IOOF loses case over client control
IOOFfaces a potential damages settlement of $4.5 million after losing a protracted legal battle in which two financial advisers alleged the group sold building society offices held by them to the Bendigo Bank group in 1999.
The decision in the case heard in the Supreme Court of Victoria early last year, was handed down recently finding in favour of the two advisers, Warwick Hawksworth and Ken Taylor. At the time of the original agreements in 1996, both were working withWinchcombe Carson, which is fully owned by IOOF.
The legal dispute centred around a deal each of the advisers made with IOOF to take over the business and clients of building society branches held by IOOF, which were then sold and transferred to the Bendigo Bank in mid 1999.
In handing down his ruling, Judge Habersberger found IOOF had agreed that Hawksworth and Taylor would take on the business of the two IOOF building society branches, situated in Mildura and Frankston in Victoria. Hawksworth and Taylor were not acting in business together but the court stated the cases were similar enough to warrant a single case.
In the written findings of the case, Habersberger stated an agreement had been reached in February 1996 that the operations of the Frankston branch would transfer to Taylor with IOOF paying some operating expenses and commission to Taylor for enacting building society business on behalf of IOOF.
Taylor would also have exclusive access to the branch’s client base and IOOF would not compete with him in the provision of financial services to these customers.
The judge found a similar agreement had been struck between Hawksworth and IOOF in November 1996, which implied he would own the business of the branch and, subject to IOOF approval, be able to sell it and the client base in the future.
However, Judge Habersberger stated the agreements had been breached despite the fact IOOF had made public announcements and circulated termination letters regarding the sale of the IOOF Building Society branches to Bendigo Bank.
“I consider that neither of these documents could constitute valid notice of termination. General announcements to the world at large do not satisfy the requirement to notify the other party to the contract of its termination,” Judge Habersberger wrote in the findings.
He went on to state although these documents were in writing they were not notices from IOOF indicating its intentions to terminate the agreements.
Furthermore, the judge stated the electronic transfer of clients in the two branches on June 30, 1999, to the nearest Bendigo Bank branch was a repudiation of the agreements with the two advisers because IOOF “had failed to give any, let alone reasonable, notice of termination”.
Final damages will be set at a later date.
AUTHOR
Jason Spits
Recommended for you
AFCA has confirmed United Global Capital’s membership of the body will not be extended to accept further complaints, avoiding a repeat of the Dixon Advisory scenario.
Three of Australia’s largest financial advice groups have shared their thoughts with Money Management on whether they would include crypto on their approved product lists.
Shadow treasurer Angus Taylor has vowed to introduce a bill to legislate a raft of financial services reforms if the Coalition is elected.
Money Management examines the share price of financial advice licensees over one year to 31 March, with M&A actions in the final quarter having a positive effect for two licensees.
