In Goldie Marketing Pty Ltd v Financial Ombudsman Services [2015] VSC 292, the Supreme Court of Victoria found that the Financial Ombudsman Service Limited (FOS) has a broad discretion to abstain from determining disputes, and indicated that successful attempts to challenge the exercise of that discretion will be few and far between.
The Plaintiff, Goldie Marketing Pty Ltd (GM) conducted the business of a toymaker with various popular licenses GM had borrowed approximately $8.8m from Australia and New Zealand Banking Group Limited (ANZ). In late 2013, GM was in default under its loans and ANZ served default notices and cancelled GM’s loan facilities. In December 2013, GM lodged a dispute with FOS claiming that ANZ had:
- Negligently loaned $2.5m to an over-leveraged GM;
- Delayed approval of seasonal funding for GM’s business activities; and
- Failed to sufficiently assist GM to help it overcome financial difficulties.
Ultimately, FOS made a decision that a Court would be a more appropriate venue to consider the matter pursuant to clause 5.2 of FOS’ Terms of Reference.
On the same day the FOS decision was made, ANZ gave notice to GM that it would be appointing external receivers to GM. GM subsequently commenced proceedings in the Supreme Court of Victoria seeking judicial review of the FOS decision and applied for an interlocutory injunction to prevent ANZ from pursuing the debt until the trial could be heard.
The main basis of GM’s submissions was a telephone conversation between a FOS representative and an agent of GM, in which FOS advised that the primary reason for the decision was that FOS had resourcing issues on the basis that FOS was not confident it had the expertise to determine the dispute. GM claimed that this reason fell outside the Terms of Reference.
In granting the injunction (to restrict ANZ from appointing receivers), the Court considered whether or not GM had a prima facie case. The Court found that GM had a prima facie case, that damages would not be an adequate remedy, and that the balance of convenience “firmly” favoured granting the injunction. The finding that there was a prima facie case was based on there being a factual issue as to what considerations FOS paid mind to, and a legal issue as to whether FOS may properly have regard to those considerations.
However, in its trial judgment, the Court came to the following findings:
- FOS has a “very wide discretion to determine whether to exclude disputes” which does not prevent FOS from taking into account their own resources and availability;
- The Court will not disturb FOS’ decision unless there is evidence of bad faith, bias, or the decision was so unreasonable that no reasonable decision-maker could have arrived at that decision; and
- Contrary to the view of Gilmour J in Wealthsure Pty Ltd v Financial Ombudsman Services Ltd [2013] FCA 292, the FOS Terms of Reference form the entire contract and the Operational Guidelines merely assist in understanding the Terms of Reference.
Conclusion
The decision confirms the breadth of FOS’ discretion to exclude disputes that may be more appropriately heard by a court. The Court has also confirmed that it will not overturn FOS’ decision unless “no reasonable tribunal could have come to that conclusion” (this is the usual test applied under administrative law principles).
There is however, some concern due to the delay and costs associated with an application for judicial review of a FOS decision. If there is a prima facie case that the applicant has a ground of review of a decision of FOS (for example if there is a factual question as to what FOS took into consideration, and a legal question as to whether FOS was entitled to consider those factors), then, ceteris paribus, the Court appears to be willing to grant an interlocutory injunction. This could provide an avenue (albeit an expensive one) for debtors to delay Financial Service Providers from recovering a debt or enforcing securities for a significant period of time. In this case, the delay from the default notice to the trial judgment was over 18 months, not to mention the legal costs incurred by all parties involved.
Interestingly, due to changes in clause 5.1 of the FOS Terms of Reference (the inclusion of subsection r), if this particular matter had been heard after 1 January 2015, the dispute would likely have been excluded due to “involving a credit facility that exceeds $2m” and GM may not have been able to demonstrate a prima facie case to obtain the injunction.
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