have been kicking themselves for the next ten years, or more. I hope that the information included is of use to you.”

58 On 13 December 2000 Mr Green sent to Mrs Truesdale a letter in the same terms and containing the same information as the letter he sent to Mr Gothmann on that date (with the exception of the handwritten postscript).

59 On 15 December 2000 Mrs Truesdale invested a further $3,000 in GTF.

60 On 28 March 2001 Mr Green wrote to Mrs Truesdale as follows:

“As discussed on the telephone, I enclose schedules showing the current values of investments for Robin and yourself.

The last two days have had positive results in the world markets, and this is not reflected in the unit prices yet. Next week should see an improvement in the unit prices and the overall value.

I have enclosed some information from AMP Investments which I know will be of interest to you. The Fund Managers are confident and over the last couple of months have been buying shares at bargain prices. The benefit of this will only reflect when the world markets continue to rise.

I look forward to hearing from you soon.”

Mr and Mrs Joosten

61 Mr and Mrs Joosten were living in Holland in 2000 and were contemplating returning to Australia.

62 They invested a total of $211,514 in GTF and GGOF.

63 On 20 December 2000 Mr Green sent them a Christmas message and included in it the following:

“Your investment in the Technology Fund has dropped a bit but they say there is going to be a boom next year. Good time to invest some more money if you have any.”

Dr Tuffley

64 Dr Tuffley was a semi-retired general medical practitioner aged 69 in 2000 who Mr Green classified as a moderately aggressive investor.

65 On Mr Green’s advice Dr Tuffley invested $37,250 in each of GTF and GGOF. He also invested his entire superannuation fund of $301,521 in GGOF.

Mr Fitz-Herbert

66 Mr Fitz-Herbert switched his superannuation funds into units in GGOF, investing $194,000.

The performance of the funds and Mr Green’s advice to stay in

67 Late in 2000 there was a significant “downward correction” in technology stocks in the United States which had a negative impact on the funds.

68 Although initially the portfolio of shares in which AMP Capital invested (advised by Henderson Investors) performed reasonably well (the Exit Price for GTF reached a high of $1.20 in September 2000), by 5 December 2000 the Exit Price for GTF units had fallen to 80 cents.

69 For most of March 2001 the Exit Price ranged between 65 and 54 cents.

70 During the period late 2000 until the end of the first quarter 2001 AMP Capital regularly published various newsletters about the performance and prospects of the funds. The following are examples of statements that were made in such material during the period November 2000 to April 2001:

· A paper dated 15 November 2000 entitled “Technology Comment - From Utopia to Myopia…To Cornucopia” by Nitin Mehta, Deputy Chief Investment Officer, International Equities, AMP Henderson Global Investors, which amongst others said the following:

“However, what really matters are the powerful undercurrents which determine long-term investment returns. And the technology currents are still surging ahead. The new technology continues to promise a cornucopia of products and investment potential. Therefore, we remain invested in many exciting, wealth generating opportunities.”

· A paper dated December 2000 entitled “E-Report” by Shane Oliver, Chief Economist, AMP Henderson Global Investors which amongst others said the following:

“Outlook: AMP Henderson Global Investors expects Australian share prices to rise over the coming 12 months. Share prices are reasonable value, interest rates have probably peaked and the low Australian dollar may spark foreign interest in selected companies.”

· A paper dated January 2001 entitled “Is the long-term bull market in shares over?” by Shane Oliver, which amongst others said the following:

“We believe this view is too pessimistic. We expect the bull market in shares to remain in place for many years.”

· A paper by Nitin Mehta dated first quarter 2001 which amongst others said the following:

“Investment outlook

There may be a lull after the storm as factors are combining to provide near-term relief for investors: lower interest rates, more reasonable valuations and a slowing in the rate of earnings downgrades. The respite may last provided that news about global economic activity does not worsen.

Of concern, the fund’s Productivity theme with its exposure to technology and communications is still vulnerable though much of the erosion in these fundamentals is already priced in. First quarter earnings pre-announcements will likely prepare investors for more evidence of fast-shrinking demand. But after that, some stability should return. Productivity is still underpinned by innovation and the willingness of consumers and business to take to new products. If the economy holds, the period of greatest uncertainty, maximum pain and deteriorating fundamentals will pass. In general, we are responding to market uncertainty by shifting to investment themes that have more visible earnings. At the same time, we are committed to investing in the best growth opportunities that pop up.”

· A paper dated April 2001 entitled “the global growth opportunities fund – thematic investing in tough times” by Nitin Mehta which amongst others said the following:

“But the dramatic fall in technology stocks over the past year reflects that most of the bad news is out. In a final burst, first-quarter financial results from technology companies may provide more grisly evidence of the less-than-rosy state of business for the sector. But that may mark the end of the worst.”

· A paper dated April 2001 entitled “A tough quarter for technology” by Paul Kleiser, joint head of the AMP Global Technology Fund which amongst others said the following:

“The long-term outlook is still good for the technology industry because innovations are occurring at a rapid pace and consumers and business have not lost their appetite for new products and ideas.”

71 Some of this material was passed by Mr Green on to his clients.

Troubled times, the clients complain

72 In March 2001 the Exit Price for GTF units was around the 60 cents mark.

73 When Mr Whittaker noticed that the value of his investments had started to drop he had telephone conversations with Mr Green. Mr Green advised him to hang on on the basis that the investments would “come good” or “come back”.

74 In March and April 2001 Mr Green wrote to Mr Whittaker recommending that he not withdraw any funds from the investments on the basis that there were prospects that the value would improve.

75 Mr Green himself remained optimistic about the funds even once their value began to drift and on 2 March 2001 he invested $35,000 in GTF.

76 Queries from his clients caused Mr Green to send the following email on 3 April 2001 to Mr Stephen Rossiter of AMP Financial Services asking questions about the funds and their performance:

“I have a handful of clients that have invested around $1 million in the Global Technology Fund, and so far they have lost half of their money, and are not happy people, as you can only pacify people for so long.

Their comment to me is that AMP Hendersons must have invested a lot of money in the dot coms at their high prices, as well as buying other technology stocks at high prices. My argument has been that AMP will investigate every company for their real assets, the share price related to profit as well as the assets of the company, and that the ratio is correct before shares are purchased.

However, given the disgusting performance, I am doubting my own words, so I very much urgently need from you details of some of the companies that the fund is invested into, and information about those companies and I think our clients have a right to know whether this downturn is a result of the world recession, or whether it is the result of AMP’s incompetence.

The facts that I feel that are important are:

The information contained in your “Stock Stories” of January 2001 on the company Check Point is exactly what my clients are asking for.

I cannot stress enough the importance that this information be given to me to pass on to my clients at this time, and made available to all other investors in the Global Technology Fund. Some of my clients are frantic at the moment.

Another comment made to me which I would like clarified is that the managers in the Technology Fund will buy shares as the money comes in to maintain the percentage of shares to cash ratio as in the asset allocation. Would this be regardless of the price of the share compared to the value of the share, at the time? This would mean that they are forced to buy at the high prices regardless. This to me does not make good business sense.”

77 Mr Rossiter replied on 7 April 2001 in the following terms:

“I have had the opportunity to speak to my contact person at AMP Hendersons regarding the Global Technology Fund.

I hope that this information will help you respond to your client concerns and assist them in making informed investment choices. I have highlighted the questions in your email, and placed responses below to them.

Q. Their comment to me is that AMP Hendersons must have invested a lot of money in the dot coms at their high prices, as well as buying other technology stocks at high prices. My argument has been that AMP will investigate every company for their real assets, the share price related to profit as well as the assets of the company, and that the ratio is correct before shares are purchased.

Your answer is correct. AMP Hendersons do not invest in the dot.coms. We did invest in technology companies when prices were high, as did every other technology fund manager in the world. The reason for this is that we are running a technology fund, hence we cannot simply sell our technology shares when we think the market is going to fall. We invest “true to label”. In other words, we are a technology fund, hence we must invest in technology stocks.

Q. I think our clients have a right to know whether this downturn is a result of the world recession, or whether it is the result of AMP’s incompetence.

It is a result of neither. One could argue that the global slowdown we are seeing at the moment is largely caused by the downturn in technology stocks. The NASDAQ lost over 67% of its value from its peak in March 2000. This has wiped out many billions of dollars for investors, and people all over the world are hurting as a result of the losses. In other words, the downturn in the performance of the Global Technology Fund was as a result of the fall in value of technology stocks around the world. The sad reality is that if you invest in a market and that market crashes, you will lose money regardless of how good your fund manager is. I know that this is little consolation to our investors, but our fund is down by less than 50% where as the market in general for tech stocks is down by nearly 70%, so we have actually outperformed both the market and our Australian competitors with similar funds to ours. We were actually the best performing technology fund in Australia since our inception in March 2000.

As I said, I realise this is little consolation but it does show that if you had recommended another technology fund, your clients would have lost more than they have with us.

Q. List of the companies

Q. Assets of the companies

If your clients require this depth of information I would suggest that they refer to each company’s website to get an indication of their assets.

Q. Product or industry that the companies are involved in

I have attached the top 10 stocks in the portfolio as at 31 March 2001 along with the sector break up of the fund.

We cannot provide this information due to sensitivity reasons.

Q. Price paid for shares and current share prices.

Similar suituation [sic]. Current share price can be obtained from the corporate website.

Q. Reasons for the purchase.

As above. Far far too sensitive.

Please note that the 3 above questions ask for very sensitive market information. This information is very valuable to competitors.

Please note that AMP Hendersons are happy to tell you about our process for selecting stocks but cannot divulge any more specifics about the portfolio.

Q. Is the share price decrease because all technology stocks are down, or is it because the specific company is not performing to their expectations

It is because all technology stocks are down. As I said earlier, when you have money in a market that is falling, you will lose some money regardless of how good you are at picking stocks.

Q. What percentage of the fund is in the dot coms and were they bought on expectations or on sound judgment.

Zero. You can confirm this by referring to the portfolio listing attached above.

Q. Another comment made to me which I would like clarified is that the managers in the Technology Fund will buy shares as the money comes in to maintain the percentage of shares to cash ratio as in the asset allocation. Would this be regardless of the price of the share compared to the value of the share, at the time? This would mean that they are forced to buy at the high prices regardless. This to me does not make good business sense.

This is partially true. We do have a limit, in that we must keep at 75% of the funds [sic] money in technology shares. When we are bearish about the market, we increase our weighting to cash and reduce our weighting to shares. This is the position the portfolio is in at the moment, however we do have to keep at least 75% in shares. The reason for this is that we have to be true to label. That being said, we do change our approach when the market is falling. We have moved into the more defensive stocks. These are stocks with highly visible cash flows, long term contracts and sound customer bases.

The point about technology is that it is an extremely volatile sector, as has recently been proven, and as such it is not a short term investment. The prospects for this fund going forward are excellent and AMP Hendersons believe that there is significant potential to create investor wealth going forward. If your clients are considering exiting the fund, they could well have bought at the peak and be [sic] well sell in a trough: This to me does not make good long term sense.

My contact at AMP Hendersons is having a teleconference with the portfolio manager on Tuesday. If you have any questions you would like asked, please phone or email them through to me.”

78 In the middle of 2001 Dr Tuffley informed Mr Green that he had requested termination of his investments with AMP Investment Funds.

79 On 19 July 2001 Mr Green wrote a lengthy letter to Dr Tuffley expressing his disappointment at the loss of Dr Tuffley as a client and seeking to persuade him to change his mind about leaving AMP and liquidating the investments.

80 In August 2001 the GTF Exit Price went as low as 38 cents.

81 During that month Mr Whittaker’s lender made a first margin call on him. According to Mr Whittaker he exhausted all his cash reserves including by cashing in his wife’s superannuation to meet the call.

82 By September 2001 a significant part of the value of Mr Whittaker’s investment had been eroded. He complained to Mr Green who suggested to him that he complain directly in writing to AMP.

83 Mr Green settled a draft letter which Mr Whittaker prepared. In the letter Mr Whittaker recounted that at the time he borrowed the further $500,000 from Colonial he was assured by Mr Green that the borrowing ratio meant that a margin call would never occur. He also described himself as an extremely conservative person.

84 On 10 September 2001 Mr Green advised Mr Gothmann in writing to hold on to his investment in GTF notwithstanding the drop in value.

85 Later in September 2001 Mr Green had a conversation with Mr Gothmann in which he suggested Mr Gothmann complain directly to AMP. Mr Gothmann did so by letter dated 20 September 2001. In that letter, he said amongst others, that he and Mrs Gothmann were conservative investors. They said they had a healthy policy in the high growth sector which they used on Mr Green’s advice to take out a loan with BT to invest in GTF. They said that they had contacted Mr Green regularly about the loss of value in the fund but were assured by Mr Green that they should stay in and he regularly encouraged them to put more into the policy. The information Mr Green provided them from AMP supported this. They had retired from business and were living off revenue from their assets.

Mr Green’s authorities are suspended and then cancelled

86 The complaints which Mr Whittaker and the Gothmanns made directly to AMP set off a chain of events which resulted in a catastrophic outcome for Mr Green and the Company.

87 Mr Nicholson commenced to investigate the complaints and obtained the client files for Mr Whittaker and the Gothmanns from Mr Green.

88 Mr Nicholson met with those clients and also with Mr Green. He also had telephone conversations with Mrs Truesdale and Dr Tuffley.

89 Mr Nicholson formed the view that Mr Green had failed to comply with internal AMP standards and guidelines one of which was a failure to have financial plans vetted.

90 On 17 October 2001 Mr Green’s authorities to represent AMP were suspended pending further investigations.

91 On the same day Mr Green sought help from the AMP Representatives Association with regard to his suspension. He sent a lengthy letter to Mr Brady of that Association in the following terms:

“I am seeking help from the AMP Reps. Assn. as to if they can give me any legal representation in regard to my suspension of licence with AMP.

The situation is as follows:

I have advised a lot of my clients to invest in the AMP Global Technology Fund and this fund has lost 70% of its value in the last 12 months as you would be aware. Seven of these clients have margin loans.

Two of the clients have written to AMP asking for their help as they have been given margin calls and will be forced to sell. These clients [sic] loans were $500,000 and $700,000. Two other clients sold out because of margin calls, and their loans were $100,000 and $50,000, and AMP are looking into their cases, to offer some compensation.

AMP’s argument for suspending my licence seems to revolve around two things: (1) They are claiming that I did not have the approval from them to recommend margin lending and (2) that I have over-exposed my clients to the Technology sector.

In answer to (1), I telephoned Susan Laine in December 2000 to ask her some questions about margin lending, and she mentioned to me at the time that perhaps I should not be recommending margin lending. We had Colonial and BT several seminars at Mt. Gravatt office over the years, and I have even gone to margin lending workshops in the AMP Building and the ASX. I personally did my first margin lending with Chase AMP in 1987. As you would be aware, AMP Investment Funds are always aware of any margin lending as BT or Colonial hold security over existing investments. I have not tried to hide the situation and was not made aware that this was limited to Tier II advisers until December 2000. Documentation attached shows that Peter Nicholson was fully aware of the margin lending, and as a result, allowed me a special concession to do this. I did a training and accreditation, which I did on the 19th February, 2001.

I have not organised any margin lending since the beginning of the year for two reasons, one being that the markets have dropped so much I have not been confident to recommend this; and the other being I have spent most of this year taking telephone calls and having appointments with clients trying to calm them about the decrease in values of both Investment Funds and superannuation, particularly in the Global Growth Opportunities sector. I would rather you not show AMP these letters from Peter Saunders and Peter Nicholson as they have chosen to completely lie about ever making any such statement, let alone in writing, and have discredited me all the way. With both AMP and myself these rules have been bent, but there was nothing wrong about the margin lending that I advised, that I consider, as none of them borrowed more than 50/50 ratio. AMP at the time certainly did not see any alarming factors in their audits. Also, when we are talking about procedures, Peter Saunders had meetings with both the clients who had written letters to AMP, but at no time have they discussed with me anything about the meetings or any offer that has been made. This can only mean that I am guilty to be proven innocent. As you can see by the letters from my clients, they are not making any damaging remarks about my conduct, but one can only see that they are asking AMP for help, not to crucify Gary Green. If I am to be suspended because of my conduct in recommending margin lending, Peter Nicholson, Peter Saunders, Peter Donovan and Susan Laine also knew that I was doing this, and in fact Peter Donovan said at one of the seminars that was conducted by Colonial that I had done several margin lending cases. I fail to see that I am guilty of misconduct when it was a known fact and accepted. Where the guilt lies is in the fact that the Fund has lost 70% value in twelve months. Is this my fault?

Since December, the clients that have been in the fund have telephoned me more or less on a weekly basis and asked for my advice on whether they should cut their losses and get out because of the consistent downslide in the markets.

I in turn consistently asked AMP Fund Managers for their advice on what they should do, and consistently asked them for information to send to the clients and AMP’s standard reply was it is a managed fund and they should stick with it and in the long term (five or more years) it will be okay. All this information was sent on to my clients. In hindsight, they all should have sold out in January. However, I agree with AMP that a managed fund is a long-term prospect and should not be looked at on a monthly basis – at least I did agree. I don’t anymore.

The next major point of contention is whether I was over zealous in recommending the Global Technology Fund in particular. I would have to say the greed plays a major role in investing. My presentation to the clients was simply the documentation that was given to agents on the release of the Technology Fund which was a glossy folder which showed tremendous information regarding the fund. The most significant page was headed “And we have consistently performed”. This shows that since 1985 to 1999, the fund outperformed the MSCI world index, and although there were great variances in the performance, it had only one negative year in 1994 (about a –5% return). I think if you looked at the AMP Bond Trust over that period it would show a loss also in that particular year. Does that mean that the Bond Trust is also extremely volatile. At the time that this fund was introduced about April 2000, the NASDAQ had fallen from a high of 5049 approximately 40%. It would seem that was a fairly reasonably correction, and a good time to recommend such a product, and in that following few months, the fund had actually gone up 30%. I would have to say that the clients were fairly excited about the product, as I was. I invested heavily myself in the fund, and in fact, I have personally lost a great deal also.

As to whether each client was “overweighted” in the technology fund itself, I note as follows. The sector I was recommending is the second largest sector in the world today, which at the time was 28% of the world market in total, as opposed to the Australian market being less than 1% of the world market.

On an individual basis, in the case of client 1, he has over $1 million invested in properties through his self-managed superannuation fund as well as a house on the Sunshine Coast worth about $500,000, a block of land worth about $200,000, and a business that is probably worth $1,000,000 plus other investments. These investments were discussed briefly, but he did not wish to discuss full details.

In the case of client 2, the plan was based on the fact that they had $715,000 at the time in the AMP High Growth fund, and placed $700,000 in the Technology Fund. Once again, their assets which they don’t fully want to disclose, I have gained knowledge of over the past 24 years. I know that they have a newsagency shop worth approx. $500,000, a house in the Northern suburbs of Brisbane worth $500,000 and a unit on the westside of Brisbane worth $250,000, at least $300,000 in the bank and superannuation in Australian Equities worth about $200,000, plus other investments.

There is no doubt that all my clients who invested in the Technology fund a year ago have lost 70%, and it is also a fact that I was enthusiastic about recommending the Technology Fund (and I still believe that the fund will perform in time).

Gary, I would very much like a copy of AMP’s letter to you so I can clarify any other comments made.”

92 On 8 January 2002 AMP cancelled Mr Green’s and the Company’s appointments.

93 The effect of the cancellation was to bring Mr Green’s (or more correctly the Company’s) financial advisory business to an end.

94 Mr Green suffered significant stress as a result of this misfortune. Mental and physical problems ensued.

95 From the time of the cancellation he has largely spent his time occupied with these proceedings, which were commenced in the Industrial Relations Commission of New South Wales on 25 February 2002 and were cross-vested to this Court on 15 November 2004.

AMP compensates the clients

96 Each of Mr Green’s clients named above (and other clients) ultimately lost significant amounts of money as a consequence of their investments in the funds.

97 Mr Green’s advice was reviewed by Mr Nicholson AMP Financial Planning’s Risk and Compliance Manager. He concluded that advice which Mr Green had given had been inappropriate and not in keeping with his clients’ true risk profile. Mr Nicholson calculated settlement figures for each of them at the difference between the value of the investment that was appropriate to their risk profile and value recommended by Mr Green. AMP paid each of them an amount of money to compensate them for their loss. The amounts paid to the clients included:

a $699,492 paid to Mr Whittaker on 25 July 2003;

b $770,000 paid to Mr and Mrs Gothmann in October 2003;

c $60,642 paid to Mr Fitz-Herbert in September 2003;

d $109,896 paid to Dr Tuffley on 11 November 2003;

e $29,489 paid to Mrs Truesdale on 12 December 2003;

f $162,197 paid to Mr and Mrs Joosten in January 2004.

Redemption of the plaintiffs’ investments

98 Mr Green and the Company redeemed the units which they held in

GTF and GGOF as follows:

Date

Units redeemed

Exit Price

Amount redeemed

Applied against Loan

25 Sep 2001 876,911.74 0.33 $289,502.55 Applied against BT

4 Apr 2002 125,116.18 0.36 $45,479.92

23 Oct 2002 58,689.83 0.22 $13,410.58 Applied against Colonial

TOTAL 1,060,717.75 $348,393.05

Date

Units redeemed

Exit Price

Amount redeemed

Applied against Loan

5 Nov 2002 689,184.13 0.23 $161,205.90 There is a dispute as to the application of the funds

Date

Units redeemed

Exit Price

Amount redeemed

Applied against Loan

4 Apr 2002 132,477.52 0.57 $76,565.55

Date

Units redeemed

Exit Price

Amount redeemed

Applied against Loan

Aug 2000 – Dec 2001 15,310.4 Various $13,020.00 Applied to pay various taxes

20 May 2002 202,535.2 0.54 $128,347.39

TOTAL 217,845.72 $141,267.39

99 It will be observed that the number of units reflected as having been redeemed is greater than the number reflected as having been acquired by investment. The difference is accounted for by reinvested distributions between the original acquisitions and the ultimate redemptions, and is immaterial.

AMP Capital’s divestment

100 The AMP Annual Report for the financial year ended 30 June 2001 had disclosed, by way of notes to and forming part of the financial statements, that “Other Associates” of AMP had during the year purchased 5,899,879 units in GTF and redeemed 470,987, and that at 30 June 2001 they held 5,428,892 units.

101 Mr Gerald Naughton was in 2001, and is now, Investment Director, AMP Funds at AMP Capital. He was responsible for the overall management of the funds.

102 A management team within AMP (known as Henderson Asia Pacific Management Team or “HAPMT”) which included Mr Naughton and Mr Merv Peacock were collectively responsible for investment decisions by AMP Capital.

103 On 17 January 2001 (when the Exit Price for GTF units was 78 cents) Mr Naughton addressed a memorandum to HAPMT on performance and strategy for AMP Capital.

104 The memorandum dealt with the subject of ‘’seeding” and made express references to GTF. Amongst others the memorandum stated:

“5.1 We currently have two “seeding” investments within AMP Henderson:

· Global Technology Fund ($3.8m): we have seen a considerable write down on this and the recommendation is to hold until there is some recovery

· …

9 The investment in Global Technology has clearly cost us considerably, given relative returns. However, while coming months are likely to see volatile returns, it seems better for us to hold for recovery, than to “lock in our losses”. Consequently we should retain our investment, but this should be reviewed monthly by M Peacock and G Naughton.”

105 The memorandum refers to $3.8 million as the then value of AMP Capital’s investment in GTF which had been worth approximately $6 million a year earlier.

106 On 22 February 2001 Mr Naughton wrote another memorandum to HAPMT. This memorandum was tendered (with parts of it removed including certain tables) for reasons of confidentiality or lack of relevance. The redacted version of it is as follows:

“Memo to Henderson’s Asia Pacific Management Team

INVESTMENT IN BALANCED SRI AND FUTURE DIRECTIONS FUNDS

PROPOSITION

Will HAPMT approve the investment as outlined?

BACKGROUND

As HAMPT is aware we wish to start the SRI Balanced and Future Directions Fund. We would like to have a fund operational by 1 March 2001.

The difficulty with new funds is that initial transaction costs and initial cash flow can make significant distortions to performance, eg if we get $10,000 as an initial cashflow from retail investors, we have to invest this and a day’s delay in being aware of the cash and thus investing it, could have a significant impact if the fund size is only $100,000. (NB for retail money, it may be 1 – 3 days between the investor making the cash deposit and the cash appearing on our transaction sheets).

To overcome these issues we wish to start the funds with $4m and $6m initial money by Wednesday 28 February, so that the price from 1 March is “clean” of any initial transaction costs and there is a sufficient fund size to prevent distortions arising from small retail cashflows. If a large investors [sic] wishes to invest (eg $10m), we would arrange for an “actual” price to prevent any distortions.

There have been considerable discussions on where we can get the $10m.

· Agreeing a procedure for how we deal with “business” as opposed to “investment” use of capital. We do not need to agree the procedure before undertaking this transaction, but agree to starting the procedure. This is underway

· it being within our “mandate

· Us being comfortable that there are no liquidity constraints.

LIQUIDITY ISSUES

Both SRI Balanced and Future Direction are invested in marketable securities, through various underlying trusts. There is no issue in raising cash, if we need it (albeit at current prices).

However, the very reason we need to “seed” the funds means there is a window where we would not wish to pull the money. We thus need to be comfortable that we can raise sufficient external money (ie $50m) so that we can “pull” our seeding, if we wish to, within 3 – 6 months.

Given the experience with Global Technology and Global Growth and the interest already expressed in these two products, this is not unrealistic

MANDATE

Our current Mandate is below. There is some issue as to whether this is a formal instruction from Group, or “current practice”. However, correspondence between Treasury and us over previous issues would seem to indicate that there is “informal” acceptance of this Mandate at both ends.

[Table redacted]

· to what extent do we ensure compliance with the “benchmark

· the transaction costs involved

· the taxation brought forward

· The timing of raising cash.

TIMING

· We cannot raise any money from Australian Fixed Interest (it is in IDF 2)

· It would take 5-7 days to raise cash from International Shares (ie Global Technology (we could still close out our position and use cash from our cash allocation for a few days)

· We can raise cash from other classes in 2 days.

INVESTMENT VIEW

· SRI Balanced and Future Directions should give returns similar to or better than, a normal 70:30 Fund over the medium term – but in the short term as it has a 50:50 domestic:international mix, it can vary widely.

· We are currently reducing our bond exposure in favour of cash and looking to investing in shares – but we would not wish to decrease our share exposure.

· Given the loss we have taken of Global Technology, we would wish to hold for recovery, but there is considerable debate when we will see this.

COST CONSIDERATIONS

· There are Transaction costs of about 0.4% to get out of Australian and International Shares, and to get into the balanced funds.

· Australian Shares are held at a profit of 8%, Global Tech at a loss of 22% and International Fixed at a profit of 7%.

The big issue is tax

· the actual cost we incur through selling assets

· Consider that eventually we would pay this tax, so the “costs” to us is the “loss in earnings” from paying this tax today, as opposed to in, say, 5 years time.

To complicate the issue Global Tech is held at a loss – so if we sell we create a “tax loss” to offset the “tax profit” on other assets.

Set out below are various “scenarios” of how we could sell assets, the resultant “cash” cost (ie transactions cost plus tax paid) and the “real cost” (ie transaction cost plus the pv of the earnings lost from bring tax forward); and the resultant fund structure.

Case 1: the theoretically correct sales – so we end up with the benchmark asset mix

Case 2: selling no Global Technology, as we want to hold for recovery
Case 3: sell 50% of our Global Tech, to “hedge the bets” on whether they will recover, but still crystallising the tax loss
Case 4: akin to Case 3 (ie only sells 50% Global Tech), but does not sell Int Fixed (which has a profit)

[Table redacted]

Clearly Case 1, which is the theoretically correct answer, has the lowest cost. Case 2 and 3 are unrealistic, from a cost point of view, while Case 4 is an alternative if we want to retain at least 50% of our Global Tech.

(Note there is a minor funding issue – we could not get cash for Global Tech by 28 Feb, but we can cover this by using our cash portfolio and getting cash from Global Tech back by 5 March).

To be “perverse” if we sold all the Global Tech – given the tax loss – and took the balance from Australian Shares, we would end up with an underweighting in International Shares (8% of 10% benchmark) but we would have a “real” cost of $20,000 and a cash “benefit” of $75,000!!

I thus recommend we proceed with Case 1 – it is theoretically correct and cheaper.

107 Case 1 recommended by Mr Naughton (as explained by him) was the redemption of the entirety of AMP Capital’s investment, and the use of the funds obtained by that redemption to seed other funds.

108 HAPMT adopted Mr Naughton’s recommendation. The resolution which adopted it was called for by the plaintiffs but not produced. It is likely that his recommendation was accepted on about 26 February 2001, when the Exit Price for GTF units was 65 cents.

109 Mr Naughton’s affidavit evidence was that the future prospects of GTF and its likely performance “was not a factor in my recommendation to redeem the investments”. He said that the timing of the proposed redemptions was designed to offset cash flow into the fund so as not to result in unnecessary transaction costs to the fund associated with selling assets to raise the cash flow.

110 Pursuant to his recommendation AMP redeemed its units in three tranches on 28 February 2001 (Exit Price 62 cents), 15 March 2001 (Exit Price 55 cents) and 22 March 2001 (Exit Price 54 cents).

111 AMP Capital took a loss on its initial investment of over $2 million.

AMP Life’s Divestment

112 AMP Life as a life insurance business is required by statute to maintain statutory funds. Relevantly it maintained three such funds and they invested a total of $20,700,000 in the funds.

113 In about May 2001 AMP Life decided to redeem its investments in the funds from about late 2001 to late 2003 and to reinvest the proceeds directly in international shares. Mr Naughton and an AMP Capital portfolio manager were instrumental in that decision. Mr Naughton’s evidence was that the reinvestment would allow greater transparency and accountability of the performance of the portfolio and that it did not involve a consideration of the future prospects of the funds or their likely performance.

THE PLAINTIFFS’ CASE

114 In an affidavit sworn on 3 November 2008, Mr Green says that whilst looking through the 2000 AMP Annual Report (sometime in 2000) he had noticed the reference to “Other Associates” of AMP as holding GTF units upon which he phoned the AMP Financial Planning Customer Service Centre and was informed (by an unidentified person) that the reference was to AMP Henderson (presumably a reference to AMP Capital).

115 On 24 September 2001 AMP published its Annual Report for the financial year ending 30 June 2001.

116 A note to the financial statements contained in the report disclosed that during the course of the financial year AMP Capital had divested itself entirely of its investment in GTF and AMP Life had significantly reduced its holdings in both of the funds.

117 In an affidavit sworn on 14 December 2003, Mr Green says he received the 2001 report in about November or December 2001 at which time he did not read it carefully. He says that he only came to an appreciation of the significance of it when he analysed the report in October 2003. This was more than a year and a half after the commencement of proceedings.

118 Mr Green says that had he received “any news at all that AMP Capital had decided to redeem its own investments in the Global Funds and to recommend to any AMP related company that it do the same, that news would have been tremendously important” from his point of view. He says that such news “would have impelled” him to withdraw his investments in both funds as quickly as possible and to cause the Company to do likewise.

119 Ultimately, during submissions, the plaintiffs did not seek to make out a case based on any recommendation by AMP Capital to AMP Life to redeem. They directed their attention exclusively to AMP Capital’s decision to redeem all of its GTF units.

120 I shall refer to the decision by AMP Capital in February 2001 to redeem all of its GTF units as “the decision”.

121 There is no issue that AMP Capital did not inform the plaintiffs of the decision.

122 I shall refer to the failure by AMP Capital to inform the plaintiffs of the decision as “the conduct complained of”.

123 The plaintiffs say that the conduct complained of was conduct which was misleading or deceptive or likely to mislead or deceive in contravention of either s 52 of the Trade Practices Act 1974 (Cth) (“the TP Act”) or s 12DA of the Australian Securities and Investments Commission Act 1989 (Cth) (“ASIC Act”) as they then applied.

124 The plaintiffs say that by the conduct complained of they suffered loss or damage in that, but for it, they would have redeemed their GTF units in February 2001 when the Exit Price was significantly higher than it was when they ultimately did redeem, which they did during the period 25 September 2001 to 5 November 2002.

125 They say that they would have invested the proceeds of that redemption in the following other AMP products in which Mr Green already held investments in the same proportions as they had invested in those other funds, namely the AMP Equity Fund (50 per cent), AMP Blue Chip Fund (15 per cent), AMP Small Companies Fund (20 per cent) and Future Directions Australian Fund (15 per cent).

126 They claim as damages the difference between the amount they would have received had they earlier redeemed and the amounts they did receive when they redeemed, plus the returns they would have received on the other mentioned funds in which they say they would have invested.

127 During the hearing the plaintiffs abandoned a claim that the conduct complained of caused the loss of their financial advisory business.

128 The immediate consequence of the plaintiffs restricting their claim to one against AMP Capital arising out of the decision, is that the proceedings against AMP Life and AMP Financial Planning are to be dismissed.

129 The defendants put in issue each element of the plaintiffs’ claim.

THE ISSUES

130 The issues which fall for determination are accordingly the following:

a whether the conduct complained of was misleading or deceptive or likely to mislead or deceive;

b whether the plaintiffs would, had they been told of the decision, thereupon have redeemed all their GTF units;

c if so, when they would have done so; and

d whether, if they had done so they would have invested the redemption proceeds in the other AMP funds as they assert.

131 I will deal with each of the issues in turn, but before doing so it is necessary to set out the text of the relevant statutory enactments which applied at the relevant time and to state the legal principles concerning their application.

THE LAW

The relevant statutory provisions

132 Section 52(1) of the TP Act, which is a provision of Pt V of that Act, provided as follows:

Misleading or deceptive conduct

(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

133 Section 4(2)(a) of the TP Act provided as follows:

134 Section 4(2)(c) of the TP Act provided as follows:

135 Section 82(1) of the TP Act provided as follows:

“Actions for damages

136 Section 12DA of the ASIC Act provided as follows:

137 Section 12GF(1) of the ASIC Act provided as follows:

“A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision D (sections 12DA to 12DN) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”

138 Section 12BA(1) of the ASIC Act defined “financial service” to mean a service that consists of providing a financial product or that is otherwise supplied in relation to a financial product.

139 “Financial product” was in turn defined to include a security (the meaning of which is determined by reference to the Corporations Law: see s 5(3) of the Corporations Law), which included interests in a managed investment scheme.

140 No submissions were made on which of the TP Act or the ASIC Act applies in this case. In my view the conduct complained of relates neither to the provision by AMP Capital of a financial product nor to a service supplied. It also does not concern a service supplied in relation to such a product. It concerns a failure by AMP Capital to inform about a decision which it took in relation to its own property.

141 I have accordingly proceeded on the basis that s 52 of the TP Act applies rather than s 12DA of the ASIC Act. It was not suggested that the outcome of the proceedings would be different depending on which enactment applied.

Liability principles

142 Save as to one aspect which is referred to below, there was no issue between the parties with respect to the principles which apply to a consideration of whether the conduct complained of was misleading or deceptive or likely to mislead or deceive as contemplated by s 52. Briefly, the applicable principles are the following:

a the question is whether having regard to all the relevant circumstances there has been conduct which is misleading or deceptive or likely to mislead or deceive: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32;

b silence can be misleading or deceptive even if there is no duty to reveal relevant facts: Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at 88;

c unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, mere silence does not support the inference that that fact does exist: Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 at 53,195;

d if the circumstances are such that a person is entitled to believe that a relevant matter affecting him, her or it would, if it existed, be communicated, then the failure to communicate it may constitute conduct which is misleading or deceptive because the person who ultimately may act to his, her or its detriment is entitled to infer from the silence that no danger or detriment existed: Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97; and

e where a party claims to have been misled by a failure to make full and true disclosure, that party bears the onus of proving how what was not said was likely to mislead or deceive: Fraser v NRMA Holdings Ltd (1995) 55 FCR 452.

143 The defendants submitted that conduct which consists of remaining silent cannot constitute misleading or deceptive conduct within the meaning of s 52 as affected by ss 4(2)(a) or (b) and (c) of the TP Act unless the silence was intentional. They put that the plaintiffs’ case failed at the outset because it was not established (nor was it suggested) that AMP Capital’s failure to tell them of the decision was deliberate.

144 Support for this submission is to be found in a number of first instance decisions including the decisions of Finkelstein J in Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd & Anor (1998) 155 ALR 714 and Merkel J in Johnson Tiles Pty Ltd & Ors v Esso Australia Ltd & Anor (1999) ATPR 41-696.

145 The proposition is derived from a construction of ss 4(2)(a) or (b) and (c) of the TP Act which proceeds as follows: ss 4(2)(a) and (b) provide that a reference to engaging in conduct is to be read as a reference to the doing of or the refusing to do any act; s 4(2)(c) provides that a reference to refusing to do an act includes a reference to refraining (otherwise than inadvertently) from doing that act; accordingly, for refraining to be conduct (within the meaning of the TP Act) it must be otherwise than inadvertent, that is, deliberate.

146 The proposition has, however, been expressly rejected in Victoria by the Court of Appeal in CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd (2005) ATPR 42-042. Nettle JA said at [34] with respect to it that:

“the misleading and deceptive quality of remaining silent inheres in the non-disclosure of information; not in any refusal to provide it. Consequently, it does not follow from the fact that a failure to act must be intentional in order to be actionable, that silence must be intentional in order to be actionable.”

147 I am bound to follow the decision of the Victorian Court of Appeal, as an intermediate appellate Court in another jurisdiction on a matter of common legislation, unless I am convinced that it is plainly wrong: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [135]; Tillman v Attorney-General (NSW) (2007) 178 A Crim R 133 at [25], [104].

148 Far from being convinced that the decision is wrong, it seems to me that it is correct.

149 Accordingly, I reject the submission that for silence to be actionable misleading conduct it must be deliberate.

Damages principles

150 There was no issue between the parties as to the applicable principles with respect to damages under s 82 of the TP Act. They are as follows:

a in order to recover damages the plaintiffs must prove that loss or damage was suffered “by” the conduct complained of. The word “by” used in s 82 of the TP Act expresses the notion of causation which is to be approached in a practical or commonsense manner: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514;

b the plaintiffs bear the onus on the balance of probabilities of showing that the conduct complained of induced them to refrain from redeeming their GTF units or, put positively, that had the decision been communicated to them they would have sold them then: Rosenberg v Percival (2001) 205 CLR 434; Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950; and

c the measure of damages is the difference between the position the plaintiffs now are in and the position they would have been in had the conduct complained of not occurred: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1.

WAS THE CONDUCT COMPLAINED OF MISLEADING OR DECEPTIVE OR LIKELY TO MISLEAD OR DECEIVE?

151 The conduct complained of was misleading or deceptive or likely to mislead or deceive if at the time it occurred the plaintiffs had the reasonable expectation (or were entitled to believe) that they would be told of the decision.

The plaintiffs’ submissions in chief

152 The plaintiffs for whom Mr LS Einstein, together with Messrs Pulsford and Stewart, of counsel, appeared initially put that the matters which gave rise to the reasonable expectation that the decision would be disclosed to the plaintiffs were the following:

a AMP’s culture of openness and high moral principle;

b the materiality of the redemption decision to reasonable investors in the position of Mr Green and the Company;

c the existence of a statutory duty requiring disclosure; and

d legislative recognition of the need to satisfy investor expectations.

153 The “culture of openness and high moral principle” was said to be derived from the AMP Code of Conduct and the high standards of conduct which AMP projected.

154 However, the factual circumstances of any given case will dictate whether high moral principle or the dictates of openness have been offended. The existence of or terms of a code which expresses a devotion to moral principle and openness does not assist in answering that question. To say therefore that conduct is misleading because there is a code decrying it involves circularity. This was recognised during submissions and the proposition was abandoned.

155 The statutory duty said to require disclosure was put to be derived from provisions in the Corporations Law (ss 1001B and 1001D) which require certain entities to disclose information of which they become aware that is not generally available and that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of the securities of the entity. This proposition was correctly abandoned because there was no evidence that general knowledge of the decision would have affected the price of GTF units. In reality it would not have done so. The Exit Price of a GTF unit is simply a proportion of the net asset value of the fund (leaving aside transaction costs). The decision would have had no material effect on the net asset value of the fund unless it would have had a material effect on the price of the numerous Australian and international shares which formed the bulk of GTF’s net assets. At the lowest, this would be most unlikely.

156 The submission on legislative recognition of the need to satisfy investor expectations was based on the statutory provisions mentioned. When reliance on those provisions was abandoned so was the submission.

157 Ultimately the plaintiffs’ submissions in chief were crystallised into the following:

a based on a “constellation of factors” the plaintiffs had a reasonable expectation that AMP Capital would disclose to them the fact of the decision;

b by non disclosure, the represented state of affairs that continued in the mind of investors was that AMP “was still in”, that is that it had itself invested in GTF. This state of affairs was originally represented by the disclosure made in the 2000 Annual Report that “Other Associates” held GTF units;

c what made the non-disclosure misleading was the absence of any correction to that position;

d the reasonable expectation was not met and the non disclosure was therefore misleading; and

e had there been disclosure of the mere fact of the decision the plaintiffs would have redeemed all of their GTF units.

158 The factors (in the constellation) which were submitted to give rise to the reasonable expectation of disclosure were identified as the following:

a as at late February 2001 the GTF market was in sharp decline;

b as an investor in GTF and a financial planner, Mr Green was nervous and he and his clients were losing money;

c he was seeking guidance and information from AMP on issues which impacted directly on whether the current GTF investments should be maintained;

d Mr Green’s learning and experience within the investment community was limited to his work as an AMP agent, the training he had received from AMP and his experience as an investor in AMP products;

e he knew that GTF had been promoted as a 7 to 10 year investment (that is, ending somewhere between 2007 and 2010) and that AMP Capital had also made a significant investment in the fund;

f the London-based Henderson Team with its expertise and successful track record of achieving an average annual growth for a similar fund of 34.1 per cent since 1984 was used by AMP Capital “as a major promotional tool”;

g Mr Green knew that AMP Capital:

h unlike the direct line enjoyed by AMP Capital, the average investor had no such advantage at all;

i as an investor AMP Capital therefore found itself in a preferred position;

j AMP Capital was also very disappointed in GTF’s performance, it having achieved an actual performance of minus 31.8 per cent against a benchmark of 2.2 per cent; and

k in the midst of all of this Mr Green was subject to mounting pressure from client calls, his health was suffering as a result and he had begun to lose faith in AMP.

AMP Capital’s submissions

159 AMP Capital, for which Mr JW Stevenson of senior counsel and BJ Jones of counsel appeared, put that:

a the evidence did not establish that as at February 2001 the plaintiffs knew that AMP Capital “was in”. It was put that Mr Green’s evidence in his affidavit of 3 November 2008, that in 2000 he became aware of AMP Capital’s investment in GTF, should not be accepted because:

i. it was inconsistent with an affidavit he swore on 14 December 2003 in which he said he became aware in 2003 that AMP Capital:

· owned 5,429,000 units in GTF as at 30 June 2000 (11 per cent of all issued units);

· acquired 21,000 units in GTF during the year ended 30 June 2001;

· redeemed 5,450,000 units (that is, all of its holdings) in GTF during the year ended 30 June 2001;

· reduced its percentage holding in GTF from 11% to 0% during the year ended 30 June 2001; and

ii. a powerful factor pointing to the probability that Mr Green only knew of AMP Capital’s investment in 2003 was that he used his own investments to persuade his clients to invest, not AMP Capital’s;

b any reasonable expectation of disclosure could only be one for disclosure which was itself not misleading or deceptive;

c as AMP Capital thought “there was good potential for recovery” and that it should “hold for recovery” it would have been misleading or deceptive for it simply to have announced that it had redeemed its investment as that would have conveyed the representation that it did not think there was good potential for recovery;

d there could be no reasonable expectation that AMP Capital make such a misleading or deceptive announcement;

e to make an announcement that was not misleading or deceptive, AMP Capital would have to explain its motivation to redeem, and explain how its decision to redeem sat with its view as to the future prospects of the fund (viz that “there was good potential for recovery”);

f such an announcement could not rationally affect any investor’s decision to redeem or sell (save that it might cause investors to also “hold for recovery”); and

g there could be no reasonable expectation that AMP Capital make an announcement that could not rationally affect an investor’s decision to redeem.

The plaintiffs’ submissions in reply

160 In reply, the plaintiffs put that whether AMP Capital should have disclosed merely the fact of the decision or the reasons for it as well, did not matter, because:

a either way the plaintiffs’ legitimate expectation of disclosure had not been met; and

b if AMP Capital would have given the full explanation (as Mr Naughton had described it), Mr Green would not have believed it and the plaintiffs would have redeemed anyway.

Consideration

161 With respect to the initial proposition put by the plaintiffs that AMP Capital had represented to investors (in this case the plaintiffs) that “it was in”, that is, that it had itself invested in GTF, the representation was said to be derived from the disclosure in the Annual Report for 2000 which Mr Green said he read during 2000 and about which he was given information on the telephone that “Other Associates” was a reference to AMP Capital.

162 The defendants put that this evidence should not be accepted for the reasons which are referred to above. On one reading of Mr Green’s 14 December 2003 affidavit it was at odds with his 12 September 2008 affidavit. However, on what I consider to be the fairer view of it, what the earlier affidavit sought to convey was that only in 2003 did Mr Green become aware that there had been both acquisitions and disposals and realised the significance of the two in combination than of each of the events individually. Put another way the affidavit did not on its fairer reading convey that only in 2003 had he become aware of the acquisitions on their own.

163 It is perhaps significant that Mr Green’s affidavit evidence about the 2000 Annual Report and his telephone conversation only came by affidavit sworn on 3 November 2008 which referred for the first time to a conversation which had occurred some eight years earlier with an unnamed person, which made it difficult if not impossible for AMP Capital to test. In addition, the same Annual Report disclosed that 470,987 GTF units had been disposed of during the year, and the prospectus itself had disclosed that AMP Capital was free to invest in GTF itself; however these were not matters about which Mr Green was cross-examined.

164 As is dealt with more fully below I did not form a view that Mr Green was being untruthful in the evidence he gave, and I accordingly accept that the conversation with the unnamed AMP person took place as he says. What effect if any the information which was conveyed to him in 2000 had on his actual state of mind (or would hypothetically have had if the decision had been disclosed) during 2001 is another matter.

165 With respect to the plaintiffs’ principal submission that they had a reasonable expectation that AMP Capital would disclose the mere fact of the decision and that it was misleading for AMP Capital not to have done so, almost all of the factors within the constellation identified by the plaintiffs have (as one might expect) either directly or indirectly to do with the performance or prospects, the perceived performance or prospects or the knowledge of matters relevant to the performance or prospects of GTF.

166 This is no doubt because underlying the expectation for which the plaintiffs’ contend, is the notion that AMP Capital’s decision to redeem conveys the inference that it is based on a negative view about the future performance or prospects of GTF (whether in the short term or long term), and the substance of the plaintiffs’ complaint is that a negative view so conveyed would have caused them to redeem.

167 But the evidence established that considerations of future performance or prospects played no role in AMP Capital’s decision to quit.

168 Whilst there was a faint challenge during his cross-examination to the evidence of Mr Naughton that the future prospects of GTF and its likely performance was not a factor in his recommendation that AMP Capital redeem its GTF units, I accept his evidence that the decision was not taken on the basis of a perception that the price of the units was either likely to deteriorate further or not ultimately likely to recover. The prospects of the fund were neutral in the decision. The redemption was for the purpose of seeding other funds.

169 That is of course not to say that the decision would have been taken if the value of the portfolio and the price of GTF units had been on the rise, but that was not then the fact, and if they had been on the rise that would have been known to the plaintiffs in which case it would have been difficult to imagine that AMP Capital’s decision to redeem would in event have conveyed an inference about negative sentiment.

170 There was no evidence to suggest that by 22 February 2001 the considerations which had caused Mr Naughton in his 17 January 2001 memorandum to recommend that AMP at that time should hold for recovery (which implied a view that there would in time be a recovery) had changed. The conclusion in his subsequent memorandum was driven by different considerations.

171 The evidence also established that no part in the decision was played, nor was it affected, by any information which AMP Capital had as a consequence of its relationship with AMP Henderson Investors.

172 It may be the case that it would have been misleading on the part of AMP Capital not to disclose the decision had it been based on considerations (especially negative considerations) of the future prospects of GTF or its likely performance, although I have significant doubts that it would have been, unless AMP Capital had been possessed of information that was not generally available and upon which it was acting. But that is not this case.

173 The plaintiffs could not have had a reasonable expectation of being told of an investment decision by AMP Capital concerning its GTF units where no part in the decision was played by any view (let alone a negative view) of the future prospects of GTF or its likely performance. In such a case its decision cannot be said to convey anything material or relevant to the making of a decision by another reasonable investor in GTF units.

174 AMP Capital could not reasonably be expected to disclose, and investors could not reasonably expect it to disclose, its investment decisions where a view of the future prospects of GTF or its likely performance is extraneous to the making of those decisions.

175 Factors identified in the “constellation” which do not concern the performance, prospects or knowledge of things going to the performance or prospects of GTF such as that Mr Green’s history as a financial adviser, his learning and experience, or AMP Capital’s position as responsible entity for and promoter of GTF, self-evidently also could not give rise to a reasonable expectation on the part of the plaintiffs that AMP Capital would disclose investment decisions into which considerations of the performance and prospects of GTF did not intrude.

176 There is also force in AMP Capital’s submission that disclosure simply of the decision without disclosing its basis would itself have been misleading or deceptive because of what it might conceivably, incorrectly, have conveyed namely a negative view of the prospects or future performance of the fund.

177 For these reasons AMP Capital’s failure to disclose the decision was not misleading or deceptive or likely to mislead or deceive.

178 The plaintiffs’ submission in reply that had the explanation for AMP Capital’s redemption been given (as described by Mr Naughton) Mr Green would have not believed it because he was beginning to lose faith in AMP does not assist them.

179 This is because it proceeds on the premise that a true explanation would have been given, which in turn means that AMP Capital would not, even on the plaintiffs’ case, have engaged in any conduct that was misleading or deceptive or likely to mislead or deceive.

180 It is not the plaintiffs’ case that there was disclosure of the decision without disclosure of the reasons.

181 Given that no disclosure either of the decision itself or the decision together with the reasons for it was made, and that had there been disclosure of the reasons there would have been no misleading conduct (whether Mr Green had believed Mr Naughton or not), the only case open to the plaintiffs is that the failure to disclose the decision (without the reasons) was misleading or deceptive.

182 I have found that there was no reasonable expectation which made failure to disclose the decision misleading or deceptive.

183 It follows that the question whether Mr Green would have believed Mr Naughton’s explanation, on the hypothesis that he had given one, does not arise.

184 The plaintiffs’ claim accordingly fails.

WOULD THE PLAINTIFFS HAVE REDEEMED THEIR GTF UNITS IF THEY HAD BEEN TOLD OF THE DECISION?

185 Mr Green’s evidence of what his subjective state of mind would have been had he been told of the decision is hypothetical, as is his evidence that he would have redeemed his, and caused the Company to redeem its, GTF units.

186 Mr Green’s credit was attacked. One of the principal matters relied on was the asserted contradiction between his affidavits of 14 December 2003 and 12 September 2008 on the question of his knowledge of AMP Capital’s investment, which I have dealt with above. Also relied on were accounts of conversations given on affidavit by some clients (who were not cross-examined) which differed from Mr Green’s account.

187 Given the number of affidavits sworn by him and the breadth of the factual matrix it was inevitable that some points would be scored in the cross-examination of Mr Green. But the points were somewhat peripheral.

188 Although I did not form an unfavourable impression of Mr Green, it by no means follows that the hypothetical evidence of what he would have done had the decision been conveyed to him is to be accepted.

189 His evidence was in substance no different from the hypothetical type of evidence which McHugh J described in relation to medical issue cases in Chappel v Hart (1998) 195 CLR 232. At [32] in footnote (64) his Honour said:

“Human nature being what it is, most plaintiffs will genuinely believe that, if he or she had been given an option that would or might have avoided the injury, the option would have been taken. In determining the reliability of the plaintiff's evidence in jurisdictions where the subjective test operates, therefore, demeanour can play little part in accepting the plaintiff's evidence. It may be a ground for rejecting the plaintiff's evidence. But given that most plaintiffs will genuinely believe that they would have taken another option, if presented to them, the reliability of their evidence can only be determined by reference to objective factors, particularly the attitude and conduct of the plaintiff at or about the time when the breach of duty occurred.“

190 In Rosenberg v Percival in the context of what a patient would have done in the face of a warning about a pending operation McHugh J said the following at 449:

[45]

decided

had

191 In a similar context in Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 Samuels AJ said at 581:

“It is, of course, true that a patient's evidence about what he or she would have done if told of certain risks may be coloured by the fact that the risks did in fact eventuate; but it is open to a court to disbelieve evidence found to be tainted by hindsight: Manderson, ‘Following Doctors' Orders: Informed Consent in Australia’ (1988) 62 ALJ 430 at 434. Obviously, in endeavouring to ascertain what the plaintiff's response would have been to adequate information had it been conveyed at the appropriate time, a court will be greatly assisted by evidence of the plaintiff's temperament, the course of any prior treatment for the same or a like condition, the nature of the relationship between patient and doctor including pre-eminently, so far as it can be established, the degree of trust reposed in the doctor by the patient. The extent to which the procedure was elective or imposed by circumstantial exigency and the nature and degree of the risk involved will all be matters of considerable importance: see Robertson, ‘Informed Consent to Medical Treatment’ (1981) 97 LQR 102 at 122.”

192 At page 582 his Honour said:

“Moreover, it was correct for the Judge to take heed, as he did, of the likelihood that the appellant’s account of her hypothetical response must be coloured by the catastrophe which the operation brought in its wake.

It was therefore essential for his Honour to examine with great care the evidence which the appellant gave upon this critical point.”

193 Mr Green undoubtedly genuinely now believes that had the decision been disclosed, he and the Company would have then redeemed.

194 However, Mr Green’s evidence has undoubtedly been profoundly coloured by the catastrophe which has befallen him.

195 Mr Green has, as his counsel put it, “lived this case”. Since 2002 he has largely devoted his time to it. Up until the hearing he persisted in a clearly untenable claim for compensation for the loss of his or the Company’s financial advisory business on the basis that that too had come about by reason of the conduct complained of.

196 These proceedings were already on foot for about 18 months before, according to Mr Green, he realised the significance of the information in the 2001 Annual Report, which now forms the only basis for these proceedings.

197 There are a significant number of objective features, described below, of Mr Green’s attitudes and behaviour including at or about the time of the decision each of which is inimical to the conclusion that Mr Green and the Company would have redeemed, and on the basis of which I have formed the conclusion that Mr Green’s evidence that he and the Company would have redeemed, should be rejected.

198 Not only am I not satisfied on the balance of probabilities that they would have redeemed, in my view it is more likely than not that they would not have done so.

199 Firstly, throughout the period December 2000 to March 2001 Mr Green viewed the low price of the units as an opportunity for both himself and his clients to buy cheaply and obtain a bargain. As Mr Green said in his 17 October 2001 letter to Mr Brady “the greed plays a major role in investing”. Mr Green’s view was manifested by the following examples of his actions:

a on 5 December 2000 he informed Mr Whittaker that he had invested all that he could possibly “scrape up”;

b on 13 December 2000 he advised Mr Gothmann that he should seriously consider investing as much as he could while the prices were low to take advantage of dollar cost averaging;

c on 20 December 2000 he suggested to the Joostens that it was a good time to invest some more money if they had any;

d Mr Green himself invested $35,000 in GTF on 2 March 2001 at a price of 60 cents (when the price had been between 70 and 90 cents for most of January and February 2001);

e on 6 March 2001 he advised the Gothmanns seriously to consider further investing in GTF describing the share prices at the time to be at “rock bottom” (the Gothmanns invested $8,000 six days later); and

f on 28 March 2001 he sent information to Mrs Truesdale and said “The Fund Managers are confident and over the last couple of months have been buying shares at bargain prices”.

200 Secondly, Mr Green held the view, which he conveyed to clients, that GTF was a long-term investment. For example, in his letter to Mr Whittaker of 5 December 2000 he emphasised the importance of “sticking with” that strategy and the importance during market volatility of remembering “your long term goals”. He commented that: “The short term volatility pales into insignificance over the long term“. He still had this view on 10 July 2001 when the Exit Price of GTF had fallen as low as 45 cents and he wrote to Dr Tuffley urging him to stay with AMP and not to redeem his investment in the funds. He expressed the view that it would not be a good decision to sell at such a low point given that the money was invested not in one company but several hundred top companies throughout the world. This view had not changed by 10 September 2001 (when the Exit Price of GTF had fallen to 36 cents) when he wrote to Mr Gothmann advising him to hold on to his investment in GTF notwithstanding the drop in value.

201 Thirdly, during the first quarter of 2001 Mr Green viewed technology stocks positively and was confident that recovery was imminent. His view was consistent with views expressed in the published materials (referred to above) to which he paid significant regard. His confidence was manifested amongst others when:

a on 20 December 2000 he told the Joostens that GTF had dropped a bit “but they say there is going to be a boom next year”;

b on 28 March 2001 in his letter to Mrs Truesdale he informed her that “The Fund Managers are confident and over the last couple of months have been buying shares at bargain prices. The benefit of this will only reflect when the world markets continue to rise”; and

c on 5 April 2001 he wrote to Mr Whittaker that he had been assured by AMP Capital “that future looks brighter for the fund”.

202 As at 17 October 2001 he still believed that the funds had a positive future. He said in his letter to Mr Brady:

(and I still believe that the fund will perform in time)

203 Fourthly, he placed significant emphasis on the ability, track record and reputation of AMP Henderson Investors to manage the funds successfully and took the view that the underlying investments were sound as appears for example from his letters to Mr Gothmann and Mrs Truesdale of 13 December 2000.

204 Fifthly, even though Mr Green was at all times cogniscent of the risk involved in investing in the units, he advised his clients to invest and in some cases to invest further, contrary to their real risk profile, even in the face of the decline in value of GTF.

205 Sixthly, in April 2001 (at a time when the price had dropped below 50 cents) he neither redeemed himself nor advised his clients to redeem. In his email of 7 April 2001 Mr Rossiter wrote, in answer to the questions which Mr Green had asked in his email of 3 April 2001:

“The point about technology is that it is an extremely volatile sector, as has recently been proven, and as such it is not a short term investment. The prospects for this fund going forward are excellent and AMP Hendersons believe that there is significant potential to create investor wealth going forward. If your clients are considering exiting the fund, they could well have bought at the peak and be [sic] well sell in a trough: This to me does not make good long term sense.”

206 There was no suggestion that Mr Green did not agree with Mr Rossiter.

207 For knowledge of the decision to have impelled Mr Green to redeem as he says it would have would have required him:

a to abandon a long-term investment strategy which he had implemented and had advised others to implement over a significant period of time;

b to forego what he thought was an opportunity of buying in at bargain basement prices;

c to change his mind about what he thought were good prospects for the future recovery of technology stocks, a view which he had communicated to his clients;

d to crystallise a loss which he did not think was a good idea; and

e to forsake the optimism about the funds which had characterised his view of them for a long time.

208 In my view it is most unlikely that disclosure of the decision would have brought about these changes so as to cause Mr Green to act as he now says he would have.

209 Additionally as was submitted by AMP Capital, whilst Mr Green had relied on his own investment in GTF as a factor in persuading his clients to invest there was no suggestion that he had ever informed them that AMP Capital had invested, even though he says he specifically enquired in 2000 and was told that the reference to “Other Associates” in the 2000 report was a reference to AMP Capital. This itself goes some way to weakening the contention that knowledge of the decision would have been of critical significance to him.

210 Moreover if, as I have accepted, Mr Green did become aware in 2000 of the investments of AMP Capital and AMP Life, then he was also aware that AMP Life’s investment was significantly greater than that of AMP Capital. If he had been told only (as was the fact) that AMP Capital had decided to redeem he would have still known that AMP Life remained in to the tune of some $20 million knowledge of which would inevitably have diluted the effect, if any, of disclosure to him of the decision.

211 The plaintiffs have not established that they would have redeemed had they been told of the decision. Their case accordingly fails for the further reason that they have not established that by the conduct complained of they suffered loss or damage.

IF THE PLAINTIFFS WOULD HAVE REDEEMED, WHEN WOULD THEY HAVE DONE SO?

212 Although, having regard to the conclusions I have reached it is not necessary to consider when, if the plaintiffs had redeemed, they would have done so, I will nevertheless consider that question. The date upon which they would have redeemed is relevant to any assessment of damages because the price of GTF units was not static.

213 The evidence did not establish when Mr Naughton’s recommendation was accepted by HAPMT but it seems it would have been a few days after his recommendation.

214 The defendants put that it would have taken some days or weeks for the information about the decision to filter through to the plaintiffs.

215 The plaintiffs put that the information could and would have come through very quickly and that they would have sold during the week of 22 February 2001.

216 In my view, if AMP had considered that the material ought to be disclosed it could and would have been disclosed swiftly within hours rather than days. In my view the information would have been available to the plaintiffs by 28 February 2001 at the latest.

217 The prospectus states that if a request for redemption is received:

“We normally pay your withdrawal amount to you within 5 business days after we process your request. Please allow at least 5 business days for deposits to clear through the banking system.”

218 The prospectus further states that if a request for redemption is received before 2.00pm on a business day, the withdrawal will be processed at the end of that day and if it is received on a non-business day it will be processed on the next business day.

219 28 February 2001 was a Wednesday. If the plaintiffs had redeemed on that day, the proceeds would have been available to them ten business days later, that is by 14 March 2001.

220 If it was necessary to calculate their loss, the date for the calculation would in my view be 14 March 2001.

IF THE PLAINTIFFS HAD REDEEMED, WOULD THEY HAVE INVESTED ALL OF THE PROCEEDS IN OTHER AMP FUNDS?

221 Mr Green had invested in other AMP funds. The plaintiffs put that upon redemption they would have invested in those funds in the same proportions as the investments which Mr Green had made in them.

222 The defendants put that the plaintiffs would firstly have used the proceeds to discharge the margin loans of $1.4 million.

223 The defendants tendered in evidence the terms of the BT Margin Lending and Colonial Margin Lending loan documents:

a The BT Loan contained a provision (in clause 20) to the following effect:

“Proceeds from the redemption will be applied to pay or repay part or all of the total amount owing .”

b The Colonial Loan contained a provision (in clause 3.6) to the following effect:

“We may set off any money we owe you against any money you owe us. If at any time any of the amount owing is due but has not yet been paid, you authorise us to apply any credit balance in any account you have with us (including the Colonial Margin Lending Deposit Facility ) towards satisfaction of the payment that is due.”

224 Mr Green’s evidence as to what he would have done with the proceeds is, once again, hypothetical. I am not satisfied that the plaintiffs have established that they would have invested the proceeds of a redemption as Mr Green says. In my view, for the following reasons, it is more likely that they would have used them to pay the margin lenders.

225 Firstly, although the evidence did not establish clearly whether the proceeds of the Company’s redemption on 5 November 2002 was applied to its margin loan, the proceeds of Mr Green’s redemption of his GTF units on 25 September 2001 ($289,000) was applied against the BT Margin Loan rather than reinvested. There was no basis given as to why he would have acted differently had the redemption occurred earlier and before Mr Green’s authorities had been suspended.

226 Secondly, the BT margin loan required redemption proceeds to be treated that way.

227 Thirdly, although the Colonial margin terms did not require redemption proceeds to be treated that way, the proceeds of Mr Green’s redemption of his units on 23 October 2002 were applied to that margin loan.

228 Fourthly, the evidence did not clearly establish whether the proceeds of the Company’s redemption of its GTF units on 5 November 2002 were applied to its margin loan with Colonial. There was no evidence establishing that the funds were otherwise invested in other AMP funds.

229 Fifthly, in an affidavit sworn by Mr Green on 24 September 2008 he says that between 2001 and 2003 he and the Company made withdrawals from their investments in the other funds for the purpose of reducing the amounts owing under the margin loans which were taken out in order to enable their investment in GTF and GGOF, totalling $3,314,278. The evidence established, however, that not all of those proceeds were used for the stated purpose. $488,192 of the moneys withdrawn went to an unidentified destination after repayment in full of the margin loans. The evidence revealed no explanation for the discrepancy. It does, however, provide some evidence that money which was not required for payment of margin loans was not kept in the alternative funds which to some extent undermines the proposition that that is what Mr Green would have done with the redemption proceeds.

230 The defendants called an expert, Mr Potter, who was not cross-examined, who carried out calculations of the plaintiffs’ loss based on alternative scenarios of the plaintiffs either having received the redemption proceeds on 22 February 2001 and having from then had the benefit of interest at Supreme Court rates or of having received the redemption proceeds and repaid the margin loans so as to receive the benefit of a reduction of interest payable on those loans by reason of the payments.

231 Assuming all other matters in favour of the plaintiffs, in my view, adjusted to assume that redemption and payment to the margin lenders occurred not less than ten business days after 28 February 2008, the latter would be the appropriate calculation of the plaintiffs’ loss.

CROSS-CLAIM

232 On or about 12 August 1986 AMP Life and Mr Green entered into a loan agreement under which AMP Life lent to Mr Green $102,100.

233 Under the agreement interest is payable at the rate of 14 per cent per annum but AMP Life may waive any interest in respect of the period up to termination of the Company’s appointment as its representative. The Company’s appointment as representative was terminated with effect from 5 April 2002 and AMP has waived its right to interest up to that time.

234 It cross-claims, as second cross-claimant, against Mr Green as first cross-defendant, for the capital sum plus interest from 5 April 2002 at the rate of 14 per cent per annum.

235 The only defence raised by Mr Green to the cross-claim is one of equitable set off against the loan moneys of damages claimed by him against AMP Life.

236 Mr Green’s claim for damages against AMP Life has failed and accordingly he has no defence to the cross-claim.

237 There will as a consequence be judgment against him for the amount claimed plus interest at the applicable rate.

CONCLUSION

238 The plaintiffs’ claim against the defendants is dismissed with costs.

239 There will be judgment for the second cross-claimant, AMP Life, against the first cross-defendant, Mr Green, for $102,100 plus interest at the rate of 14 per cent per annum from 5 April 2002. Mr Green is to pay the second cross-claimant’s costs of the cross-claim.

240 Short minutes are to be brought in reflecting this outcome.

241 The exhibits are to be returned.

**********

05/12/2008 - Insert date of judgment - Paragraph(s) cover page

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Citations

Green v AMP Financial Planning Pty Ltd [2008] NSWSC 1164

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CITATION:	Gary Sydney Green & Anor v AMP Financial Planning Pty Ltd & Ors [2008] NSWSC 1164 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	4,5,6,7,10,13,14 November 2008
JUDGMENT DATE :	5 December 2008
JUDGMENT OF:	Hammerschlag J
DECISION:	Plaintiffs’ claim against the defendants dismissed with costs. Judgment for the second cross-claimant against the first cross-defendant for $102,100 plus interest at the rate of 14 per cent per annum from 5 April 2002. First cross-defendant to pay the second cross-claimant’s costs of the cross-claim.
CATCHWORDS:	TRADE AND COMMERCE – Trade Practices Act 1974 (Cth) and related legislation – consumer protection – whether certain conduct misleading or deceptive or likely to mislead or deceive under s 52 of the Trade Practices Act 1974 – plaintiffs invested in funds managed by the third defendant, including a fund described as the Global Technology Fund (“GTF”) – second and third defendants also held units in GTF, a fact known to the plaintiffs – in February 2001, third defendant decided to (“the decision”) and subsequently did redeem its units in GTF – the third defendant did not disclose to the plaintiffs either the fact of the decision (“the conduct complained of”) or its redemption – from late 2000 to late 2001 value of units in GTF deteriorated significantly – plaintiffs allege that by the conduct complained of the third defendant engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and that had the third defendant disclosed the decision to the plaintiffs they would have redeemed their units in GTF and invested all of the proceeds in other funds – held that the conduct complained of was not misleading or deceptive or likely to mislead or deceive and accordingly that the plaintiffs’ claim fails – whether non disclosure of information must be “deliberate” to be liable to be conduct that is misleading or deceptive or likely to mislead or deceive – held that it need not be deliberate, following the decision of the Victorian Court of Appeal in CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd (2005) ATPR 42-042 - DAMAGES – whether plaintiffs would have redeemed their units in GTF had they been told of the decision – objective features of the plaintiffs’ behaviour and attitude at the relevant time does not support plaintiffs’ oral evidence that they would have redeemed their units – held that even had plaintiffs been told of the decision, they would not have redeemed – whether if the plaintiffs had been told of the decision and had redeemed, they would have invested all of the proceeds into other funds or whether they would have firstly used the proceeds to discharge margin loans – held that the plaintiffs would have firstly used the proceeds to discharge margin loans
LEGISLATION CITED:	Corporations Law (Cth) Corporations Act 2001 (Cth) Trade Practices Act 1974 (Cth) Australian Securities and Investments Commission Act 1989 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd & Anor (1998) 155 ALR 714 Johnson Tiles Pty Ltd & Ors v Esso Australia Ltd & Anor (1999) ATPR 41-696 CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd (2005) ATPR 42-042 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Tillman v Attorney-General (NSW) (2007) 178 A Crim R 133 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Rosenberg v Percival (2001) 205 CLR 434 Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Chappel v Hart (1998) 195 CLR 232 Ellis v Wallsend District Hospital (1989) 17 NSWLR 553
PARTIES:	Gary Sydney Green Gary Green Pty Ltd (ABN 26 010 415 639) AMP Financial Planning Pty Ltd (ABN 89 051 208 327) AMP Life Limited (ABN 84 079 300 379) AMP Capital Investors Limited (ACN 001 777 591)
FILE NUMBER(S):	SC 50060/2005
COUNSEL:	L.S. Einstein with G.W. Pulsford and D.C. Stewart(Plaintiffs) J.W.J. Stevenson SC with B.L. Jones (Defendants)
SOLICITORS:	Lexington Law Group (Plaintiffs) Mallesons Stephen Jacques (Defendants)

Date	Units redeemed	Exit Price	Amount redeemed	Applied against Loan
25 Sep 2001	876,911.74	0.33	$289,502.55	Applied against BT
4 Apr 2002	125,116.18	0.36	$45,479.92
23 Oct 2002	58,689.83	0.22	$13,410.58	Applied against Colonial
TOTAL	1,060,717.75	$348,393.05