Supreme Court confirms wide scope of FOS discretion to exclude disputes from its dispute resolution
Goldie Marketing Pty Ltd v Financial Ombudsman Services  VSC 292
The revelations in the case around FOS staffing, expertise and decision-making make for interesting reading for those involved in banking enforcement litigation and the reasons in the case provide helpful guidance on construing the TOR.
In Goldie Marketing Pty Ltd v Financial Ombudsman Services  VSC 292 (19 June 2015) the Supreme Court of Victoria has confirmed the very broad scope of the discretion of the Financial Ombudsman Service (‘FOS’) to exclude disputes from its dispute resolution scheme under its Terms of Reference (‘TOR’). This decision ought to give FOS confidence that the TOR permit it to depart from the non-exhaustive list of grounds for refusal in making future decisions and have regard to extra considerations.
Goldie Marketing, a toy manufacturer, had several complex secured facilities with ANZ that involved international business activities. Goldie Marketing defaulted. The guarantors/directors lodged a FOS complaint, which FOS declined to hear. The complainants alleged that the FOS decision was not made in accordance with the TOR, which contains contractual obligations governing FOS’s decision making.
The TOR operates as a tri-partite contract between the complainants, the lender and FOS. The TOR gives FOS a general discretion to exclude disputes from its jurisdiction and lists examples of grounds, including where the court would be a more appropriate forum for resolution. This ground was provided to the complainants in FOS’s written reasons, declining to hear their dispute, with FOS explaining that obtaining an accurate picture of a dispute with such complexity required a court’s discovery processes and subpoena power.
A lengthy recorded telephone conversation – between FOS and the complainants’ agent – was tendered in evidence to show that FOS’s decision to reject the dispute was chiefly due to staffing and an expertise shortage within FOS. The conversation occurred before the written reasons were given and was designed to give the complainants a heads-up that their dispute would not be entertained.
The complainants argued that a staff shortage was not a valid reason under the TOR. The reason was also included in the written reasons. They submitted that the telephone conversation made it clear that the staff shortage was the ‘materially operative’ reason (despite the comprehensive written reasons setting out a number of other grounds) and sought a declaration that FOS’s decision was invalid.
Further, the complainants argued that Operational Guidelines allegedly incorporated in the TOR contain a binding obligation to only exclude a dispute where there is a compelling reason, and that there was none in this case.
Justice Cameron found that the Operational Guidelines are ancillary to and merely provide guidance for readers of the TOR, as opposed to being incorporated in the TOR (and thereby having contractual force). Her Honour therefore found that no compelling reason for refusal was required, albeit noting that there were compelling grounds in any event on the facts.
FOS was found to be entitled to take account of resourcing and staff capacity under the TOR. It was not limited to the type or character of grounds listed in the TOR.
The court also provided sound policy reasoning: preventing FOS from taking into account practical or administrative matters in deciding whether to exclude a dispute would effectively require it to accept disputes in relation to which it could not properly discharge its obligations efficiently and effectively.