New South Wales Supreme Court CITATION : Berry v Questor Financial Services Limited & Ors [2009] NSWSC 1402 HEARING DATE(S) : 6, 7 and 17 October 2009 JUDGMENT DATE : 18 December 2009 JUDGMENT OF : Bergin CJ in Eq DECISION : Amended Statement of Claim dismissed. Plaintiff to pay defendants' costs of proceedings CATCHWORDS : [FINANCIAL SERVICES] - Statutory regime governing the provision of financial services - Requirements to hold Australian Financial Services licences - Provision of financial services through authorised representatives - [TRUSTS] - Whether investors intended the creation of a trust irrespective of whether the plaintiff remained an authorised representative of the defendants - [CONTRACT] - Whether contract between the plaintiff and the defendants included a term that the plaintiff was entitled to receive fees irrespective of whether she was an authorised representative of the defendants - [ESTOPPEL] - Whether defendants estopped from denying the plaintiff's entitlement to receipt of fees irrespective of whether she remained an authorised representative of the defendants - [MISLEADING OR DECEPTIVE CONDUCT] - Whether disclosure documents "defective" - Whether omission misleading or deceptive LEGISLATION CITED : Corporations Act 2001 (Cth) Bahr v Nicolay (No 2) (1988) 164 CLR 604 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 CASES CITED : Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Walker v Corboy (1990) 19 NSWLR 382 Wilson v Darling Island Stevedoring and Lighterage Co Ltd (1956) 95 CLR 43 Julie-Anne Berry (Plaintiff) PARTIES : Questor Financial Services Limited (First Defendant) Executive Wealth Management Financial Services Pty Limited (Second Defendant) Bridges Financial Services Pty Limited (Third Defendant) FILE NUMBER(S) : SC 4459 of 2009 COUNSEL : M Leeming SC/K Dawson (Plaintiff) GC Lindsay SC/S Mirzabegian (Defendants) SOLICITORS : Bartier Perry (Plaintiff) Freehills (Defendants) - 48 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BERGIN CJ in Eq 18 DECEMBER 2009 4459 OF 2009 JULIE-ANNE BERRY v QUESTOR FINANCIAL SERVICES LIMITED & ORS JUDGMENT 1 The plaintiff, Julie-Anne Berry, a Certified Financial Planner, seeks an order for payment of Adviser Service Fees (ASFs) allegedly due for financial services provided to investors who have invested funds in the financial products offered by Questor Financial Services Limited (Questor), the first defendant. The plaintiff also makes claims against Executive Wealth Management Financial Services Pty Limited (EWM), the second defendant, and Bridges Financial Services Pty Limited (Bridges), the third defendant. 2 Questor is the trustee of the Portfolio Services Retirement Fund and is the Responsible Entity for managed investments schemes, relevantly, the Retirement Income Plan, the Superannuation Plan, the Super Accumulation Plan and the Personal Investment Plan (the Plans). Questor operates an investment administration platform known as "The Portfolio Service"(TPS) that provides access to a selection of investments for superannuation and non-superannuation investment products, including the Plans referred to (the Products). 3 EWM provides financial services to investors either directly or through an authorised representative (AR), such as a financial planner. It offers the Products to potential investors. Bridges provides financial planning and stockbroking services, including professional advice on investment, superannuation and retirement income strategies. It also provides administrative services to Questor. Up until 30 April 2009 each of Questor, EWM and Bridges was a wholly owned subsidiary of Australian Wealth Management (AWM). On 30 April 2009 AWM merged with IOOF Holdings Limited and each of the defendants is now a wholly owned subsidiary of that company. 4 The plaintiff claims that in respect of the investors who invested funds with Questor on her advice, Questor was obliged to deduct ASFs from those investors' funds, and EWM/Bridges were obliged to pay them to her. It is alleged that their failure to do so was in breach of trust and in breach of contract. The plaintiff also makes claims of misleading or deceptive conduct and conventional estoppel. The defendants deny that they are obliged to deduct or pay the ASFs to the plaintiff. They claim they were only obliged to pay the ASFs to the plaintiff whilst she remained an AR of EWM. The defendants claim that the statutory regime governing the financial services industry and the contractual arrangements with the investors, do not authorise them to make the deductions, and even if they were so authorised, the deduction is on a discretionary basis only. Financial Services Industry 5 Chapter 7 of the Corporations Act 2001 (Cth) (the Act) regulates the financial services market. Subject to certain exemptions, a person who carries on a financial services business must hold an Australian financial services licence (AFSL) covering the provision of the financial services: s 911A and s 913B. One of the exemptions to this requirement is where a person provides the financial service as a representative of another person who carries on a financial services business and holds an AFSL: s 911A(2)(a)(i). 6 A "financial service" includes the provision of "financial product advice"; dealing in a financial product; and operating a registered scheme: s 766A. A "financial product" is a facility through which, or through the acquisition of which, a person makes a financial investment or manages financial risk or makes non-cash payments: s 763A. The holder of an AFSL may give an AR a written notice authorising that person to provide a "specified financial service or financial services on behalf of the licensee": s 916A. The AR then provides financial advice to clients on behalf of the holder of the AFSL. 7 The holder of an AFSL is required to make certain disclosures to its clients, either itself or through its AR, and must provide to its clients a Financial Services Guide (FSG): s 941A; 941B; a Statement of Advice (SoA): s 946A; and a Product Disclosure Statement (PDS); ss 1012A, 1012B and 1012C. The FSG must include information about "remuneration (including commission) or other benefits" that the AR "is to receive in respect of, or that is attributable to, the provision of any of the authorised services": s 942C(2)(f). An SoA must include "information about the remuneration (including commission) or other benefits" that the AR "is to receive that might reasonably be expected to be or have been capable of influencing" the AR "in providing the advice": s 947C(2)(e). A PDS must include information about any amounts "that will or may be deducted" by way of "fees, expenses or charges": s 1013D(1)(d)(iii). 8 The holder of an AFSL must take reasonable steps to ensure that its ARs comply with financial services laws and are trained and competent to provide the financial services: s 912A(1)(ca) & (f). It is also required to have in place arrangements for compensating a "retail client" (including an investor) to whom the AR provides financial services, for loss or damage suffered by that client because of, inter alia, breaches of the Act by the AR: s 912B (1). 9 Section 917B of the Act provides: If the representative is the representative of only one financial services licensee, the licensee is responsible, as between the licensee and the client, for the conduct of the representative, whether or not the representative's conduct is within authority. 10 Section 917E extends the responsibility of the AFSL holder so as to make it liable to the client in respect of any loss or damage suffered as a result of the AR's conduct. In those circumstances the client has the same remedies against the AFSL holder as against the AR: s 917F(1). Plaintiff's background 11 The plaintiff has worked in the financial planning industry since 1990, when she commenced work in the financial planning division of the St George Building Society in Port Macquarie. She then worked for Scott and Finlay Accountants as a financial planner from 1993 to 1996, when she joined State Super Financial Services. Between 1997 and 2001 she was employed by NRMA Financial Planning, Clearview Retirement Solutions. 12 In late 2001 or early 2002, Holiday Coast Credit Union Ltd (HCCU) acquired a financial planning business from Fred O'Toole, an AR of Bridges, and established HCCU Pty Ltd, which later changed its name to Holiday Coast Wealth Management (HC). The plaintiff was on the Board of HCCU immediately prior to the acquisition of this business and then resigned and become the Senior Financial Planner of HC. HC did not hold an AFSL and it requested Bridges to approve the plaintiff as an AR of Bridges. Bridges Agreement – 9 January 2002 13 The plaintiff entered into an Employed Representative & Agents Agreement with Bridges on 9 January 2002 (the Agreement). The Recitals to the Agreement noted that the plaintiff was employed by HCCU and that Bridges, at the request of HCCU, had agreed to grant to the plaintiff "a Proper Authority in accordance with the Regulatory Laws": [Recitals 3 - 4]. Bridges appointed the plaintiff "with a Proper Authority to act by arrangement as an authorised representative on the terms and subject to the conditions" of the Agreement: [2.1]. That appointment commenced on 9 January 2002 and continued subject to the provisions of the Agreement: [2.2]. The Agreement could be terminated with notice by either party giving to the other 30 days notice in writing specifying the date of termination: [5.2]. 14 The plaintiff accepted the appointment and acknowledged that it was conditional and dependent upon the continuing appointment by Bridges and on the plaintiff continuing to satisfy the conditions set out in the Agreement, including the duties and functions set out in Schedule 2 of the Agreement: [2.4]. Schedule 2 of the Agreement was in the following terms: (a) the [plaintiff] is authorised to prepare financial plans and provide investment advice for Clients, utilising only those products contained in the Recommended Products List; (b) every financial plan prepared by the [plaintiff] for a Client must be approved in accordance with Bridges portfolio checking procedure contained in the Compliance Manual. (c) the [plaintiff] must make and maintain contemporaneous file notes in respect of each instruction [she] takes or receives from a Client; (d) the [plaintiff] must satisfy any training requirements of which BRIDGES notifies [her] in writing; (e) the [plaintiff] must strictly adhere to the Procedures and the requirements set out in the Compliance Manual and in this regard, it is acknowledged that BRIDGES may vary, add to or delete from the Compliance Manual at any time and upon the [plaintiff] receiving notice of any such variations, [she] will be bound by them as if they were originally included in the Compliance Manual; and (f) the [plaintiff] must maintain the Minimum Service Standards. 15 It was agreed that the "Compliance Manual" formed part of the terms and conditions of the Agreement: [1.1]. It was defined in the Agreement as the publication produced by Bridges and made available to the plaintiff. It includes Bridges' operational policies and procedures as amended from time to time, and the relevant legislation and designated procedures to which the plaintiff was required to adhere. The expression "Minimum Service Standards" was defined in the Agreement as services by the plaintiff that are consistent with the Financial Planning Association of Australia Limited (FPA) Code of Ethics and the Rules of Professional Conduct. "Client" was defined to include "a person seeking or utilising or considering utilising or who has utilised or engaged the services" of the plaintiff and/or HC. 16 The Compliance Manual is a comprehensive document dealing with the regulatory regime and the obligations of an AR under that regime. The Manual also refers to the AR's obligations to disclose all fees, charges and benefits that may be perceived as influencing a particular sale to investors: [13.1]. The Agreement (including the Compliance Manual) does not deal with the quantum of payments or the structure of payments that the plaintiff was to receive for the provision of services as an AR of Bridges. EWM Agreement – 12 September 2006 17 In September 2006 the plaintiff decided to leave HC and set up her own business with a new business partner, Paul Stack. They established Berry Stacks Financial Services Pty Ltd, trading as Berry Financial Services. On 12 September 2006 EWM (as an AFSL holder) wrote to the plaintiff congratulating her on successfully completing the initial training specified by EWM for the issue of certification as an AR. That letter included the following: EWM facilitates the giving of investment advice in relation to the products listed in our authorised products list. EWM reserves the right to modify the Authorised Product List from time to time. You will be notified prior to any such modification. EWM authorised (sic) Representatives for this purpose, and for no other purpose. In addition to the above, please sign and date the version of this letter marked "copy" to confirm your agreement to the following: 1. You must keep your EWM certification in a safe place at your place of business and you must return it to us when we ask for it. 2. You must produce your certification upon request by the Australian Securities and Investments Commission and/or a member. 3. You cannot hold a certification from another licensee, (except your employer), while you hold a certification from EWM unless EWM and your other licensee consents to this with us. 4. To be an effective financial adviser you must be aware of and comply with all Australian Securities and Investments Commission Practice Notes and Policy Statements which relate to employees of a licence and/or Authorised Representatives. EWM will provide you with training on these Practice Notes and Policy Statements. 5. Under your certification with EWM you can only provide recommendations in relation to the products listed in the Authorised Product List. You are not authorised to sell any other products under your EWM certification. 6. Since you act as Authorised Representative of EWM, when you recommend any product from the Approved Product List you must make sure that the member understands this clearly. 7. The Corporations Act requires all licensees to conduct their business in an efficient, honest and fair manner. Since EWM acts through Authorised Representatives it is important that you as a EWM Authorised Representative comply with this requirement as well. 8. You are required to comply with any operating guidelines that EWM may publish from time to time. This includes, but is not limited to, compliance reviews of your client files and pre-vetting of advice to ensure that it meets appropriate standards. 9. All application forms, applications monies, switch or redemption requests must be promptly lodged with the product issuer. 10. EWM is liable to a member for your acts as its Authorised Representative. Therefore, you must comply with all directions, policies and procedures of EWM as advised to you. 11. You must undertake any on going training as required by EWM. EWM will keep a register that records all the training you have undertaken. 12. EWM will monitor and review the holding of your certification at regular intervals. 13. EWM may at its discretion revoke your certification at any time. If this occurs you must return to EWM your authorised Representative's authority and any other documents advised by EWM. 14. We understand that you will keep all information provided to you on us (sic) confidential between us. 15. EWM may vary these terms and conditions from time to time by notifying you in writing. 18 The plaintiff signed the copy of this letter on 12 September 2006. 19 When the plaintiff changed her position from an AR of Bridges to an AR of EWM, Bridges wrote to the investors who had made investments in TPS as a result of advice received from the plaintiff in her capacity as an AR of Bridges. That letter was signed by the then CEO of Bridges and EWM, Alexander Hutchison and was in the following terms: We write to inform you that your financial planner Julie Berry has resigned as an employee of the Bridges Port Macquarie office effective 8 th September 2006. Julie is leaving Bridges to establish her own financial planning practice. Our aim is to ensure that you continue to receive the best possible investment advice and service. To achieve this aim we ask that you indicate on the enclosed form whether you wish to: A remain a client of Bridges, in which case we will arrange for another Bridges financial planner to look after your ongoing financial advice needs. or B remain a client of Julie Berry, in which case she will contact you. Rest assured that your current investments in The Portfolio Service will not be affected should you wish to continue to receive your financial advice from Julie. 20 The plaintiff provided services as an AR of EWM between September 2006 and July 2009. Discovery of an oversight 21 In March 2009 the plaintiff agreed to purchase Mr Stack's shares in Berry Stacks Financial Services Pty Limited. The company's name was subsequently changed to Berry Financial Services Pty Limited. The plaintiff applied for finance from the National Australia Bank (the Bank) to purchase Mr Stack's shares and the Bank requested a copy of any agreement between EWM and the plaintiff. As a result of this request, Stephen Hunt, of Bridges, wrote by email dated 24 March 2009 to the Bank enclosing a copy of the plaintiff's AR certification and the letter of 12 September 2006 signed by the plaintiff. That communication included the following: Julie was previously an Authorised Representative of "Bridges", as an employee of Holiday Coast Credit Union (for which Bridges held an interest in) before being transferred to EWMFS in September 2006. As we already held the required information/agreements etc for Julie under the Bridges AFSL, not all of this information was required again as a form filling exercise to be duplicated under the EWMFS AFSL. EWMFS is a "sister" AFSL to the Bridges AFSL under the Wealth Management Division of Australian Wealth Management and was set up for the purpose of employing Authorised Representatives within the group, but not under the "Bridges" brand. Please find attached the EWMFS AFSL for your reference,as (sic) well as current certificate for PI Insurance. As stated, I am a Responsible Manager for both the Bridges & EWMFS AFSLs and Julie Berry has been personally known to me for a period of 6 years, both as a Bridges Authorised Representative and an EWMFS Authorised Representative. Whilst the "branding" is different, the Approved Products List, processes, systems, compliance & training are the same across both Bridges & EWMFS. Julie conducts her client stockbroking via Bridges, an ASX participant. 22 The Bank was concerned to identify "how remuneration gets paid by the Licensee to the authorised representatives, and the terms and conditions of appointment that accrues the payments". The Bank asked Mr Hunt whether he could provide advice as to whether there was "another agreement in respect to fees and remuneration". In response to that request Mr Hunt wrote to the Bank by email on 25 March 2009 as follows: Please find attached the "Bridges" version of our Representatives Agreement for your reference. I am currently liaising with our Legal Dept to complete an EWMFS version that would apply to Julie Berry. Please note that an agreement between Julie & EWMFS currently doesn't exist in that Julie's licensing under EWMFS was an internal transfer from the Bridges AFSL, and from a Bridges office that we owned under a joint venture. Hence it appears the signing of a new Representatives Agreement under the EWMFS AFSL was "overlooked" by the AWM staff member(s) responsible for this at the time back in September 2006. However, since November 2006, the appointments & agreements process hence forth has fallen under my department's responsibilities. Please note the "confidentiality" of this agreement document and it is not to go outside of your department/or to person's (sic) not associated with Julie Berry's finance application, nor to be used for any purpose other than to satisfy your enquiries with respect to the Tripartite Agreement you spoke of. I have attached a remuneration & dealer fee summary that outlines the remuneration splits between Bridges/EWMFS and each office/Authorised Representative. In short, Bridges/EWMFS retains 10% of any upfront fee/commission revenue and 12% of any ongoing fee/commission revenue, irrespective of whether it be for investment (super & non-super) or risk (life insurance) business. As I mentioned, all payments are made on a monthly basis from the "Bridges/EWMFS Commission Account" to the office account for each Bridges/EWMFS branch (NOT individual planners). I can confirm that payments due to Julie Berry are paid to the entity "Berry Financial Services". 23 On 26 March 2009 Mr Hunt wrote to the plaintiff enclosing a document described as "your Representatives Agreement" with EWM. That communication stated that the Agreement was "in essence, the same as for Bridges Representatives" with some relevant changes that he outlined. Mr Hunt wrote: "Hope this all makes sense" and then thanked the legal department officer for her "prompt attention to this Agreement given the sense of urgency in your situation". Mr Hunt requested the plaintiff to give him a call "to discuss next steps/signing to satisfy" the Bank's requirements. There is no evidence of any further communication between the plaintiff and EWM about this agreement. 24 This "agreement" included a definition of "Representatives Private Clients List" as "Clients who have become Clients due to the sole efforts of the Representative, unless otherwise agreed by each of the Representative and Chief Executive Officer of EWMFS that the Client has become a Client in connection with or through a EWMFS Referral Source": [1.1]. The restraint clause excluded application to persons in the Representative Private Clients List: [13.3]. It also included the following: 5.1 Brokerage and Commission Payments Due The Representative acknowledges that payments due to it from EWMFS under this Agreement will be wholly based on a sharing of brokerage, fees for service and/or commissions and on achievement of results. EWMFS will pay such share of any brokerage, fees for service or commission payments based on business transacted or conducted for the benefit of Clients by the Representative in accordance with this Agreement, upon the basis set out in the most recent relevant EWMFS policy statement. The Representative acknowledges that the basis of sharing such brokerage, fees for service or commission may be revised from time to time by EWMFS, the details of which will be advised by EWMFS in writing. Prior to any revision which may result in a significant and material change to a Representative's brokerage, fees for service and commission payment, EWMFS will consult with a forum of Representatives. 5.2 Service Fee Payments Due The Representative may, subject to the approval of EWMFS, charge a fee for service for work performed or services provided by it to a Client or a Referral Service. The Representative will ensure that any such amount is paid direct to EWMFS who receives the same on account of and for the benefit of the Representative and after deducting from amounts received such other amounts as may be agreed between EWMFS and the Representative, will pay the agreed balance to the Office. 5.3 All Payments to the Office All brokerage, commission payments, fees and other amounts (including any advances) due by EWMFS in connection with the EWMFS Business will be paid to the Office. The Office will receive such amounts on account of and for the benefit of the Representative and after deducting from amounts received such other amounts as may be agreed between the Office and the Representative, will pay the agreed balance to the Representative. 5.4 Advance If agreed EWMFS may pay to the Office in connection with the Representative an advance which will be offset against amounts payable under Clause 5.1 5.5 Payments – Timing and Referral A share of brokerage, commission and fee payments will only be paid following the placement of business and the lodgement of a receipt by the Representative in accordance with the Procedures or in the case of fees, the receipt of fees from Clients or a Referral Source as appropriate and after normal processing by EWMFS. 5.6 No Representation Regarding Payment No representations are made by EWMFS as to the amount of brokerage, commission, fees or other payments which may or may not be paid in the conduct of a EWMFS Business. 25 This is the only document that sets out arrangements for payments between EWM and ARs. However the parties "overlooked" putting this in place. Neither party referred to this Agreement in their submissions and it was not signed prior to the plaintiff resigning from EWM. The "policy statement" referred to in clause 5.1 does not appear to be in evidence. 26 There are in evidence some forms entitled "The Portfolio Service Adviser service fee". These are forms provided to investors in TPS to complete if they "have agreed to pay an Adviser service fee". The form provides for the investor to indicate to which "Plan" the Adviser service fee applies and includes a request to arrange for the "AFSL Holder" named in the document to receive a payment, either as a percentage or a flat dollar fee. The document includes the following: 4. I/we acknowledge that the Adviser service fee nominated above will apply from the later of 1 October 2006, or the date that Questor receives the completed Adviser service fee form. the Adviser service fee in respect of my/our investment options in The Portfolio Service will be no greater than the maximum amount stated in the Product Disclosure Statement. that the Adviser service fee will be deducted from my/our balance in the Cash Management Account at the end of each quarter. the trustee is not responsible for any advice provided to me/us by my/our financial planner. I/we may instruct the trustee to cancel or alter the Adviser service fee nominated on this form and will do so in writing. Death or incapacity does not bring an end to this agreement and that the trustee will continue to deduct fees and expenses in relation to my/our investment options in The Portfolio Service. My/Our legal representative will contact the trustee in relation to this agreement. the trustee may cancel this arrangement at any time. I/we agree to be bound by the conditions as detailed above. 27 The form then provides for the "Financial Planner" to complete the second page of the document, filling out personal details and the identity of the "AFSL holder". The form then provides: The investors named above have instructed me to provide them with financial planning and investment advice on their investment options in The Portfolio Service. I agree to provide such advice on the terms and conditions contained in the investor's instructions. I understand the terms as above. In particular, I acknowledge that your liability to pay my Adviser service fee from time to time will not exceed the amount calculated above and that the investor or trustee may cancel or reduce this amount at any time. I indemnify the trustee against any claims arising pursuant to advice given by me to the investor named above. 28 The plaintiff signed a number of these forms and was cross-examined about the statement that "the trustee may cancel this arrangement at any time". The plaintiff appeared not to have been aware of this provision and said that at the time she signed the forms she did not read them "with as much detail as one should" (tr 68). Economic downturn 29 In late 2008, Michael Carter, the present Chief Executive Officer of EWM and Bridges, wrote to all ARs advising that "the current market environment" had caused Questor/EWM/Bridges to review the suitability and viability of Wholesale Funds, known as "Target Outcome Funds", and that these Funds were to be closed. Mr Carter advised that there were similar "United funds available that offer greater economies of scale and further portfolio diversification". He also advised that the clients would be notified of the closure of the Funds and provided with a United PDS. In an email in response the plaintiff asked Mr Carter whether they were now "United product floggers" and commented that it was "a very disappointing turn of events" and that it made "one think carefully about the diversity of TPS in the future". Mr Carter responded: Absolutely not. I am very conscious of the issue of diversity and independence which has always been at the heart of the Bridges culture and approach. Whilst these changes are necessary the United solution is a pragmatic one. You can choose to invest clients in an alternative either before transition or after if you are not comfortable. But maybe wait to see what Research say in their report or ask them about alternatives. 30 The plaintiff pointed to these communications as evidence of her dissatisfaction with the services and research that was being provided by EWM. The plaintiff claimed it was this dissatisfaction that caused her to "look for alternatives" to operating as an AR of EWM. The plaintiff resigns from EWM 31 The plaintiff claimed in her evidence that on Friday, 10 July 2009 she had the following conversation with Michael Carter: Plaintiff: I'm sorry to tell you that I am resigning as an AR of EWMFS. It's the services I'm resigning from and not the product. I'd like to be able to continue to use it. I think you know why I'm resigning. We've had some issues and it's about the services. It's the services that I no longer want to have access to, but it's not my intention to remove anybody from the product because I have no issues with the product. I'd like to retain access to Portfolio Net so that I can continue to service the clients. MC: I'm going on leave for 2 weeks so I'll leave everything as it is while I think through the issues. I'm concerned about setting a precedent for the other planners. Plaintiff: Will the ASF continue to be paid to me? MC: Yes. Plaintiff: I understand you need to do a bulk release letter, or something like that. MC: That won't be a problem … Where are you going? Plaintiff: Why does it matter to this conversation? MC: I want to know. Plaintiff: I'm going to ComCorp Financial Advice. MC: We've got no agreement to pay ComCorp for new clients. Plaintiff: My client's aren't new, they're existing. I don't want to be involved in anything that is going on between you and Alex. That's to do with you. I don't want that to be about me. I want to continue to look after my clients. MC: Will you continue to use TPS? Plaintiff: If I could, but I would have to use my new APL (Approved Product List from the new licensee). 32 The "Alex" referred to in this conversation alleged by the plaintiff is Alexander Hutchison referred to earlier, who was formerly the CEO of EWM and Bridges and is now the Managing Director of ComCorp Financial Advice (ComCorp), which is owned by MMC Contrarian Limited (MMC). Mr Hutchison is also a director of MMC. 33 Mr Carter denied that during this conversation with the plaintiff he said that the ASF would continue to be paid. His evidence was that the conversation was in the following terms: Plaintiff: I am handing in my resignation effective close of business today. I wanted to tell you this personally. I didn't want this to be acrimonious. MC: This wasn't what I was expecting. I thought you were here to talk about FPA matters. Plaintiff: I haven't been happy with research and other services. MC: Where are you going? Plaintiff: ComCorp. They have bought a 40% interest in my business and a key part of my decision to move there is that they are providing me with referral sources which you can't. MC: There might be some issues given that we don't have any agreements with ComCorp. It would be good if you could put your resignation back in your pocket for a few weeks so that we can work out any implications. Plaintiff: That won't be possible. They are making announcements on Monday to the ASX. I understand you can give me a bulk release letter. MC: There won't be a problem with that. It's pretty standard. Plaintiff: Will I still get my ongoing commissions? MC: There will be no problem with the retail commission as they will go to your new dealer. 34 On 13 July 2009 Mr Carter and the plaintiff had the following telephone conversation about which there is no real controversy: Plaintiff: Hello Michael, I thought you were going on holiday. MC: Something came up. Julie, further to our conversation the other day, we are sending a bulk release letter for each of your clients today. Plaintiff: Thank you Michael. MC: You are also going to receive limited PNet access until the end of September. However, there is not much we can do in relation to your Adviser Service Fee. I won't change the arrangements, and I'm not going to pay the Adviser Service Fee through to ComCorp. Also you won't be provided with a data feed either. Plaintiff: Does this mean you are forcing me out of TPS? MC: Yes, or you can find another way to be remunerated. 35 On 13 July 2009 the plaintiff wrote to Mr Carter by email in the following terms: I refer to our conversations on Friday and earlier today. I now confirm our discussions as follows: As you are aware effective 10 th July 2009 I have resigned as an Authorised Representative of Executive Wealth Management Financial Services Pty Limited. I confirm that the new Licensee for myself is Comcorp Financial Advice, AFSL 331367 My resignation is primarily in relation to the quality of the Dealer Services and support provided to me by EWMFS. As a separate issue, I have approximately $29 mil under management in The Portfolio Service (TPS). I need to be able to continue to service those clients and to receive the Adviser Service Fee (ASF) as agreed with my clients and which is due to me. The easiest way for me to continue to administer my clients portfolios is to retain access to PNet. This makes it simple from both your end and mine. As agreed we will retain this access initially until the end of September whilst you consider any issues related to this. I have reflected on our conversations and I will say that I was surprised that you on Friday mentioned that providing ongoing TPS access and functionality could be an issue because it may set a precedent for other planners who could find it easier to move. In my mind the 'setting a precedent' for other planners to move is not a relevant consideration from either mine or my clients point of view. Really my clients in TPS should not potentially suffer because of such a consideration. I must say I think you are confusing your Licensee responsibilities with those as a product provider. This is precisely one of the other issues besides that of service which I was concerned about and that led me to make my decision to resign as discussed. Indeed, all I am asking is to be treated as any other Dealer Group from a product point of view. That is to receive restricted access to PNet, a data feed to Xplan for my clients as this will be my new client management system and of course be paid my Adviser Service Fee which I am entitled to as per the TPS PDS and which my clients have agreed to pay to me for my service. I also confirm that ComCorp does in fact have a RCTI Agreement with you so I can be paid my ASF. I also note that today you have informed me that you will not pay me my Adviser Service Fee. As the clients have instructed you to do so, and as the PDS clearly states that the Adviser Remuneration including implementation and/or Adviser Service fee will be paid to "the AFSL holder". Could you provide me the reason in writing as to why you have made this decision as I am at a loss to understand your actions. My clients will, in my opinion be disadvantaged by this move by you to force me to move them from The Portfolio Service a product that I was and am happy to continue to use as a platform for my clients investments. Whilst I have indeed terminated our Dealer Services arrangements, this is a different proposition to terminating my ability to continue to service my clients in a platform (product) that AWM happens to own. ComCorp – 13 July 2009 36 On 13 July 2009 the plaintiff became an AR of ComCorp. 37 On the same day ComCorp issued a Media Release advising that, as a wholly owned subsidiary of MMC, it had acquired 40% of Berry Financial Services. The Media Release also included the following: Demand for access to quality financial planners is growing, particularly in the Mid-North NSW Coast region, where Berry Financial Services is based. This increased demand is largely a result of referrals through ComCorp's network of referral partners, such as credit unions. … "In many ways ComCorp is ideally placed to provide a robust transparent structure for financial planners as ComCorp does not have the structural conflicts of interest issues that bedevil some other participants in the financial services industry" Mr Hutchison said. ComCorp, a Principal Member of the FPA, is encouraging other financial advice practices to consider the prospect of joining the ComCorp dealer group. The acquisition of a stake in Berry Financial Services epitomises the structure of ComCorp's business model - to acquire full or partial stakes in financial planning businesses and then to grow the business at the same time providing access to referrals from our exclusive relationship with our referral partners. RCTI Agreements 38 Questor claims that it's general policy and practice, in compliance with statutory requirements, is that a person may only make investments with it through an AFSL holder, or an AR of an AFSL holder, of which it approves. In order to remit ASFs to AFSL holders, Bridges (acting on behalf of Questor) has a Recipient Created Tax Invoice Agreement (RCTI Agreement) with each paying dealer. Comcorp RCTI Agreement with Questor 39 On 1 June 2009 Bridges entered into an RCTI Agreement with ComCorp in relation to 33 historical clients. This agreement provides that ComCorp will be paid for "any supply made by" it to Bridges for financial planning services in respect of the clients defined as those persons named in the Client List, which is attached as Annexure 1 to the agreement. This RCTI Agreement does not cover the investors whose funds are the subject of this litigation. 40 Bridges does not have any other commercial arrangements with ComCorp because ComCorp is a competitor of Bridges and EWM. Letter of 30 September 2009 41 On 30 September 2009 Questor wrote to the investors to whom the plaintiff had provided financial services on behalf of EWM, advising that ASFs had not been deducted since the plaintiff's resignation as an AR of EWM on 10 July 2009. The letter advised the investors of the plaintiff's commencement of these proceedings and also included the following: As was explained in the Product Disclosure Statement which you received when you invested in TPS, the Adviser Service Fee which you agreed to pay was to be paid to the particular Australian Financial Services Licence holder responsible at the time for financial advice provided by Ms Berry. In your case, this was EWM for whom Ms Berry was acting as an authorised representative at the time and until 10 July 2009. To our knowledge, since Ms Berry resigned, EWM has not provided to you, and is no longer providing you with, financial advice (through Ms Berry or anyone else). Therefore, in our view, we are not entitled to continue to deduct adviser service fees from your account and it would be inappropriate for us to do so. 42 Questor has refused to deduct ASFs from the investor's funds referable to the period after 10 July 2009. Proceedings Commenced 43 The proceedings were commenced on 7 September 2009 and listed for urgent final hearing. The proceedings were heard on 6, 7 and 16 October 2009. Mr M Leeming SC, leading Ms K Dawson, of counsel, appeared for the plaintiff and Mr GC Lindsay SC, leading Ms S Mirzabegian, of counsel, appeared for the defendants. Open Offer 44 On the first day of the hearing Questor made an offer to the plaintiff "without admissions of any kind". The open offer was a proposal to send a letter to the investors to whom the plaintiff had provided financial services on behalf of EWM, in the form tendered headed "Your Investment in The Portfolio Service" [Ex 1]. The letter refers back to the letter dated 30 September 2009 in which the investors were advised that the plaintiff was no longer an AR of EWM and that she had become an AR of ComCorp. The letter advises the investors that a number of steps have been taken by Questor to ensure that the investors are not disadvantaged following the plaintiff's move to ComCorp, if they decide they want to close their accounts with TPS. 45 The letter advises the investors that Questor is prepared to waive the $10 standard transaction fee and the $39 stockbroking transaction fee that would usually apply if investments in TPS are redeemed. The proviso to the waiver of these fees is that the investors withdraw all their investments and close their accounts before 31 December 2009. The letter also advises the investors that there will be no exit fees. 46 The letter also deals with investments in funds that have been "frozen" as a result of repercussions of the global financial crisis. In this regard the investors are advised that Questor will, if requested, work with the relevant fund managers to transfer the funds to "an alternative platform where possible". The letter includes the promise that Questor will pay any applicable transfer duty to the Office of State Revenue owing up to 31 December 2009. Questor also promises to "rebate" the TPS administration fee in any of the investments "in the process of being wound up" or in a specified frozen fund. 47 This open offer was rejected by the plaintiff. Recent letters to investors 48 The plaintiff has relied on numerous letters received from the investors that she claims constitute confirmation by those investors that they wish the plaintiff "to receive from their money the agreed ASFs". As at 7 October 2009 the plaintiff had received in excess of 85 letters. 49 The plaintiff wrote to the investors and invited them to confirm, by signing the foot of the letter, their confirmation in relation to the payment of the ASFs. That letter included the following: … the previous licensee has now informed us that it has decided not to pay to Berry Financial Services the Adviser Service fee which you have Authorised be paid from your cash account in The Portfolio Service. We are of the view that they have no right to disregard your written instructions. To this end we have taken the decision to pursue this matter with legal action to ask the Court that the Adviser Service fee continue to be paid from the cash account in accordance with your instructions. … To that end we ask you please confirm that you wish for me to continue to be your financial planner, to provide to you financial planning advice and that the Adviser Service fee you instructed to be paid, be paid to me from the cash account in The Portfolio Service as previously agreed. … I, [name of Investor], confirm that I wish to retain Julie Berry as my financial planner and that the Adviser Service Fee be deducted in the usual way from my investment in The Portfolio Service and paid to Julie Berry. The disclosure documents 50 As an AR of EWM the plaintiff provided prospective investors with a Financial Services Guide (FSG), a Product Disclosure Statement (PDS), a Statement of Advice (SoA) and an Authority to Proceed. Each of the plaintiff's clients signed an Application Form contained in a PDS for the relevant Product. The FSG 51 The FSG that the plaintiff gave to the investors was prepared and produced by EWM. It included the statement: "The financial services referred to in this Financial Services Guide are provided by our financial planners on our behalf". 52 The plaintiff was identified as the investors' financial planner by the disclosure of her AR number. The section headed "Important Information about the Financial Services Guide" included the following: It tells you about Executive Wealth Management Financial Services Pty Limited (EWMFS) also referred to as 'we' or 'us' or 'our'. The FSG helps you decide whether to use our financial services. It provides information on: who we are the financial services and products you can receive how we, your financial planner (and associates) are paid and any conflicts that may exist 53 The FSG advises the investors that EWM will provide them with SoAs and PDSs. It also advises the investors that EWM is part of AWM. It advises that EWM holds an AFSL to provide the financial services that are outlined in the FSG. After setting out the services that EWM is authorised to provide, the FSG provides: Financial services will be provided by us directly, or through our authorised representatives, such as your financial planner. 3. What your financial planner is authorised to do Your EWMFS financial planner acts on our behalf and can provide you with the services listed above. Generally, your financial planner is authorised to provide financial advice on and deal in only those financial products on our Approved Product List. … 4. How we and your financial planner get paid When your financial planner provides financial services to you, certain fees are charged for providing these financial services. Please note: The amount of the fees charged depends on the nature of those financial services. Your SoA will set out the exact amount of fees, commissions and other benefits that we and your financial planner will receive. If you have been referred to us by a third party, the SoA will also set out any applicable amount paid to that third party. Your financial planner will receive a share of fees and in some instances commission may be paid from EWMFS for the financial services they provide to you. Alternatively, your financial planner may receive a salary from us, or their employer if employed by a third party, together with a performance bonus. The PDS 54 The PDS in respect of each Plan included an Application Form. The 2006 version of the Application Form for the Personal Investment Plan included the following: 8. Adviser service fee Only complete this section if you have agreed to pay an Adviser service fee. Please select the amount of the Adviser service fee. Percentage % per annum (maximum 2.225% pa), or Flat dollar fee $ per quarter (maximum 2.225% pa). … 10. Signature(s) and confirmations … I/we authorise the Responsible Entity to deduct from my/our plan all fees, expenses and taxes payable incurred on my/our behalf to my/our plan. 55 The PDS for the Plans also included a section entitled "Fees and other costs" which included the following: This document shows fees and other costs that you may be charged if you invest in the Plan. These fees and costs may be deducted from your account, from the returns of your investment or from the Plan assets as a whole. 56 The PDS for the Plans included a table setting out the types of fees, the amount of fees and how and when they are paid. It included "Service Fees" with an explanation: "This fee includes an amount payable to a financial planner" and "your financial planner may charge a fee for ongoing advice". The investors are referred to examples of adviser remuneration under the heading "Additional explanation of fees and costs" on page 17 of the PDS. The additional explanation of fees and costs included the following: Other service fees Adviser service fee You should regularly review your investment portfolio with your financial planner so that your portfolio continues to be appropriate for your circumstances. The fee charged for this service is agreed separately by you with your financial planner and may be: a nominated percentage of your investment per annum or a flat dollar fee deducted per quarter. The maximum Advisor Service Fee that can be charged is 2.225% pa. It is deducted from your account at the end of each quarter and is based on your average daily balance. Please refer to the Statement of Advice from your financial planner. The amount of the Administration Fee and Adviser Service Fee cannot exceed 3.075% pa of your account balance. … Examples of adviser remuneration Your financial planner is authorised by an AFSL holder to provide financial services to you. The following fees, payable to the AFSL holder, are inclusive of GST: … where an Adviser Service Fee applies, the AFSL holder can be paid up to 2.39% pa of your account balance. So if your account balance was $50,000, the AFSL holder can be paid up to $1,195 pa in fees. The Adviser Service Fee is in addition to the fees shown in the table of 'Fees and other costs'. … The Implementation Fee and Advisor Service Fee must be agreed by you with your financial planner and specified on the Application Form. To be able to recommend investment options in the Plan and receive fees, your financial planner must disclose to you all fees which are charged. Please refer to the Statement of Advice your financial planner gives you. As a member of the Investment and Financial Services Association (IFSA), we maintain an Alternate Forms of Remuneration Register. The Register, which you can view by contacting us, outlines some alternative forms of remuneration (including the incentive payments referred to above) that we may pay to or receive from licensees, fund managers or representatives. 57 In the "Confirmations and acknowledgements" section of the Retirement Income Plan PDS the investors were advised that by signing the Application Form they: acknowledge that we may deduct all fees, expenses and taxes from your investment portfolio … authorise us to give information about you and your investments in the Plan to your financial planner … agree to your financial planner being paid a fee as disclosed in this PDS The SoA 58 The plaintiff provided each of the prospective investors with an SoA setting out the details pertinent to those investors. The front page of each of those SoAs identified the plaintiff as "Authorised Representative no 263902" of EWM and also included reference to EWM's AFSL number. It also provided that the "financial planner will generally receive commission from EWMFS for the financial services they provide to you". The disclaimer applied to EWM and "its authorised representatives". 59 The SoA included a section entitled "Fees & Ongoing Service", under which there was a section entitled "Remuneration – Ongoing Fees". This section identified an Adviser Service Fee as 1%, divided as to 0.12% to EWMFS with the balance of 0.88 % to "Corporate". The SoA recorded that the Adviser Service Fees would be deducted from the investors' cash management account on a quarterly basis. 60 Each of the investors signed an "Authority to Proceed" that included statements that the investors: Have read, understood and retained a copy of the Statement of Advice prepared by Julie Berry, Authorised Representative of Executive Wealth Management, of Berry Financial Services Pty Limited … Accept that fees and charges are involved in the establishment and ongoing management of our investments and that these have been detailed and discussed to our satisfaction and we agree to the terms of this Statement of Advice. Payment process 61 During the period that the plaintiff was an AR of EWM, the process by which the ASFs were deducted and paid was as follows: (a) each month, Questor paid a monthly estimate to Bridges in respect of the ASF owing to EWM for that month ("the Sum"); (b) 12% of the Sum was provided to EWM; (c) 88% of the Sum was paid by Bridges to the plaintiff each month by payment into a bank account in the name of Berry Financial Services; (d) at the end of each quarter, Questor deducted amounts referable to ASF from the TPS accounts of the investors; (e) at or around the same time as the quarterly deduction by Questor, Bridges conducted a reconciliation of the amounts deducted by Questor against the amounts paid to EWM and the plaintiff; and (f) any adjustments that were required to effect the reconciliation were made by Bridges the following month. Breach of Trust 62 The plaintiff claims that there was a contract between each investor and Questor which included an acknowledgment that Questor could deduct all fees, expenses and taxes from the investors' Investment Portfolio and an agreement that the plaintiff would be paid a fee as disclosed in the PDS Application forms and/or the SoAs. 63 The plaintiff submitted that Questor had the benefit of an authority from each investor to deduct ASFs, coupled with a promise made to each investor that those ASFs would be paid to the plaintiff. The plaintiff has referred to this as the "ASF Term" and claims that Questor holds the benefit of the ASF Term on trust for her. In support of this submission the plaintiff relied upon the following passage of Fullagar J's judgment in Wilson v Darling Island Stevedoring and Lighterage Co Ltd (1956) 95 CLR 43 at 67: … equity could and did intervene in many cases by treating the promisee as a trustee of a promise made for the benefit of a third party, and allowing the third party to enforce the promise, making the promisee-trustee, if necessary, a defendant in an action against the promisor … it is difficult to understand the reluctance which courts have sometimes shown to infer a trust in such cases. 64 The plaintiff also relied upon the following passage from the judgment of Mason CJ and Wilson J in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 121: … the courts will recognize the existence of a trust when it appears from the language of the parties, construed in its context, including the matrix of circumstances, that the parties so intended. We are speaking of express trusts, the existence of which depends on intention. In divining intention from the language which the parties have employed the courts may look to the nature of the transaction and the circumstances, including commercial necessity, in order to infer or impute intention. 65 The following passage of the judgment of Mason CJ and Dawson J in Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-619 was also relied upon (footnotes omitted): On the other hand Fullagar J. stated a contrary view in Wilson v. Darling Island Stevedoring & Lighterage Co Ltd: "It is difficult to understand the reluctance which courts have sometimes shown to infer a trust in such cases". His Honour was referring to contracts whereby a benefit is promised to a third party. We agree with his Honour's comment. If the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving affect to the intention, then there is no reason why in a given case an intention to create a trust should not be inferred. 66 The plaintiff submitted that the subject matter of the trust is the benefit of the ASF Term. It was submitted that the intention to create the trust is readily inferred from a number of circumstances, including that the plaintiff was the only adviser providing a service to the investors and that the name of the fee, the Adviser Service fee, suggests that it was a fee for her benefit. It was also submitted that the nature of the product, one that requires ongoing financial planning services, suggests that there was an intention to create a trust. The plaintiff submitted that the investors are informed at the time that they make their decision to invest with Questor, that the plaintiff will be paid a fee or a commission as disclosed in the Application Form signed by the investors. The plaintiff also submitted that Questor is a commercial trustee and in those circumstances it is all the more readily to be inferred that the investor, who was agreeing for Questor to hold his or her money on trust, is also agreeing that Questor holds part of it on trust for the plaintiff. Finally, the plaintiff submitted that the need to give commercial efficacy to the agreements pursuant to which the investments are made requires the inference that there was an intention to create a trust. 67 The defendants claim that Questor is not authorised by the investors to deduct and remit ASFs to the plaintiff. It was submitted that the "authority" of each investor in the PDS Application Form was an authority to deduct and remit ASFs to EWM, as the AFSL holder of which the plaintiff was an AR at the time the PDS was given to each investor. It was also submitted that the recent letters provided by the investors are not sufficient to authorise Questor to deduct and remit ASFs to the plaintiff. 68 The defendants submitted that when the FSG, PDS and SoAs are read in context, the expression "financial planner" in the PDS must be read as a reference to the plaintiff acting as an AR of EWM, and not in her personal capacity. They submitted that investors authorised Questor to deduct the ASFs payable to EWM, on the basis that the plaintiff, as EWM's agent, had provided the services the subject of the ASF. 69 The defendants submitted that it is not clear what is now being authorised by the investors in the recent letters. The expression "the usual way" in the confirmation is undefined and unexplained. The "usual way" up to 10 July 2009 was for fees to be deducted and remitted by Questor to EWM. It is submitted that this method of payment cannot, as a matter of logic, continue, because the plaintiff is no longer an AR of EWM. 70 The defendants also submitted that the plaintiff's recent letters to the investors plainly encouraged each investor to sign them without having recourse to independent legal advice. Certainly, there was no suggestion in the letter that such course should be adopted. The defendants also complained that the letters contained conclusions as to what had been authorised by the investors and the content of the investors' alleged "written instructions", in circumstances where those matters were in dispute. A further complaint made by the defendants was that the letters did not advise the investors of the defendants' positions in relation to the alleged authority to pay the fees to "Berry Financial Services". In all the circumstances the defendants submitted that the letters cannot be characterised as constituting fully informed consent by those investors who signed them. 71 It seems to me that Questor was clearly authorised to deduct the ASFs from the investors' accounts for payment to EWM. Previously EWM paid the 88% proportion of the fee to the plaintiff as an AR of EWM. Although EWM had "overlooked" putting a detailed written agreement with the plaintiff in place, there is no issue that the process for payment of the share of the ASFs to the plaintiff whilst she was an AR of EWM was that referred to in paragraph [61] above. 72 In Walker v Corboy (1990) 19 NSWLR 382 Clarke JA said at 390: … caution … should be exercised when deciding whether an intention to impose trust obligations should be inferred from the complex set of circumstances which often attend the commercial relationship of parties who have traded together for a long period of time. 73 I am of the view that when read in context, the reference to "financial planner" in the FSG, the PDS, the SoA and the Authority to Proceed signed by each investor, is a reference to the plaintiff as an authorised representative of EWM and acting on behalf of EWM, not on her own behalf. The statutory regime under Chapter 7 of the Act reinforces this construction. The plaintiff was not entitled to provide the relevant financial services in her own right unless she was the holder of an AFSL. The plaintiff was not a holder of an AFSL and was only able to provide the relevant financial services as an AR of an AFSL holder, being EWM. 74 In answer to the plaintiff's claim to a personal right to the ASF, the defendants accepted that the amount of the ASF had been determined by negotiation between the plaintiff and each investor, but consistently with the Act and the plaintiff's position as an AR of EWM, she conducted those negotiations on behalf of EWM. The defendants submitted that the plaintiff accepted that each investor was provided with an FSG and an SoA, both of which indicated that the plaintiff was providing the financial services on behalf of EWM. 75 In each of the PDSs the investors authorised the deduction of fees and expenses. The investors confirmed that they agreed to their financial planner being paid a fee as disclosed in the PDS. The authority in the Retirement Income Plan was expressed in terms of an "acknowledgement" by the investor that Questor "may" deduct fees and expenses. I agree with the defendants' submissions that the use of the word "may" indicated that Questor had the discretion to decide whether it would deduct these fees. The forms that contained the statement that the "trustee may cancel this arrangement at any time" were signed by the investors and also by the plaintiff. This statement puts the matter of Questor's discretion in this regard beyond any doubt. 76 I am satisfied that the intention of the investors and Questor was that Questor would deduct the ASFs and pay them to EWM who would hold them on trust for the plaintiff and then pay the agreed proportion of the ASFs to the plaintiff, only whilst she remained an AR of EWM. There is nothing within the disclosure documents that suggests that Questor or EWM would pay the plaintiff a share of EWM's ASFs if she no longer represented EWM. Indeed the statutory regime and the repetition of the plaintiff's position as an AR of EWM in the disclosure documents militates against such an intention. 77 I am of the view that these investors would have understood the need for the plaintiff to remain as an AR of EWM to entitle her to a share of EWM's ASF. They had received the letter from Mr Hutchison when the plaintiff changed her status from an AR of Bridges to an AR of EWM. That letter made it clear that once the plaintiff ceased being an AR of Bridges, the relationship was different and they had to make a choice to stay with Bridges, in which case an alternative Bridges financial planner would be provided, or to remain with the plaintiff, in which case the plaintiff would make contact with them about future arrangements. 78 Once the plaintiff decided to give up the AR position with EWM, she gave up her entitlement to receive the proportion of the fee payable to EWM. The plaintiff's case is that whilesoever the investors left their investments with the defendants, she was entitled to be paid a share of any ASF payable to EWM. All of the disclosure documents make plain the intention that the ASF was to be paid to EWM and/or EWM's authorised representative. There is nothing within the documentation to suggest that the investors and Questor intended to allow payment to a person who was not authorised by EWM. 79 The plaintiff's trust claim fails. Contract Case 80 The plaintiff claims that EWM agreed that she would receive 88% of the Adviser Service Fee paid by investors (or more accurately, authorised by investors to be deducted from their invested funds) whilesoever they maintained investments administered by the defendants. This claim needs to be understood and analysed on the basis that the plaintiff would receive such share of the ASF irrespective of whether she remained an AR of EWM. The plaintiff gave evidence that at the time she became an AR of EWM she met with representatives of EWM including Alex Hutchison and Mr Carter. There was a PowerPoint presentation dated 23 August 2006 provided to the plaintiff by Mr Hutchison that contained a section on "External dealer services", which included the statement: "External Dealers access the same support services as the Bridges dealership." The three examples of dealers on that page were "Bridges", "EWM" and "External Dealers". 81 The plaintiff's evidence was that she recalled a discussion in relation to the "fee split of commission" that was to be "12% to the licensee and 88% to our business on the Adviser Service Fees and or ongoing fees". The inclusion of the reference to "external dealers" is not controversial. The plaintiff does not hold an AFSL and is now employed by an AFSL holder that is in competition with the defendants. This material does not establish a term in any contract that the plaintiff would receive ASFs whilesoever the clients who made the investment on her advice remained with Questor. 82 The plaintiff also claimed that Mr Carter made a concession in cross- examination that the "stream of ASFs" in respect of "private clients" travelled with the AR and did not stay with the AFSL. The evidence of Mr Carter in this regard was as follows (tr 91): Q In relation to private clients, you accept, don't you, that they do transfer and follow the authorised representative if the authorised representative moves from one licence holder to another? A That's correct. Q And when I say they follow, I mean by that, really the fees that those investments generated, follow? A Where there's the capacity to pay those fees, that's correct. 83 I am not satisfied that Mr Carter's evidence amounts to a concession that the ASFs, as a matter of course, are paid to the financial planner as opposed to the AFSL holder. When the plaintiff ceased being an AR of Bridges, a letter was sent to the investors that the plaintiff regarded as her "private clients", giving them the option of maintaining arrangements with Bridges or alternatively moving on with the plaintiff to have a relationship with EWM. That letter was necessary to ensure that the legislation was complied with and the contractual arrangements between Questor and the investors and the AR and AFSL holder were properly in place. This so-called concession is not established and to the extent that any concession was made it does not establish that there was a contract between the plaintiff and EWM that the plaintiff would receive a share of EWM's ASFs whilesoever the investors maintained their investment with Questor, irrespective of whether the plaintiff remained as an AR of EWM. 84 The plaintiff also claimed that the "custom and practice" relating to the payment of fees to ARs, who are not ARs of EWM, supports the plaintiff's claim that a term of the contract between the plaintiff was that she would be paid a share of EWM's ASFs whilesoever the investors maintained their investment with Questor and irrespective of whether the plaintiff remained an AR of EWM. The evidence relied upon in this regard by the plaintiff was an affidavit of Ross Johnston, a financial planner who had previously been an AR of Bridges. Mr Johnston left Bridges in 2002 and in 2005 became an AR of Australian Unity. At that time some of Mr Johnston's clients who had remained with Bridges approached him for financial planning advice. He contacted Bridges and was asked to sign an RCTI agreement so that he could be paid ASFs by Bridges in respect of those clients. He executed that agreement in June 2006. Subsequently ASFs were paid to him as an AR of Australian Unity by Bridges on a monthly basis, in respect of those investors who had requested advice from Mr Johnston. Mr Johnston resigned from Australian Unity in January 2009. He continues to have clients who have funds invested in TPS and despite the fact that he has not been an AR of Bridges since 2002, Questor continues to issue monthly invoices to Australian Unity for him and to pay Australian Unity ASFs in respect of those clients. It is not clear from Mr Johnston's affidavit whether Bridges has been made aware that Mr Johnston is no longer an AR of Australian Unity. In this particular instance Bridges decided that it would enter into an RCTI agreement with Mr Johnston. 85 The plaintiff tendered material (Ex C) in support of her claim that there were numerous ARs, who are not ARs of EWM, to whom EWM pays a proportion of its ASFs in respect of investors who have invested funds with Questor on the advice of those ARs of other AFSL holders. There was controversy about this evidence. Mr Leeming originally produced a list of such ARs as agreed facts. When that was not agreed, he contented himself with the list being used as an "aide memoire" of invoices that are in Ex C, being invoices sent by Bridges addressed to various entities, other than EWM, that appear to be AFSL holders. 86 The invoices in Ex C do not support a finding for which the plaintiff contends. There is no evidence of the arrangements between the investors and the entities named in those invoices, nor is there any evidence of the arrangements between the investors, alleged to be the clients of those entitles, and any of the defendants. 87 The evidence relied upon by the plaintiff is inadequate to establish a term as pleaded by the plaintiff. It does not satisfy the requirements in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226. There is no evidence that there was a notorious and uniform custom relating to the payment of ASFs to ARs who are not ARs of EWM or Bridges, such that would support the term for which the plaintiff contends. 88 It seems to me that the plaintiff's case is misconceived. She does not claim that she entered into the written agreement that was forwarded to her by Mr Carter in March 2009. The claim made in contract, as contained in the Amended Statement of Claim, is that the contract between the plaintiff and EWM was not reduced to writing, save in so far as it appeared in the Authority provided to her by EWM. 89 The only basis upon which EWM is authorised to receive an ASF is if it provides financial services to the investor. The only basis upon which the plaintiff is entitled to a "split" or a share of that ASF, is if she provides the service as described, as an AR of EWM. I am not satisfied that the plaintiff has established that there was a term of the contract between herself and EWM that she would receive 88% of the ASF whilesoever the investors maintained their investments administered by the defendants, irrespective of whether the plaintiff was an AR of EWM. 90 The plaintiff's case in contract fails. Conventional Estoppel 91 The plaintiff claims that each of the parties adopted an assumption that the ASFs would be deducted from the investors' funds, and the percentage agreed between the plaintiff and the investors would be paid to the plaintiff, for so long as the investors retained their investment in any financial product that was administered under or connected with TPS. An essential element of this assumption was that such deduction and payment would be made to the plaintiff irrespective of whether the plaintiff remained as an AR of EWM. The plaintiff claimed that such assumption was fostered by the defendants' reference to an "external dealer" in the PowerPoint presentation and the conversation referred to above between the plaintiff and Messrs Hutchinson and Carter when the plaintiff became an AR of EWM. Reliance was also placed on the existence of the RCTI Agreement with ComCorp in relation to 33 clients who remain as investors with Questor. 92 Mr Leeming submitted that the Court is entitled to find that this is how the industry works especially because it is "commercially sensible for that to be so". I disagree with that submission. Commercial good sense may suggest that a trustee may wish to retain a good relationship with investors so that funds remain with it. On the other hand, it is understandable that trustees and their associated companies exercising commercial good sense, may not wish to administer funds, at their cost, for the benefit of a person who has given up the role of representing them and has become the agent of a competitor. The plaintiff cannot simply rely upon a notion of commercial good sense to prove a common assumption. The plaintiff has to prove that there was such an assumption by the respective parties. 93 The evidence of the history between the plaintiff and Bridges and then between the plaintiff and EWM establishes that the plaintiff was able to transfer quite easily from her authorised status with Bridges to then authorised status with EWM because they were associated companies and they were both AFSL holders. The assumption was that the plaintiff would receive her share of Bridges' ASFs, and subsequently EWM's ASFs, because she was their authorised representatives. This is quite a different situation from abandoning an AR status with EWM to take up an AR role with a competitor with EWM and/or Bridges. 94 Mr Leeming submitted that it was not necessary to the success of the plaintiff's estoppel claim for the plaintiff to prove that Mr Carter informed her on 10 July 2009 that the ASFs would continue to be paid to her after her resignation from EWM and the commencement of her employment with ComCorp. This alleged statement is relied upon to prove that there was an assumption in the defendants that ASFs would be paid to the plaintiff whilesoever the investors that she brought to the defendants retained their investments with the defendants. As I apprehend it the plaintiff has not mounted a claim of estoppel by representation in that conversation, in reliance upon which the plaintiff acted to her detriment. Even if that is wrong and the plaintiff seeks to propound such a case, it must fail. There is no evidence that the plaintiff relied upon the representation in making her decision to move to ComCorp. There is no suggestion in her evidence that had Mr Carter informed her on 10 July 2009 that she would not receive such payments she would not have resigned from EWM. The plaintiff conducted negotiations and due diligence investigations over a period of months and had committed her company to ComCorp at the time she spoke to Mr Carter on 10 July 2009. 95 Mr Carter denied in his affidavit evidence that he informed the plaintiff on 10 July 2009 that the ASFs would continue to be paid to her when she resigned from EWM. His evidence in cross-examination was as follows (tr 88-91): Q Do you remember back on Friday 10 July when Ms Berry came into your office and said she was resigning and moving to ComCorp? A I do. Q You knew then, didn't you, that the most important part of her revenue was advisor service fees? A It was a large part, that's correct. Q Which is no different from many other authorised representative, a large component of her income was advisor service fees? A Correct. Q You told her, didn't you, there was a discussion between you and her about what was going to happen to the adviser service fees? A There was a discussion about commissions. … Q It would be very natural, would it not, for someone, a major component of whose revenue was adviser service fees to speak with you about those adviser service fees continuing when she was to become an authorised representative of ComCorp? A There was discussion about commissions and bulk release of clients. … Q Now, you say in your affidavit, don't you, that there was no mention of the adviser service fees? A I do. … Q Don't you think you might be mistaken about that? A I don't believe so. Q You called her back on Monday morning, didn't you? A I did. Q And then you said to her words to the effect "There is not much I can do about the adviser service fees"? A Correct Q The reason that you called her back was that you were conscious that you were seeking to change the position that you told her on Friday, namely that she would be getting adviser service fees, correct? A No, that's not correct. Q There is no doubt, is there, that on the Monday morning you called her back and there is no doubt, is there, that on the Monday morning you expressly referred to "advisor service fees"? A That's correct. Q Why did you do so? A Because on the Friday discussion the issue that I raised was the lack of business arrangements with ComCorp and there was a request from Ms Berry with regards to ongoing access to systems and use of TPS and that in the context of having executed a limited and restricted RCTI arrangement with ComCorp for 33 clients only five weeks previously, I wanted to reflect on what exactly was in that agreement before confirming arrangements with them, moving forward. Q But you agreed with me that there was discussion of fees on Friday? A Fees were raised in the context of commissions and the bulk release of clients. That's correct. … Q You know, don't you Mr Carter, that Ms Berry says that on the Friday morning you told her that she would continue to receive advisor service fees? A Yes, that's what she says, yes. Q Now, that's in fact what happened, isn't it? A I don't believe that's what happened? Q And because you were conscious of that, that was the reason why you rang her up on Monday to say, "There is a problem with adviser service fees"? A I rang her on Monday because I had said to her on Friday that I needed to consider the implications of her move to ComCorp. … Q Yes. The reason that you told her on Friday she would continue to get the adviser service fees was that all of the clients who she was providing financial planning advice to under the name Berry Financial Services, were private clients just like the NRMA clients who she had brought to Bridges back in 2006? A I don't believe I specifically referred to the adviser service fees, but in relation to private clients, that would be the case. 96 The email the plaintiff sent to Mr Carter on 13 July 2009 makes no suggestion that Mr Carter had informed the plaintiff on Friday 10 July 2009 that she would be paid the ASFs. If such a statement had been made and then resiled from, it is reasonable to expect that the email would have contained some reference to the defendants' change of position. All that the plaintiff wrote on this topic was: "I also note that today you have informed me that you will not pay me my Adviser Service Fee." The plaintiff then went on to claim that "the clients" had instructed the defendant to pay the fee to the "AFSL holder". The plaintiff then asked for "the reason in writing as to why you have made this decision. If there had been a change of position since Friday 10 July 2009 from agreeing to pay the ASFs to the plaintiff I have no doubt that the plaintiff would have requested reasons as to why the defendants had changed their position. I regard the contents of the email of 13 July 2009, extracted earlier in this judgment, as supportive of Mr Carter's evidence. 97 The plaintiff has not established the existence of a common assumption. The plaintiff's case in estoppel fails. Misleading or Deceptive Conduct 98 The plaintiff claims that there are misleading or deceptive statements in the FSG, the PDS and the SoAs by reason of the absence from those documents of a statement to the effect that "if for any reason Ms Berry ceases to be an Authorised Representative of EWM, then we will cease to pay her" (the omission). The plaintiff submitted that each investor agreed to invest funds with Questor on the basis that he or she was prepared to pay substantial ASFs as agreed with the plaintiff. It was also claimed that a number of the investors had been clients of the plaintiff for many years and that they "ought to have been told that even though there had been no difficulty when Ms Berry transferred from being the authorised representative of NRMA to Bridges, and from Bridges to EWM, a different regime would apply in the case of her moving from EWM to ComCorp". It was submitted that for this reason the documents are "defective" within the meaning of s 953A and s 1022A of the Act. 99 A PDS is "defective" if it contains a misleading or deceptive statement or there is an omission of material required by s 1012G(3)(a) of the Act. An FSG is "defective" if there is a misleading or deceptive statement in it or there is an omission of material that is required under s 942B or 942C of the Act. An SoA is defective if there is a misleading or deceptive statement in it or there is an omission from it of material required by s 947B, 947C or 947D of the Act. 100 I do not regard the omission as misleading or deceptive. Each of the documents made it very clear that it was EWM that was entitled to the ASF. The fee was payable to the AFSL holder. This was a matter that was quite clear from the documents and clearly recognised by the plaintiff in her email of 13 July 2009 to Mr Carter. Each of the documents also made it very clear that the plaintiff was entitled to a share of the fee payable to the AFSL holder by reason of her authority to act for the AFSL holder, being EWM. In my view it would not be reasonable for the recipients of any of these documents to conclude that Questor would deduct payments for a person who was not authorised by EWM to act on its behalf. 101 Although not necessary to consider in the light of the abovementioned findings, the plaintiff claimed that the alleged defectiveness of the PDS, FSG and SoA caused her to suffer loss. The affidavit evidence in support of this claim was that the plaintiff was never informed, "nor considered", that if she ceased to be an AR of EWM she would not continue to receive her ASFs. The plaintiff claimed that if she had known that the defendants would stop deducting and remitting the ASFs to her she would not have recommended that the investors invest with the defendants. Her evidence was that she would have used different platforms or products for their investments. The plaintiff did not call any evidence on whether the investors would have accepted her recommendation to use an alternative platform or product. There is no evidence of the fees that she may have received if her clients had accepted her recommendation. 102 The plaintiff claimed that it is not satisfactory for her to have to enter into new agreements with her clients to arrange for payment of her ASFs. She claimed that it is contrary to the previous written directions to deduct the ASFs from the investors' accounts and pay it to her. The plaintiff complained that it would be necessary for her to meet with each client to explain the circumstances of the need to enter a separate arrangement for the payment of the ASFs to her. She claimed it would be a "time-consuming exercise". The plaintiff also highlighted that one of the reasons the clients had agreed to the current method of payment was because it was very convenient for them. I should say there is no evidence of that from any investor. 103 I do not regard this evidence as establishing loss or damage. The plaintiff claims to have an ongoing obligation to these clients and would, in any event, have to communicate with them in relation to their investments. I do not see that a communication with each of the clients either to set up a direct debiting arrangement or some other form of payment regime is appropriately characterised as loss or damage. 104 The defendants submitted that, in any event, it took reasonable steps to ensure that the disclosure documents would not be defective: ss 953B(6) and s 1022B(7). The defendants also submitted that each of the steps taken by Questor and EWM were taken on their behalf by various departments of their then parent company, AWM. 105 Having regard to the conclusion that the documents are not "defective" it is not necessary to consider this aspect of the defendants' submissions. However the evidence establishes that the PDS was reviewed by the Compliance, Legal, Finance, Marketing, Operations, Product, Research and Technical departments of AWM. Each of those departments was responsible for reviewing the PDS in respect of the matters within that department's area of expertise to ensure that the PDS was "complete, correct and not misleading". Each department was provided with a checklist, the preamble to which stated that the answers should be fully considered, and unequivocal as they would be relied upon by the directors in deciding whether to issue the PDS. There were other aspects to the checklist, cautioning the departments that they should advise the Legal Department as soon as possible if they did not have the personal knowledge necessary to answer the various questions. Each department was required to sign a "Due Diligence Certificate" in respect of the review of the PDS for each Plan. The PDS was provided to the Board of Questor by the Group General Counsel for its approval. The covering document stated that a checklist had been completed and a certificate obtained from each relevant department indicating that the information in the PDS was true, complete and not misleading. 106 A due diligence committee was formed to ensure the accuracy and completeness of information included in the PDSs. The due diligence committee reviewed each of the PDSs and obtained the certificates from the departments. 107 EWM took similar steps in relation to the FSG. Each of the departments reviewed the draft FSG against a checklist and signed the certificate following the incorporation of their comments in revised versions of the FSG. EWM prepared a template for the SoAs and made substantive changes which were reviewed by and certified by the relevant departments. The SoA was also reviewed by a "Portfolio Checker" to ensure that it met the clients needs and objectives and regulatory requirements. 108 The plaintiff's claim of misleading or deceptive conduct fails. Orders 109 The plaintiff's Amended Statement of Claim is dismissed. The plaintiff is to pay the defendants' costs of the proceedings. *********************** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.