AgriWealth Capital Limited v Australian Financial Complaints Authority Limited

Federal Court of Australia|2022-11-10|Before: Mr J, Markovic J

The proceeding be dismissed.
The applicants pay the first respondent's costs, as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MARKOVIC J: 1 Since 2007 AgriWealth Capital Limited (ACL), the first applicant, has carried on business developing and managing soft wood timber (pine) forestry plantations in New South Wales and Victoria. It is a wholly owned subsidiary of Agriwealth Pty Limited. Australian Forestry Management Pty Limited (AFM), the second applicant, is also a wholly owned subsidiary of Agriwealth. 2 On 5 August 2021 ACL and AFM (collectively, applicants) commenced this proceeding by filing an originating application and statement of claim. The Australian Financial Complaints Authority Limited (AFCA) is named as the first respondent and Steven Kirby is named as the second respondent. In effect, the applicants seek to challenge AFCA's jurisdiction to determine a complaint lodged with it in July 2020 against ACL by Mr Kirby (Kirby Complaint). In particular, the proceeding concerns AFCA's decision, made by an ombudsman on 30 June 2021, that the Kirby Complaint was partially within its jurisdiction (Jurisdiction Decision). 3 Mr Kirby filed a submitting appearance. In the absence of any other contradictor, AFCA has taken an active role in the proceeding and filed a defence.

background 4 As part of its business ACL offers investors (referred to as Growers) participation in timber plantations under the terms of commercial agreements executed for the purposes of each individual project. Growers acquire shares in a project, referred to as "timberlots". One timberlot is a share in the project representing half of one hectare of the total planation area. Growers may acquire a number of timberlots in a particular project according to the scale of their particular investment. 5 Since 2006 ACL has held Australian Financial Services Licence (AFSL) No. 317238. ACL's AFSL authorises it to carry on a financial services business in the capacity of a responsible entity, relevantly, to operate the "Australian Forestry Management 2005 Land Trust", "Australian Forestry Management 2005 Plantation Investment", "Australian Forestry Management 2004 Plantation Investment" and "Australian Forestry Management 2004 Land Trust", all of which are registered managed investment schemes. 6 AFM does not hold an AFSL. 7 ACL is a member of AFCA while AFM is not. 8 The structure of the projects in which ACL is involved as responsible entity is as follows: (1) ACL owns the forestry plantation land in the capacity of a trustee of a unit trust (referred to as a Land Trust) for participating Growers; (2) the participating Growers are issued with units in the Land Trust which they acquire upon application, according to the number of timberlots for which they subscribe; and (3) participating Growers are also granted a "forestry right" over the plantation land owned by ACL in its capacity as trustee of the relevant Land Trust for the project. The forestry right acquired by a participating Grower is a dealing registered on title granting the Grower a profit à prendre to grow trees on the land, to manage those trees to maturity and, at the end of the project, to harvest the mature trees to be sold as commercial timber to provide a return to investors. 9 Mr Kirby was an investor and participating Grower in two softwood timber forestry projects, the Australian Forestry Management 2004 Tumut Softwood Project (made up of the Australian Forestry Management 2004 Plantation Investment and the Australian Forestry Management 2004 Land Trust) and the Australian Forestry Management 2005 Softwood Project (made up of the Australian Forestry Management 2005 Plantation Investment and the Australian Forestry Management 2005 Land Trust) which were established in 2004 and 2005 respectively by Mr Kirby's then employer, the Rothschild Australia Group. 10 At the time of their respective establishment by Rothschild the responsible entity under the Corporations Act 2001 (Cth) for the 2004 Softwood Project was Heathley Asset Management Limited and the responsible entity under the Corporations Act for the 2005 Softwood Project was Arrow Capital Limited. 11 On 3 June 2005 Arrow replaced Heathley as responsible entity for the 2004 Softwood Project. 12 Upon their respective commencement, AFM became the manager of each of the 2004 Softwood Project and the 2005 Softwood Project. 13 ACL acquired legal title to the plantation land for the 2004 Softwood Project and the 2005 Softwood Project as a successor trustee of the relevant Land Trust in each case and Agriwealth acquired all of the shares in AFM from Rothschild.

The project documents 14 For the reasons explained at [36] below, the issues that arise between the parties only concern the 2005 Softwood Project. Accordingly, it is only necessary to have regard to the project documents for it. 15 Relevantly, Mr Kirby holds 16 timberlots and 16 associated Land Trust units in the 2005 Softwood Project. According to Wayne Curtis Jones, a director of ACL and AFM, the project documents for that project comprise: (1) a PDS dated 8 April 2005; (2) the Constitution for the Australian Forestry Management 2005 Plantation Investment dated 3 May 2005; (3) the 2005 Land Trust Constitution dated 24 February 2005 together with amending deeds; (4) forestry right agreement dated 8 December 2009 between Mr Kirby and ACL in its capacity as land owner and in its capacity as responsible entity; (5) forestry right agreement dated 26 February 2010 between Mr Kirby and ACL; (6) forestry management agreement dated 30 June 2005 between Mr Kirby as Grower, AFM as Manager and Arrow as Responsible Entity (Management Agreement); (7) application for 16 timberlots in the 2005 Softwood Project dated 16 June 2005; (8) deed of appointment and retirement of responsible entity dated 12 December 2007 between Arrow and ACL; and (9) deed of appointment and retirement of land trustee dated 12 December 2007 between Arrow and ACL. 16 According to the PDS for each of the 2004 Softwood Project and the 2005 Softwood Project, the essential features of each scheme were as follows: (1) investors were invited to participate in either or both of a "Plantation Investment" and a "Land Trust"; (2) the Plantation Investment involved the growing of a commercial softwood plantation through to final harvest over a period of years. Returns were generated by timber sales at the time of thinning (which was an intermediate harvest) and at final harvest; (3) for this purpose, investors (Growers) entered into a forestry management agreement with AFM as manager, which was responsible for the establishment and maintenance of the plantation, and a forestry right agreement with the responsible entity which entitled each Grower to the produce from a specific parcel of land; (4) the Land Trust owned the land on which the plantation would be established; and (5) investors in the Land Trust acquired units which entitled them to a pro-rata share of the rent deducted from the final harvest proceeds and a pro-rata share of the net realisation of the land value after final harvest. 17 More specifically, the PDS provides: (1) under the heading "The Offer" that: This PDS sets out an opportunity to invest in the AFM 2005 Softwood Project (Project) by participating in either or both of: 1. Forestry Rights Interests in the Australian Forestry Management 2005 Plantation Investment (Plantation Investment), a softwood forestry plantation; and 2. Units in the Australian Forestry Management 2005 Land Trust (Land Trust), which will own the land on which the Plantation Investment is established. (2) a summary of how the "Plantation Investment" and "Land Trust" was to operate; (3) that the nominated responsible entity of the Plantation Investment and the Land Trust was Arrow which also acted as "self custodian" of the Plantation Investment and Land Trust; (4) that AFM, at the time a wholly owned subsidiary of Rothschild, was responsible for the operation of technical aspects of the 2005 Softwood Project. AFM contracted with Forests NSW "to perform all plantation management and harvest activities for the life of" the 2005 Softwood Project; (5) an overview of the Plantation Investment which, among other things, described: (a) the "Structure" of the investment as follows: An Investor becomes a "Grower" by entering into a Management Agreement with the Manager and a Forestry Right Agreement with Arrow Capital. Arrow Capital will sign each of these agreements as the attorney of each Grower. Under the Forestry Right Agreement, each Grower is allocated a specific parcel of land evidenced by holding the legal title to a "Forestry Right Interest" (FRI). In a practical sense, an FRI is broadly similar to a lease and entitles the Grower to the produce from that land. Each FRI is equal to 0.5 of a Plantable Hectare. Growers "pool" the produce from their FRI with the produce from other Growers' FRI's (the Marketing Pool). This process reduces a Grower's exposure to the impact of lower yields that may eventuate from the produce of their own individual FRI. (b) the "Establishment and Maintenance" as including: Land preparation and planting activities will be carried out over the 12 months following the Allotment Date. The Manager is responsible for establishment and maintenance of the Plantation and has contracted Forests NSW to provide these services for the life of the Project. The services to be provided by the Manager broadly cover: • Initial site and genetic material selection and preparation of the land prior to planting; • Planting, fertilising and replacement to agreed level of stock that fails at establishment; • Monitoring plantation health, growth rates, hazard reduction and overall progress; • Thinning and harvesting the Plantation and marketing the timber produced, and • Rehabilitation of the Plantation Land to agreed standards after Final Harvest. 18 The Constitution relevantly provides: (1) under the heading "Background": A This document is intended to establish a scheme to be known as the 'Australian Forestry Management 2005 Plantation Investment' to be administered for the benefit of the Growers. … C The Responsible Entity proposes to invite applications to enter into Forestry Right Agreements and Management Agreements for the purpose of permitting Growers to conduct their own business of cultivating Trees and harvesting the plantation on a commercial basis. (2) in cl 1.1 for the appointment of the responsible entity, Arrow, as the agent, attorney and/or trustee of the Australian Forestry Management 2005 Plantation Investment, which is referred to as the "Scheme", in accordance with the terms of the Constitution; (3) in cl 1.2, titled "Nature of Growers' interests in the Scheme", that: 1.2 The interest of a Grower in the Scheme (the Interest) includes: 1.2.1 the Grower's rights, title and interest under the Grower's Forestry Right Agreement, including its Forestry Right Interest; 1.2.2 the Grower's rights, title and interest under the Grower's Management Agreement; 1.2.3 the Grower's entitlement to Harvest Proceeds; 1.2.4 the Grower's entitlement to Carbon and Salinity Credit Proceeds; and 1.2.5 the Grower's Proportional Interest in: (a) the Assets; and (b) any amount set aside (but not expended) in any reserve or provision created as provided in this document. Such interest shall entitle a Grower, to exercise any rights powers or privileges set out in the Grower's Forestry Right Agreement and Management Agreement, in respect of the Assets or the Account but not otherwise. (4) in cl 2.1 for the form of applications as follows: Applications to enter into Forestry Right Agreements and Management Agreements shall be in the form attached to a PDS issued by the Responsible Entity or, when a PDS is not required, in such other form as the Responsible Entity determines in the particular case. (5) in cl 3.5 that upon acceptance of an application the Responsible Entity will prepare a forestry right agreement and management agreement for the applicant and execute and procure execution by the other parties to those agreements; (6) in cl 3.6 for each Grower to appoint the Responsible Entity as its attorney to enter into the forestry right agreement and management agreement on the Grower's behalf; (7) in cl 3.8 and cl 3.9 to have all executed forestry right agreements and management agreements stamped, subject to satisfaction that the application moneys have been released, to elect to dispatch a copy of those agreements to the Grower and to retain the originals of them; (8) in cl 6 titled "Other amounts payable by Growers under Forestry Right Agreement and Management Agreement" that: Payment obligation of the Grower 6.1 The Grower must pay all amounts referred to in the Forestry Right Agreement and the Management Agreement. Monitoring and supervision by the Responsible Entity 6.2 The Responsible Entity will monitor and supervise the payment of all amounts owing by the Grower under the Forestry Right Agreement and Management Agreement during the term of the Scheme. The Responsible Entity authorises the Grower to make all such payments directly under those agreements. (9) in cl 7.2, except in relation to the "Final Harvest", that the responsible entity is to hold the "Harvest Proceeds" to which each Grower is entitled under the management agreement on the Grower's behalf and to deposit the proceeds into an account prior to distribution in accordance with the forestry right agreement and management agreement; (10) in cl 25.5 that, upon completion of "Final Harvest and sale of the Plantation Produce", the responsible entity is to hold as agent on behalf of each Grower the "Harvest Proceeds" to which each Grower is entitled under the management agreement and to deposit the proceeds into an account prior to paying each Grower their Harvest proceeds in accordance with their entitlement under the management agreement and the Constitution; and (11) in cl 25.8 that: The Responsible Entity may make any payment due under the Forestry Right Agreement or the Management Agreement on behalf of Growers from their entitlement of the Harvest Proceeds and/or Carbon and Salinity Credit Proceeds prior to any preliminary payments under clause 26.7. 19 The Management Agreement, which is between Mr Kirby as Grower, AFM as Manager and Arrow as Responsible Entity, relevantly includes: (1) under the heading "Background" that: The Responsible Entity is the responsible entity of the Australian Forestry Management 2005 Plantation Investment scheme and has agreed to act in the interests of the Grower and liaise with the Manager on behalf of Growers on the terms of this document. (2) in cl 1.1, which concerns engagement of AFM as manager, that: The Grower engages the Manager as an independent contractor to the Grower to perform the Forestry Services and the Manager accepts such engagement on the basis set out in this document. (3) in cl 2, which concerns the authority of the Manager, that: Role of the Manager 2.1 The Grower is proposing to enter into a Forestry Right Agreement with the Landowner which is to be the subject of a Forestry Right to be granted in favour of the Grower. The Manager will do all things reasonably necessary to enter the Forestry Right Agreement on the Grower's behalf. 2.2 In the Forestry Right Agreement, the Manager will use reasonable endeavours to ensure all necessary consents and approvals are obtained on terms reasonably acceptable to the Manager to allow the Plantation to proceed on the Plantation Land. Authority to act for Grower 2.3 Generally, the Manager will act as an independent contractor in providing the Forestry Services and will not act or incur liability on behalf of the Grower, except as is necessary to do the following: 2.3.1 To use reasonable efforts to ensure that the Forestry Rights, Carbon Sequestration Rights and Salinity Credits will be owned by the Grower. 2.3.2 For the Manager to comply with the requirements of New South Wales and Commonwealth law, consequent upon the incidence of such ownership. 2.4 The Manager will have the right to carry out on behalf of and in the name of the Grower all functions which the Grower is entitled or obliged to perform or carry out in the exercise of its rights or obligations under the Forestry Right Agreement against the Landowner granting the relevant Forestry Right and any other function from time to time agreed in writing between the Manager and the Grower or otherwise authorised under this document. The Manager must only exercise these rights after consultation with the Responsible Entity. 2.5 The exercise of any right under clauses 2.3 and 2.4 is at the risk and cost of the Grower who indemnifies the Manager and the Responsible Entity against all liability, loss, actions or demands arising from the proper exercise of any such rights, power or authority. Plantation to be operated efficiently 2.6 The Grower acknowledges that the Manager is required to co-ordinate management of the whole Plantation to enable the Forestry Services to be provided in an efficient and cost effective manner. In doing so the Manager may, notwithstanding anything else in this document, treat all Forestry Rights of all Growers in any Plantations as one project for all purposes under this document. (4) in cl 4.2 in relation to the provision of services by the Manager that: The Manager will: 4.2.1 Competently provide the Forestry Services. 4.2.2 Observe and perform all of the covenants, duties and obligations in this document to be observed and performed by the Manager in relation to the Forestry Services. (5) in cl 4.10 that the day to day management of the Plantation is at the discretion of the Manager and its contractors and that, where applicable and appropriate, the Manager is to make available to the Grower the details of any independent expert advice it has obtained in relation to management of the Plantation; (6) in cl 6.1 that the Grower owns all of the "Trees" and "Timber" on the "Planted Land" and all of the "Plantation Produce" for that land; (7) in cl 7.1 that: The Grower must itself meet all costs associated with the Rehabilitation of their Forestry Right Land following Final Harvest, destruction as contemplated in clause 9 or other abandonment. (8) in cl 8, in relation to management fees, among other things, that: (a) the Grower is to pay the management fees set out in Sch 2 to the agreement to the Manger in consideration for the Manager agreeing to carry out the "Forestry Services": cl 8.1; and (b) the Grower authorises and directs the Manager and the Responsible Entity to set-off any payment to be made to the Manager or the Responsible Entity by the Grower against amounts payable but not paid by the Grower to the Manager or the Responsible Entity under the Management Agreement: cl 8.7; and (9) in cl 8.18 to 8.12 for a lien in favour of the Manager and Responsible Entity on the "Trees and Timber on the Planted Land and all Plantation Produce to which the Grower is entitled" and the steps they may take to realise those entitlements in order to discharge amounts owing to them which are due but unpaid.

The 2019/2020 bushfires 20 In December 2019 and January 2020 there were severe bushfires in New South Wales and Victoria which affected a number of the forestry plantations including those the subject of the 2004 Softwood Project and 2005 Softwood Project. Mr Jones explained that 85% of the planation trees in the 2004 Softwood Project were destroyed by fire and 68% of the plantation trees in the 2005 Softwood Project were destroyed by fire. 21 All of the Growers in the 2004 Softwood Project, including Mr Kirby, were covered by insurance for fire damage to the plantation trees but only some of the Growers in the 2005 Softwood Project were covered by insurance for that type of damage. Mr Kirby was one of the Growers who was not covered by insurance for fire damage to the plantation trees in relation to the latter project.

Events following the bushfires 22 Insurance claims were made for the fire damage and insurance proceeds were received. On 10 February 2020 and 23 April 2020 notices to Growers in the "2004-2008 Projects" were published on the "Agriwealth website". 23 The first notice informed Growers of the extent of the damage to the plantations and a visit to the plantations with insurance assessors. It relevantly included: Rehabilitation We now need to commence rehabilitation of the Forestry Right Land. Pursuant to clause 7.1 of the Forestry Management Agreement (FMA), you as Grower must meet the costs associated with rehabilitation of the Forestry Right Land. When trees are destroyed by fire that does not mean that they are reduced to an ash component. They generally remain standing and the residue has to be removed and either burned or chipped in order to rehabilitate the land. Call for funds Without any revenue from salvage, the fact that a number of Growers are uninsured and the uncertainty of knowing exactly when the insurance claims will be processed and paid there will be a call for funds to finance the rehabilitation process. We are presently obtaining quotations to have this work undertaken and we will be issuing you an invoice for your proportional share based on the number of timberlots you hold as a percentage of the total timberlots in your project. Post rehabilitation Once the Forestry Right Land has been rehabilitated we will undertake a sale process of that land through an open market tender process. Upon completion of sales the net sale proceeds will be distributed to unit holders in the relevant land trust. 24 The second notice informed Growers that the insurance claims had been finalised and settled in full, the insurance proceeds had been paid and that insured Growers could expect to receive funds due to them immediately following receipt of their bank account details. 25 Following the bushfires, AFM as manager of the 2004 Softwood Project and as manager of the 2005 Softwood Project determined to terminate the former project in its entirety and the latter project in part. 26 Between 1 April 2020 and 9 July 2020 AFM issued invoices and follow up correspondence to Mr Kirby for various costs and fees related to each of the 2004 Softwood Project and the 2005 Softwood Project. 27 In relation to the 2005 Softwood Project: (1) by letter dated 1 April 2020 AFM provided Mr Kirby with an update about the project including that AFM anticipated that it would shortly be able to post a further announcement about the payment of insurance claims, which were imminent (see [24] above), and that Growers were responsible for the cost of road construction from accessible highways to the perimeter of plantations. A tax invoice for Mr Kirby's share of those costs was enclosed. AFM noted that for Growers who were insured, those costs would be offset against the insurance proceeds due to that Grower but that uninsured Growers would need to pay the amount of the invoice; (2) by letter dated 20 April 2020 AFM provided a further update about the 2005 Softwood Project noting that as a result of bushfires the 2005 Softwood Project had been reduced to approximately 359.5 hectares of plantation land located on the Porters Retreat and Parkers properties and that AFM proposed to continue to manage those plantations. The letter continued: However, the Forestry Right Land (FRL) on which plantations have been destroyed will need to be rehabilitated by Growers pursuant to the Forestry Management Agreement (FMA). The Manager proposes to commence rehabilitation work after 31 May 2020. Following completion of rehabilitation work the Trustee of the Land Trust (being AgriWealth Capital Limited) proposes to sell the FRL on which plantations were destroyed through an open market tender process. And: Rehabilitation of the FRL is governed by clause 7.1 of the FMA. That clause states that a Grower must meet all costs associated with rehabilitation of the FRL following final harvest or destruction. AFM noted that it had sought one quote for the required rehabilitation work and that it would seek further quotes. In the meantime AFM had levied an amount of $450/hectare for initial rehabilitation work to be carried out and enclosed a tax invoice for payment of that amount as well as the road costs which had been invoiced undercover of its 1 April 2020 letter. As Mr Kirby was an uninsured Grower, he was required to pay the total amount sought of $3,290.27 by 31 May 2020; and (3) by letter dated 9 July 2020 AFM informed Mr Kirby that it had secured services for the rehabilitation of the Forestry Right Land and set out the total fixed price quote it had accepted for that work to be carried out as well as describing other incidental work to be carried out and the associated costs. Mr Kirby was provided with a summary of his share of the total costs for the work and reminded that the amount due to be paid by 31 May 2020 remained outstanding. An invoice dated 9 July 2020 for all outstanding costs in a total amount of $12,685.94 was enclosed with the letter.

The Kirby Complaint 28 On 21 July 2020 Mr Kirby submitted the Kirby Complaint to AFCA. Among other things, the Kirby Complaint: (1) in the field "My complaint is with" referred to ACL; (2) in the field "My complaint relates to" referred to "Investments"; (3) in the field "Complaint Summary" stated (as written): Agriwealth has invoiced me for fees and charges which are contrary to clear representations in the marketing section of the PDS that there would be no ongoing fees. This action wilfully ignores the clearly stated and fundamental underlying nature of the investment that (a) is fully prepaid, and (b) that investors are both "tree growers" and land owners (via a unit trust). The letters from Piper Alderman I have noted previously set out the issues in great detail and in particular the letter of 15 June clearly shows that investors representing more than 50% of the land trust units and forestry right interests have identical concerns. It seems astonishing to me and against all good practice (and ethical fairness) that a entity in a fiduciary role of both trustee of one half of an investment and manager/RE of the other half would wilfully ignore the concerns of more than half the beneficial owners of the assets and attempt to bind them to costs that are clearly not in any of their bests interests when looked at as a combination (ie as a land investor and a tree investor). The PDS clearly markets the investment as a combined package and to the best of my knowledge all of the investors represented by Piper Alderman alongside me hold identical units of trees and land. It is this symmetry that Agriwealth is wilfully ignoring in pursuing investors as "growers" for costs to be spent on land that they own as "unit holders". Also, a prepaid contract is in place with the State Forestry Commission to perform all services on the plantation INCLUDING rehabilitation. Why this contract has not been enforced is a key concern. And if it is not enforced then why has Agriwealth not recovered the "unused value" equal to about half the original total prepaid? If Agriwealth has recovered this amount why has it not been passed to the investors to offset the costs of rehabilitation that Agriwealth is now invoicing? (4) in the field "What outcome are you seeking?" stated: I am seeking compensation I know how much I am seeking AUD $58,303.85 (5) provided a break up of the amount of compensation sought of $14,480.04 deducted from insurance proceeds in relation to the 2004 Softwood Project and $43,824.81 in outstanding invoices for the 2004 Softwood Project and the 2005 Softwood Project; and (6) enclosed correspondence and the relevant invoices. 29 By 15 October 2020 AFCA had received 71 complaints about ACL (not all of which concerned the 2004 Softwood Project and the 2005 Softwood Project) which it treated by a batch approach with the Kirby Complaint as the lead case for the retail scheme. 30 Piper Alderman, solicitors, who were retained to represent Mr Kirby and other Growers in Agriwealth projects affected by fire damage, wrote to ACL. There followed an exchange of correspondence between Piper Alderman and McGirr Lawyers Pty Ltd, solicitors for ACL and AFM, including as to the parameters of the Kirby Complaint, once lodged, and AFCA's jurisdiction to determine it. It is not necessary to set that correspondence out.

The Jurisdiction Decision 31 In the Jurisdiction Decision ACL is referred to as "Company A" or "the financial firm", AFM is referred to as "Company B" and Mr Kirby is referred to as "Mr K". 32 AFCA recorded that in relation to the Kirby Complaint ACL contended, among other things, that AFM had charged Mr Kirby fees under a contract between AFM and Mr Kirby as principals for management services, that AFM is not an AFCA member and thus AFCA did not have jurisdiction to consider the Kirby Complaint. AFCA also noted its preliminary assessment conveyed to ACL and Mr Kirby in relation to jurisdiction and Mr Kirby's response. AFCA determined that the Kirby Complaint was partially within and partially outside the Australian Financial Complaints Authority Complaint Resolution Scheme Rules (AFCA Rules). 33 AFCA considered ACL's contention that it did not have jurisdiction because, relevantly, the fees were charged by AFM, which is not an AFCA member, under the Management Agreement. However, on the basis of the available information it concluded at [76] of the Jurisdiction Decision that the Kirby Complaint was partially within the AFCA Rules and partially outside them. It found that: [Mr Kirby's] claims relating to whether the schemes' governing documents allow: 76.1. charges for rehabilitation and other costs that were deducted from insurance proceeds payable to affected investors for the 2004 retail scheme and/or the 2005 retail scheme 76.2. invoices issued for further rehabilitation and other charges for the 2004 retail scheme and/or the 2005 retail scheme 76.3. management fees deducted from the proceeds of the "first thinnings" that were to be paid into the sinking fund, if on Company A's termination of the Forestry Right Interests (FRIs) the sinking fund became the (pro-rata) personal property of each investor, and 76.4. failure to pay out the sinking fund to investors in the 2005 scheme, in breach of scheme governing documents. are within AFCA's jurisdiction under Rule B.2.1(a) and/or (e). 34 The Ombudsman considered that the balance of Mr Kirby's claims, for example those alleging misleading and deceptive conduct, were outside AFCA's jurisdiction.

Events following the Jurisdiction Decision 35 As set out at [2] above, on 5 August 2021 ACL and AFM commenced this proceeding seeking to challenge the Jurisdiction Decision. 36 By email dated 24 August 2022 the solicitors for the applicants informed the Court that a settlement was reached between the applicants and Mr Kirby which resulted in the withdrawal of the Kirby Complaint insofar as it relates to the 2004 Softwood Project. However, the Kirby Complaint and the validity of AFCA's assumption of jurisdiction in relation to parts of it remains for determination by the Court insofar as it relates to the 2005 Softwood Project.

legislative scheme 37 Part 7.6 of the Corporations Act concerns the licensing of providers of financial services. 38 Section 912A of the Corporations Act sets out the general obligations of a financial services licensee including that it must "do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly": see s 912A(1)(a). 39 If financial services are provided to persons as retail clients, the licensee must have a dispute resolution system which complies with s 912A(2) of the Corporations Act: see s 912A(1)(g). In order to be compliant, the dispute resolution system must consist of both an internal dispute resolution procedure and "membership of the AFCA scheme": see s 912A(2). 40 Section 761A of the Corporations Act defines the "AFCA scheme" as "the external dispute resolution scheme for which an authorisation under Pt 7.10A is in force" and AFCA as "the operator of the AFCA scheme". 41 Part 7.10A of the Corporations Act empowers the Minister to authorise an external dispute resolution scheme if the Minister is satisfied that the mandatory requirements set out in s 1051 will be met. 42 In Notesco Pty Ltd v Australia Financial Complaints Authority Ltd [2022] NSWSC 285 at [4]-[5] Rees J explained the introduction of Pt 7.10A into the Corporations Act by the Treasury Laws Amendment (Putting Consumers First - Establishment of the Australian Financial Complaints Authority) Act 2018 (Cth) as follows: [4] In 2018, the Treasury Laws Amendment (Putting Consumers First - Establishment of the Australian Financial Complaints Authority) Act 2018 (Cth) amended the Corporations Act by adding Part 7.10A, "External dispute resolution". As explained by the Revised Explanatory Memorandum, the legislative changes followed the Ramsay Review into the regulatory requirements concerning the dispute resolution and complaints framework for providers of financial services, which found problems arising from the existence of multiple external dispute resolution schemes: at [1.11]. (The three main precursor schemes are succinctly described in MetLife Insurance Ltd v Australian Financial Complaints Authority [2022] FCA 23; (2022) 397 ALR 316 per Colvin J at [4]-[6].) The amendments introduced a new external resolution framework for the financial system, where the Minister would be able to authorise a new "one stop shop" external dispute resolution scheme for the purposes of the Corporations Act, to be known as AFCA: at [1.2]. The new framework would ensure that consumers had easy access to a single external dispute resolution scheme to resolve disputes about products and services provided by Financial Firms: at [1.27]. [5] AFCA would be based on an ombudsman model and be established by industry as a company limited by guarantee: at [1.14]. Financial Firms would be required to be members of AFCA; AFCA's members would be contractually bound to comply with AFCA's operating rules: at [1.15]. The operational aspects of the AFCA scheme would be based on private law (contractual) obligations between AFCA and its members: at [1.25]. 43 The mandatory requirements for a dispute resolution scheme prescribed by s 1051 of the Corporations Act concern organisational, operator, operational and compliance requirements. 44 Section 1050(2)(a) obliges the Minister, in considering whether to authorise the scheme, to take into account the "general considerations" under s 1051A of the Corporations Act. They, in turn, concern the accessibility, independence, fairness, accountability, efficiency and effectiveness of the scheme. 45 AFCA's scheme was authorised in April 2018 and commenced operation on 1 November 2018: see AFCA Scheme Authorisation 2018 (Cth); Treasury Laws Amendment (Putting Consumers First- Establishment of the Australian Financial Complaints Authority) Commencement Instruments 2018 (Cth). It is the only authorised external dispute resolution scheme under the Corporations Act: see s 1050(3) Corporations Act.

AFCA's complaint resolution scheme Rules 46 The AFCA Rules set out the rules and processes that apply to all complaints submitted to the AFCA Scheme and, as provided for in AFCA's Constitution, "shall form a binding contract between each Member" of AFCA and AFCA: see cl 12.1(d) of AFCA's Constitution. The AFCA Rules form part of a contract between "AFCA and Financial Firms and Complainants": rule A.1.2, AFCA Rules. Thus, when a complaint is lodged with AFCA, the AFCA Rules form a tripartite contract between AFCA, the complainant and the member of AFCA the subject of the complaint: see Notesco at [10] and the authorities cited therein. 47 The AFCA Rules are divided into seven sections. 48 It is convenient to commence with section E of the AFCA Rules which provides for the definition of terms used in the rules including: (1) "AFCA Decision Maker" means "an Ombudsman, Adjudicator or AFCA Panel"; (2) "Complainant" means "a person who has submitted a complaint to AFCA"; (3) "Financial Firm" relevantly means: 1. an AFCA Member. … 4. for the purposes of rule B.2 and A.7.1, A.7.2 and A.7.6 in relation to a complaint other than a Superannuation Complaint, "Financial Firm" also includes any employee, representative, agent or contractor of the Financial Firm including any person who has actual, ostensible, apparent or usual authority to act on behalf of the Financial Firm or authority to act by necessity in relation to a financial service. (4) "Financial Service" means, among other things: b) a product or service that is financial in nature including a product or service which is or is in connection with: … (viii) a financial investment (such as life insurance, a security, an Annuity Policy, a RSA, an interest in a registered managed investment scheme or a superannuation fund); 49 Section A of the AFCA Rules is titled "Complaint Resolution Processes" and "provides an overview of the AFCA complaint resolution scheme and how complaints are considered". 50 Rule A.1 of the AFCA Rules relevantly provides that the rules "form part of a contract between AFCA and the Financial Firms and Complainants": see rule A.1.2. Rule A.4. concerns "Complaints that AFCA considers" and relevantly provides: A.4.2 A complaint must be about a Financial Firm that is an AFCA Member at the time that the complaint is submitted to AFCA (even if not an AFCA Member at the time of the events giving rise to the complaint). A.4.3 There are some additional requirements that must be met in order for AFCA to be able to consider a complaint. In summary: a) The complaint must arise from a customer relationship or other circumstance that brings the complaint within AFCA's jurisdiction. b) There must be a sufficient connection with Australia. c) Generally, there is a time limit within which the complaint must be submitted to AFCA. d) If the complaint is about a Traditional Trustee Company Service that involve Other Affected Parties, the Complainant must get the consent of all Other Affected Parties. Section B sets out these requirements. A.4.4 There are some types of complaints that AFCA must exclude and some situations in which AFCA can decide to exclude a complaint. Section C sets this out. 51 Rule A.7 sets out restrictions imposed on a Financial Firm during a complaint. Rule A.7.1 provides: While AFCA is considering a complaint, the Financial Firm is subject to the following restrictions. a) The Financial Firm must not begin legal proceedings against the Complainant, anyone else joined as a party to the complaint or Other Affected Party about any aspect of the subject matter of the complaint. b) The Financial Firm must not seek judgment or take other action to pursue debt recovery legal proceedings that the Financial Firm began before the Complainant submitted the complaint to AFCA, other than to the minimum extent necessary to preserve the Financial Firm's legal rights. c) The Financial Firm must not take any action to: (i) recover a debt the subject of the complaint, including enforcement of a default judgment obtained in court, (ii) protect any assets securing that debt, (iii) assign any right to recover that debt, or (iv) list a default on a Complainant's credit file. 52 Section B, titled "Requirements", sets out the requirements which must be met in order for AFCA to be able to consider a complaint that is submitted by a complainant. Rule B.1 concerns superannuation complaints and rule B.2 concerns "other complaints". Relevantly rule B.2.1 provides: A complaint (other than a Superannuation Complaint) must arise from or relate to: a) the provision of a Financial Service by the Financial Firm to the Complainant; … e) a legal or beneficial interest of the Complainant arising out of: (i) a financial investment (such as life insurance, a security or an interest in a managed investment scheme or a superannuation fund);or (ii) a facility under which the Complainant seeks to manage financial risk or to avoid or limit the financial consequences of fluctuations in, or in the value of, an asset, receipts or costs (such as a derivatives contract); 53 Section C of the AFCA Rules sets out when AFCA will exclude a complaint. Rule C.1.1 provides: Rules C.1.2 to C.1.6 specify categories of complaints that AFCA must exclude unless all parties to the complaint and AFCA agree to AFCA considering the complaint. 54 Rule C.1.5 titled "Exclusions applying specifically to investment complaints including Superannuation Complaints" provides, among other things, that: C.1.5 AFCA must exclude: … b) A complaint relating to the management of a fund or scheme as a whole. 55 Section D of the AFCA Rules concerns remedies. Rule D.2.1 sets out the available remedies for a complaint other than a superannuation complaint. It provides, among other things, that: An AFCA Decision Maker may decide that the Financial Firm or Complainant must undertake a course of action to resolve the complaint including: a) the payment of a sum of money; b) the forgiveness or variation of a debt; c) the release of security for debt; d) the repayment, waiver or variation of a fee or other amount paid to or owing to the Financial Firm or to its representative or agent, including the variation in the applicable interest rate on a loan;

applicants' submissions 56 The applicants submitted that ACL is the responsible entity for, relevantly, the 2005 Softwood Project as required by s 601FB of the Corporations Act and that Mr Kirby is an investor in that "retail" projects and a "member" of the scheme within the meaning of the Corporations Act. AFCA is administering an external disputes scheme with the approval of the Australian Securities and Investments Commission and Mr Kirby invoked AFCA's jurisdiction by lodging the Kirby Complaint with it. 57 The applicants submitted that AFCA assumed jurisdiction in respect of the Kirby Complaint upon the footing that AFM was acting as an "agent or contractor" of ACL within the meaning of s 601FB of the Corporations Act and that the existence of that agency was a prerequisite to the assumption of jurisdiction. They submitted that upon the facts considered by AFCA it could not have properly concluded that AFM acted as the "agent" of ACL. In particular, ACL's predecessors as responsible entities, namely Arrow for the 2005 Softwood Project, did not appoint AFM or otherwise engage AFM to do anything that ACL was "authorised to do" in connection with the scheme. They contended that ACL, with the consent of the Growers, including Mr Kirby, has now replaced Arrow as the responsible entity for the 2005 Softwood Project and ACL is in no different position to it. 58 The applicants submitted that it is necessary to look at the scheme documents which were before AFCA when it formulated the Jurisdiction Decision. They referred in particular to the following: (1) the PDS which: (a) identifies AFM as the manager and makes plain that AFM, not the responsible entity, was "responsible for the operational and technical aspects of the project"; and (b) recorded that AFM as manager, not ACL, had contracted with Forests NSW, in the case of the 2005 Softwood Project, to perform "all plantation management and harvest activities for the life of the Project"; (2) Mr Kirby contracted directly and personally with AFM as manager under the Management Agreement for the 2005 Softwood Project. That agreement obliged AFM "as an independent contractor" to perform the "Forestry Services" as defined; (3) cl 2.3 of the Management Agreement identified the authority conferred by the Grower, in this case Mr Kirby, on AFM as the manager; (4) cl 7.1 of the Management Agreement obliged Mr Kirby as Grower to AFM to meet all costs associated with the "rehabilitation" of his forestry right land following destruction as contemplated by cl 9 of that agreement; and (5) cl 8.1 of the Management Agreement made management fees payable by Mr Kirby, as Grower, to AFM, not the responsible entity. 59 The applicants submitted that ACL's role and its rights and obligations do not differ from those of the original responsible entity of the 2005 Softwood Project, Arrow, in light of the operation of s 601FS and s 601FT of the Corporations Act. They contended that AFM has never been appointed as agent of the responsible entity to carry out the management functions of the 2005 Softwood Project and that the responsible entity has never been empowered to carry out the management functions. They also submitted that AFM has not been appointed as the responsible entity's contractor for that purpose. They noted that from the start the Growers, including Mr Kirby, have dealt with AFM as an independent contractor. ACL is simply not privy to the obligations arising from those contractual relationships nor is it entitled to claim or to receive the payments. 60 The applicants submitted that once it is recognised that there is no agency as between AFM and ACL with respect to the management function of the forestry operations or the entitlement to charge fees or to receive payments from Growers, including Mr Kirby, the foundation for AFCA's jurisdiction to affect the contractual relationship between AFM as manager and Mr Kirby as Grower disappears. 61 The applicants also submitted that AFCA had no jurisdiction because the decision to charge the management fees in issue arose out of the destruction of trees caused by the bushfires and is a decision about the management of the scheme as a whole which is excluded by rule C.1.5(b) of the AFCA Rules. 62 The applicants submitted that the outcome is that AFCA has wrongly assumed jurisdiction in respect of the Kirby Complaint.

consideration 63 In the Jurisdiction Decision, AFCA found that it had jurisdiction in relation to a part, but not the whole, of the Kirby Complaint, namely that part which concerns charges invoiced to Mr Kirby principally for rehabilitation work to the land and the trees and deductions made for some of those charges from funds which Mr Kirby complained were otherwise payable to him. That is, AFCA found that its jurisdiction in relation to the Kirby Complaint was limited to Mr Kirby's concerns about the entitlement to charge certain fees and retain moneys to meet some of those fees under the Management Agreement. 64 AFCA considered it had jurisdiction to consider those aspects of the Kirby Complaint because they came within rule B.2.1(a) and/or (e) of the AFCA Rules. As set out at [52] above, rule B.2.1 concerns "other complaints". Relevantly, AFCA was satisfied that the part of the Kirby Complaint over which it found it had jurisdiction arose from or related to: (1) the provision of a "Financial Service" by a "Financial Firm" to Mr Kirby; and/or (2) a legal or beneficial interest of Mr Kirby arising out of a financial investment such as, relevantly, an interest in a managed investment scheme. 65 The applicants' principle contention is that, because AFM is not a member of AFCA and it cannot be classified as an agent or contractor of ACL, AFCA has no jurisdiction in relation to it. The applicants also contend that AFM's decision to charge the contested management fees arising out of the fires and the destruction of the trees is a decision about the scheme as a whole and thus excluded by the AFCA Rules. I consider each of these contentions below.

Does AFCA have jurisdiction under rule B.2.1(a) or (e)? 66 It is convenient to commence the consideration of whether AFCA has jurisdiction as it determined in relation to part of the Kirby Complaint by considering the terms of rule B.2.1 of the AFCA Rules. That rule requires that the complaint must "arise from or relate to" the provision of one of a number of the specified services which follow (see [52] above). That is, there must be a connection between the complaint and the provision of the relevant service. 67 In Notesco at [130]-[131] Rees J observed the following in relation to the words "arise from or relate to" used in the chapeau of rule B.2.1: 130. As Brereton J observed in respect of the phrase "arising from" in Quintano v BW Rose Pty Ltd [2008] NSWSC 793, the words require that there be some causal connection, with the requisite nexus being a less proximate relationship than that required by the phrase "caused by"; it is sufficient if it originates in, springs from, or has it foundation in the matter, "In my view, a claim can be said to arise from a matter - at least - if it has a foundation in that matter, so that the matter is one of the underlying facts that, if they exist, together justify the claim": at [7]-[8]. 131. The phrase "relate to" gathers meaning from the context in which it appears; it is that context which will determine the matters to which it extends: Transtar Linehaul Pty Ltd v Deputy Commissioner of Taxation (2011) 169 FCR 271; [2011] FCA 856 at [56] (per Robertson J), citing Workers' Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642 at 653-654. As French CJ and Hayne J observed in Travelex Ltd v Federal Commissioner of Taxation (2010) 241 CLR 510; [2010] HCA 33 at [25]: It may readily be accepted that "in relation to" is a phrase that can be used in a variety of contexts, in which the degree of connection that must be shown between the two subject matters joined by the expression may differ (HP Mercantile Pty Ltd v Federal Commissioner of Taxation (2005) 143 FCR 553 at 563 [35] per Hill J). It may also be accepted that "the subject matter of the inquiry, the legislative history, and the facts of the case" are all matters that will bear upon the judgment of what relationship must be shown in order to conclude that there is a supply "in relation to" rights. 68 AFCA relied on rules B.2.1(a) and/or (e) to find that it had jurisdiction in relation to a part of the Kirby Complaint. 69 I turn first to consider rule B.2.1(e). That rule provides that AFCA can consider a complaint arising from or in relation to a legal or beneficial interest of the complainant, i.e. Mr Kirby, arising out of a financial investment such as, relevantly, an interest in a managed investment scheme. The applicants made no submissions about the availability of rule B.2.1(e) as a source of AFCA's jurisdiction. 70 Having regard to the terms of rule B.2.1(e) I am satisfied that it provides a proper basis for AFCA to assume jurisdiction in relation to the relevant part of the Kirby Complaint, as it did. That is for the following reasons: (1) as set out at [18] above, the Constitution establishes the scheme and provides that it is to be administered for the benefit of "Growers", appoints the responsible entity and records the responsible entity's agreement to act as agent, attorney and/or trustee; (2) the Constitution provides that a "Grower" is a person who has entered into a forestry right agreement and a management agreement; (3) clause 1.2 of the Constitution provides that the "interest of a Grower in the 'Scheme' includes" the Grower's right, title and interest under the management agreement which he or she is required by cl 3.5 of the Constitution to execute in order to participate in the Scheme; (4) the "Scheme" is the "Australian Forestry Management 2005 Plantation Investment". It is part of the project known as the "Australian Forestry Management 2005 Softwood Project" (i.e. the 2005 Softwood Project) which is constituted by the "Scheme" and the scheme known as the '"Australian Forestry Management 2005 Land Trust"; (5) it was not in dispute that the Australian Forestry Management 2005 Plantation Investment is a managed investment scheme for the purposes of the Corporations Act: see s 9 of the Corporation Act; and (6) it follows that Mr Kirby's interest in the Australian Forestry Management 2005 Plantation Investment (and his interest in 2005 Softwood Project which includes his interest in that investment) includes his rights under the Management Agreement. 71 The Kirby Complaint, insofar as the AFCA found it had jurisdiction in relation to it, concerned charges and fees, and/or deductions from insurance proceeds, made pursuant to the Management Agreement the rights under which, as I have already found, are part of Mr Kirby's interest in a managed investment scheme, i.e. the Australian Forestry Management 2005 Plantation Investment and, in turn, the 2005 Softwood Project. 72 Therefore the Kirby Complaint (or so much of it in relation to which AFCA determined it had jurisdiction) arises from, in that it clearly has its origins or foundations in, or relates to Mr Kirby's legal or beneficial interest in a financial investment, the Australian Forestry Management 2005 Plantation Investment, of which the Management Agreement forms a part. 73 Subject to considering whether the exclusion under rule C.1.5(b) of the AFCA Rules applies, that is a complete answer to the applicants' objection to AFCA's jurisdiction. However, in case I am wrong about that I consider below the alternative basis upon which AFCA found it had jurisdiction, rule B.2.1(a) of the AFCA Rules. 74 As set out at [52] above, rule B.2.1(a) requires that the complaint relate to or arise from the provision of a "Financial Service by the Financial Firm". To be within jurisdiction ACL, not AFM which is not a member of AFCA and thus is not a "Financial Firm", must have provided the "Financial Service" from which the complaint relates or arises. If the "Financial Service" was provided by AFM, as the applicants contend, then AFCA's finding based on rule B.2.1(a) that part of the Kirby Complaint was within jurisdiction is invalid. 75 The term "Financial Firm" is defined to include an AFCA member and, for the purposes of rule B.2 of the AFCA Rules, any contractor of the Financial Firm (see [48(3)] above). There is no dispute that ACL as a member of AFCA is a Financial Firm. The question that arises is whether, as AFCA contends, AFM is a contractor of ACL. 76 In order to answer that question it is necessary to consider the terms of the documents that constitute the 2005 Softwood Project. 77 As I have already observed the Constitution, which establishes the Australian Forestry Management 2005 Plantation Investment: (1) defines a Grower as a person who has entered into a forestry right agreement and a management agreement; and (2) provides that a Grower's interest in the Australian Forestry Management 2005 Plantation Investment includes the Grower's rights, title and interest under the management agreement which the Grower is required to execute. 78 The Management Agreement which Mr Kirby executed, as required by the Constitution, is a tripartite agreement between Mr Kirby as the Grower, AFM as manager and the responsible entity which at the time was Arrow but is now ACL. 79 Where the responsible entity of a registered managed investment scheme changes, as it has here, the rights, obligations and liabilities of the former responsible entity in relation to the scheme become those of the new responsible entity: see s 601FS of the Corporations Act. In addition any document to which the former responsible entity is a party under which it has acquired or incurred a right, obligation or liability and that is capable of having effect after the change, has effect as if the new responsible entity was a party to it, was referred to in it or had or might have acquired or incurred the right, obligation or liability under it: see s 601FT of the Corporations Act. Thus ACL upon becoming the responsible entity for Australian Forestry Management 2005 Plantation Investment (and the 2005 Softwood Project) took on the rights, obligations and liabilities of the former responsible entity and the Management Agreement has effect as if ACL is a party to it (in place of the former responsible entity). 80 The Management Agreement imposes obligations on AFM as manager and also on ACL as responsible entity. 81 Insofar as AFM is concerned, the Management Agreement requires it to competently provide the "Forestry Services" as defined, and to observe and perform all covenants, duties and obligations in the agreement in relation to those services (see cl 4.2). Subject to certain clauses, the day to day management of the "Plantation", being the crop of trees to be established by the Grower and other growers under the forestry rights agreements on the land, is at the discretion of AFM as manager and its contractors (see cl 4.10). 82 The PDS described the role of the manager as "responsible for the operation and technical aspects of the project" (see [17(4)] above). 83 In effect, each Grower was required to retain AFM as a manager in order to participate in the 2005 Softwood Project and unless they did so, the Australian Forestry Management 2005 Plantation Investment and, indeed, the 2005 Softwood Project, could not function. AFM had a central role in ensuring that the trees which constituted the "Plantation" were planted and developed such that without the engagement of the manager by each Grower, ACL could not "operate the scheme" constituted by the Australian Forestry Management 2005 Plantation Investment as required by s 601FB of the Corporations Act. 84 As AFCA submitted, the obligations undertaken by AFM as manager under the 2005 Management Agreement were carried out as much for the responsible entity, ACL, as for the Grower, Mr Kirby. In those circumstances AFM was, in my view, a "contractor" of ACL for the purposes of the definition of the "Financial Firm" as it applies to rule B.2 of the AFCA Rules. 85 Further, ACL as responsible entity also has obligations under the Constitution and the Management Agreement relevant to the Kirby Complaint. In particular: (1) the Constitution requires the responsible entity to "monitor and supervise the payment of all amounts owing under the … [Management Agreement] during the term of the Scheme" and "authorises the Grower to make all such payments directly under those agreements" (see cl 6.2); and (2) the Management Agreement provides that the responsible entity "has agreed to act in the interests of the Grower and liaise with [AFM] on behalf of Growers on the terms of" the Management Agreement (see recital D). 86 The Kirby Complaint must relate to or arise from the provision of a "Financial Service" by ACL to Mr Kirby. The "Financial Service" is relevantly a service that is financial in nature including a service which is or is in connection with a financial investment such as an interest in a managed investment scheme. The service provided under the Management Agreement is in connection with his interest in a managed investment scheme, the Australian Forestry Management 2005 Plantation Investment, and is an integral part of it. Further, for the reasons already explained, Mr Kirby's interest in that managed investment scheme includes his rights under the 2005 Management Agreement (see [72] above). 87 Finally, while AFM issued the invoices the subject of the Kirby Complaint, it directed Mr Kirby to remit his payments to an account in the name of ACL, its related body corporate. Insofar as the 2005 Softwood Project is concerned, the Kirby Complaint relevantly concerned the fees and charges which Mr Kirby said should be disallowed or cancelled. That a direction was given to pay ACL also shows that the Kirby Complaint is related to the "Financial Service".

Was the Kirby Complaint excluded by rule C.1.5(b) of the AFCA Rules? 88 Finally it is necessary to consider whether the Kirby Complaint was excluded by rule C.1.5(b) of the AFCA Rules. 89 That rule is exclusionary and requires AFCA to exclude a complaint relating to the management of a scheme as a whole. 90 In Vision Super Pty Ltd v Poulter (2006) 154 FCR 185 Young J considered determinations made by the Superannuation Complaints Tribunal. Among other things, the applicant argued that the Tribunal did not have jurisdiction to determine the respondents' complaints under s 14 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) which relevantly provided that the "Tribunal cannot deal with a complaint under this section that relates to management of a fund as a whole": see s 14(6). At [51]-[52] Young J said: [51] The next question is that posed by s 14(6): do the Complaints relate to the management of the Fund as a whole? I reject the applicant's submission that the Complaints are not relevantly distinguishable from a complaint concerning the investment policy being adopted by the trustee of a superannuation fund. Each Complaint relates to debits made to the complainant's own deferred benefit account. None of the Complaints mentions the management of the Fund as a whole. [52] Even if it be assumed that the Complaints relate to the treatment of a particular class of members, namely the deferred benefit members of the Fund, they cannot be said to relate to the management of the Fund as a whole. The mere fact that a trustee has acted in a similar way in relation to other members does not have the consequence that the Complaints relate to the management of the fund as a whole. Furthermore, deferred benefit members are not the whole of the members of the Fund, so it does not follow that a decision that adversely affects their particular entitlements necessarily relates to the management of the Fund as a whole. In these cases, the Complaints concern the deduction of negative interest or negative investment returns from the respondents' benefits in alleged contravention of cl C.4.10 of the deed. The Complaints cannot be likened to a complaint about the investment policy that has been adopted by a trustee. It is not to the point to observe, as the applicant did, that other types of action by a trustee in the management of a division of a fund might be regarded as an act done in the management of the fund as a whole. 91 At [59] his Honour relevantly added: Another reason why s 14(6) is inapplicable is that, in my opinion, a Complaint that the Deed has been contravened in a way that directly and adversely affects the financial position of the particular member lodging the Complaint cannot be described as a complaint about "the management of a fund as a whole". This is so even if it be assumed that the Complaints should be characterised in the way the applicant contends, ie as relating only to the question whether the debiting of interest contravened cl C.4.10 of the Deed. If the Complaints are upheld and if the applicant has in fact debited interest in contravention of cl C.4.10 of the Deed, that action could hardly be described as one relating to the management of the Fund as a whole. The Complaints are substantive and genuine and the applicant did not suggest otherwise. It follows, in my view, that the nature of the Complaints is such that they fall squarely within the tribunal's jurisdiction. 92 To similar effect in Merkel v Superannuation Complaints Tribunal [2010] FCA 564, in considering whether the complaint there related to the fund as a whole for the purposes of s 14(6) of the Superannuation (Resolution of Complaints) Act 1993 (Cth), at [57]-[58] Gray J said: 57 By its own terms, Ms Merkel's complaint was about the deduction made by Telstra Super from the amount standing to her late husband's credit in his account with Telstra Super, before the balance was paid out to Ms Merkel as beneficiary. It was not on its face a complaint concerning management of the fund as a whole. It bore no similarity to a decision about how the fund as a whole should be invested, or about any other matter that did not concern the account of an individual member. As Branson J pointed out in Employers First at [74], the focus of s 14(6) of the SRC Act is on the nature of the complaint. It is not on the nature of the decision of the trustee. Attempts by trustees to confine complaints within the narrow terms of the decisions made by those trustees have been rejected in the past. See Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330 (2001) 48 ATR 359 and Commonwealth Superannuation Scheme Board v Dexter [2004] FCA 1434. There must be some doubt as to whether an officer of the Tribunal could rely on the way in which the trustee had approached the matter, to characterise the complaint as one relating to the management of the fund as a whole. Even if it were legitimate for an officer of the Tribunal to go beyond the face of the complaint itself and rely on material supplied by Telstra Super, the characterisation of Ms Merkel's complaint was clearly wrong. 58 As Young J pointed out in Vision Super, the fact that a complaint is about how the particular account of a member was dealt with is of the greatest significance in ascertaining whether that complaint relates to the management of the fund as a whole. The fact that a trustee has dealt with other members in a similar way is of no significance. … 93 Here the part of the Kirby Complaint in relation to which AFCA assumed jurisdiction concerned charges invoiced to Mr Kirby, which he disputed. It does not follow that, because ACL has levied the same charges, and made deductions from insurance proceeds otherwise payable, to other Growers participating in the 2005 Softwood Project, the Kirby Complaint relates to the management of the scheme as a whole. The Kirby Complaint concerns the way in which Mr Kirby's interest in the scheme was dealt with and his objection to the charges and deduction that were made. That is, it is about Mr Kirby's own investment in the scheme and its ultimate value. It is not about a decision made by ACL that affects the whole of the scheme for example about the adoption of an investment policy or a decision about the way the scheme will be managed that would affect all Growers.

conclusion 94 For those reasons I am satisfied that AFCA has jurisdiction as found by it in the Jurisdiction Decision to determine the Kirby Complaint in relation to the 2005 Softwood Project. 95 It follows that the proceeding should be dismissed. As the applicants were unsuccessful, they should pay AFCA's costs. 96 I will make orders accordingly. I certify that the preceding ninety-six (96) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.

Treasury Laws Amendment (Putting Consumers First - Establishment of the Australian Financial Complaints Authority) Act 2018(Cth)

Corporations Act 2001(Cth)ss 601FB, 761A, 912A, 1050

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (14)

Cited By (1)