Australia Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Limited

Court of Appeal (NSW)|2022-08-22|Before: Bell CJ, Meagher JA

Background to the dispute

The factual background to the dispute, which was largely (although not entirely) uncontroversial, was set out with clarity at PJ [8]-[18]. Efficiency warrants the reproduction of that statement of background with only minor additions.
Prior to 2014, the Second and Third Respondents to this appeal, Mr Bai and Ms Yang (collectively the Complainants), carried on a business of importing sheepskins into China. In 2014, they agreed in conjunction with Mr David Lee to establish a sheepskin export business in Australia which was to be conducted through an Australian company, Australian Sheepskin & Hide Pty Ltd (ASSH) which is now in liquidation. Both Mr Lee and Ms Yang became directors of ASSH and each acquired 40 of the 120 issued shares in the company.
Prior to that time, Mr Bai and Ms Yang had acquired two adjacent properties at Point Cook, Victoria (Property 21 and Property 23). Mr Bai and Ms Yang lived in Property 21 when they were in Australia. That property was acquired by Mr Bai alone.
On 16 May 2014, ACFM as lender, ASSH as borrower and Mr Lee, Ms Yang and Mr Bai as guarantors entered into a loan agreement by which ACFM agreed to lend ASSH an amount of up to $2 million in connection with ASSH's business and Mr Lee, Ms Yang and Mr Bai agreed to guarantee ASSH's obligations under the agreement. At the same time, Mr Bai and Ms Yang granted mortgages over Property 21 and Property 23, respectively.

Background to AFCA proceedings

As with the general background to the parties' dispute, it is convenient and efficient to adopt with some additions the primary judge's statement of the circumstances relating to the making and disposition of the complaint.
Before proceeding to provide that description and at this point in the narrative, it is necessary to identify key provisions of the AFCA Rules so that some of the principal issues which are alive on the current appeal may be seen in their procedural context.

AFCA Rules

As previously noted, the AFCA Rules operate as a tripartite contract of dispute resolution between AFCA, the Financial Firm (here ACFM) and the Complainants. The Rules are divided into five sections: A - E. As is noted in r A.4.4, Section C sets out certain types of complaints that AFCA must exclude and some situations in which AFCA can decide to exclude a complaint.
Under r A.2.1(c), AFCA is required to consider complaints submitted to it in a way that is: "(i) independent, impartial, fair, (ii) in a manner which provides procedural fairness to the parties (iii) efficient, effective, timely, and (iv) cooperative, with the minimum of formality."
Under r A.10.2, AFCA must provide the parties to the complaint with access to relevant information and an opportunity to make submissions.
Under r A.12.1, AFCA may, after collecting relevant information and obtaining submissions from the parties, choose to provide the parties with a preliminary assessment of the complaint. If the financial services firm which is the object of the complaint fails to accept AFCA's preliminary assessment within the timeframe specified by AFCA, the complaint must proceed to a determination: r A.12.3.
When determining a complaint at the request of a party, the AFCA decision maker must consider the parties' reasons if any for disagreeing with the preliminary assessment, but it is not limited to those reasons: r A.12.5.
Rule A.14.2 provides that: "When determining any other complaint, the AFCA Decision Maker must do what the AFCA Decision Maker considers is fair in all the circumstances having regard to: (a) legal principles, (b) applicable industry codes or guidance, (c) good industry practice and (d) previous relevant Determinations of AFCA or Predecessor Schemes."
An AFCA decision maker is not bound by the rules of evidence or previous AFCA or Predecessor Schemes decisions: r A.14.3. A determination by AFCA is "final" but only binding on the complainant(s) if accepted within 30 days of receipt of the determination: r A.15.3.
Rule C.1.1 provides that 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. In this context, r A.4.7 provides that "[d]espite other rules, AFCA may consider a complaint if all parties to the complaint consent in writing and AFCA agrees to this."
Under r C.1.2(e), AFCA must exclude "[a] complaint where the value of the Complainant's claim when the complaint is submitted to AFCA exceeds $1 million …". However, that jurisdictional limit does not apply relevantly to "a complaint to set aside a guarantee supported by security over the guarantor's primary place of residence": r C.1.2(e)(iii).
Rule C.1.3(b) provides in relation to "credit complaints" that AFCA must exclude: "A complaint about a Small Business (including Primary Producer) credit facility: (i) of more than $5 million or higher amount that applies as a result of an adjustment in accordance with rule D.4.3; and (ii) where the complaint is submitted by the borrower or a guarantor of the borrower's debt."
Rule C.2.1 states that AFCA may in its discretion exclude a complaint "if AFCA considers this course of action is appropriate". The rule goes on to note that "AFCA will not exercise its discretion to exclude a complaint lightly. The discretion will only be used in cases where there are compelling reasons for deciding that AFCA should not consider the complaint."
Rule C.2.2 provides examples of circumstances where AFCA may consider excluding a complaint which include: "(a) If there is a more appropriate place to deal with the complaint, such as a court … … (g) If the Complainant is represented or assisted by an agent who may receive remuneration for this service and AFCA considers that: (i) the agent is engaging in inappropriate conduct which is not in the best interest of the Complainant, or (ii) the complaint is not accompanied by information required by AFCA."
Section D of the AFCA Rules is headed "Remedies" and r A.14.4 provides that "any remedy must be within AFCA's jurisdiction as set out in Section D." Rule D.3.1 provides: "An AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for direct financial loss. When calculating the value of such a remedy, monetary compensation and any remedy where the value can readily be calculated, such as the waiving of a debt, are included."
Rule D.4 includes a table which sets out the maximum amounts that AFCA may award for complaints, not including costs and interest. The relevant limits stated in the table in relation to a credit facility complaint by a borrower are $1 million in the case of a small business loan, and an unlimited amount where the claim is "by a guarantor to set aside a guarantee supported by security over … the guarantor's principal place of residence …". Otherwise the limit for a guarantor of a small business loan is also $1 million.

The Complaint to AFCA

On 15 February 2019, Mr Bai and Ms Yang entered into a litigation funding agreement with Mr Jeffrey Lennon and borrowed $150,000 for costs relating to the District Court proceedings. Subsequently, Mr Lennon lodged a caveat over Property 21.
On 3 March 2019, Mr Lennon purported to lodge a complaint with AFCA against ACFM. Originally, the complaint was lodged in Mr Lennon's own name and named Mr Bai as the other complainant. The Complaint was set out electronically on a standard form prepared by AFCA for the making of complaints. It contained various dialogue boxes for the complainant to supply information about the complaint and to answer certain questions.
In response to the question on the standardised AFCA Complaint Form "What outcome are you seeking", it was stated: "I am seeking compensation I am not sure how much I am seeking Over $500,000." The parties proceeded on the basis that the "I" being referred to in this answer was Mr Bai rather than Mr Lennon.
AFCA apparently responded that it had no jurisdiction to hear a complaint by Mr Lennon. Ultimately, however, he was permitted to pursue the complaint on behalf of Mr Bai relying on an "Agent Authority Form" dated 12 April 2019 signed by Mr Bai and Ms Yang as complainants. The Agent Authority Form was accompanied by a 17 page document entitled "A Story to Tell" which elaborated on the complaint (although it also contained much information agitating Mr Lennon's separate grievances with the principal of ACFM, Mr Owen Chen, as opposed to complaints specific to the Complainants' engagement with that company).
On the final page of the "Story to Tell" Document, under a bold sub-heading "And the loss personally for Bai & Yang which continues to escalate", was written the following: "• Lost $254,646.10 in the sale of 23 Ranfurlie Ave, Point Cook to pay off drawdowns 3 & 4 • $150,000 in legal fees defending the original case • $70,000 in legal fees and growing, in having to defend a personal bankruptcy claim imposed by ACFM."
On 3 May 2019, Mr Taylor of AFCA wrote to ACFM expressing the view that the complaint against ACFM was "now within our jurisdiction". This followed AFCA's receipt of the Agent Authority Form. Mr Taylor wrote: "The complaint Based on my review of the information, Mr Bai and Ms Yang say: • they were guarantors for loans made to Australian Sheep Skin & Hides (ASSH) • ACFM made an unfavourable loan to ASSH with the intention to defraud them of their properties."
On 29 May 2019, ACFM inquired of AFCA whether it was willing to exclude the complaint or consent to ACFM continuing with the District Court proceedings. In its email, ACFM noted that AFCA had the discretion to exclude complaints pursuant to r C.2 of the AFCA Rules and developed arguments to the effect that there was a more appropriate place to deal with the complaint, namely the District Court, pursuant to r C.2.2(a); that the complaint was frivolous, vexatious, misconceived or lacking substance pursuant to r C.2.2(d); and that the complainant was represented or assisted by an agent who may receive remuneration for his service and who was engaging in inappropriate conduct which was not in the best interests of the Complainants, pursuant to r C.2.2(g). Each of these discretionary grounds upon which AFCA may have chosen to exclude the complaint within its rules was further elaborated.
On 3 June 2019, AFCA informed ACFM that it had decided to reject ACFM's application for AFCA to exclude the complaint and that it did not consent to a continuation of the District Court proceedings. Mr Ben Grant, a case analyst at AFCA, wrote to ACFM purporting to explain why each of the AFCA Rules relied upon by ACFM was not applicable in the matter. Mr Grant noted that: "This complaint has changed since it was first lodged by Mr Lennon in March 2019. At that time Mr Lennon was seeking AFCA to act against third parties to the complaint and to act for his business even though ACFM had not provided Mr Lennon's business a financial service. Since March AFCA has been in discussions with Mr Lennon in relation to AFCA Rules and powers. We have advised Mr Lennon on several occasions AFCA cannot consider any claim he is raising on his or his company's behalf and he has accepted this. Over time, the complaint has narrowed to ACFM's responsibilities to Mr Bai & Ms Yang as guarantors for the loan provided to Australian Sheep Skin & Hide Pty Ltd, which is currently under liquidation and is not a party to the complaint. The only claim AFCA is considering is whether ACFM acted inappropriately or unconscionably in taking a guarantee from Mr Bai & Ms Yang and as a result whether the guarantee provided by Mr Bai & Ms Yang is enforceable. This is a claim AFCA can consider in isolation, and we will not exercise our discretion to exclude based on Mr Bai & Ms Yang['s] counterclaims against third parties, provided that those counterclaims are stayed while we consider the complaint."
By a further email of 4 June 2019 to Mr Lennon, Mr Grant of AFCA noted that AFCA was only considering whether ACFM acted inappropriately or unconscionably in taking a guarantee from Mr Bai and Ms Yang and, as a result, whether the guarantee provided by Mr Bai and Ms Yang was enforceable.
On 5 July 2019, AFCA contacted officers of ACFM to discuss the complaint and to request ACFM's credit policies. Significant documentation was supplied on 29 July 2019 including documentation in relation to the District Court proceedings. The covering email contained the submission that: "ACFM had recommended the Borrowers and Guarantors (including Mr Bai and Yang) to obtain legal advice before signing the guarantees at a meeting which occurred on or around 17 May 2014 when the loan documents were handed to Mr Lee and Mr Bai. In respect of Ms Yang, ACFM asked at the meeting in June or July 2014 if she understood the documents and whether her lawyers had explained these to her. Ms Yang responded at the time that she understood what those documents were and that these documents had been reviewed by her lawyer."
During the second half of 2019, ACFM provided further documentation to AFCA, as did Mr Lennon on behalf of the Claimants. This material included the relevant agreements, affidavits sworn in the District Court proceedings (including by Mr Bai and Ms Yang) and the Court Book prepared for the purpose of those proceedings. In that period and through early 2020, AFCA continued its inquiries, directing detailed questions to the parties as its investigation proceeded, including in relation to the circumstances surrounding the execution of loan documentation and guarantees.
On 9 April 2020, AFCA issued its preliminary assessment (titled "Recommendation") and requested a response within 30 days. AFCA summarised its "key findings" in these terms: "The complainants did not understand English at the time the guarantee was signed. The guarantee documents were written in English, and the complainants say the lender pressured them to sign the documents at the time they were provided. The lender refutes this claim but is unable to provide evidence it gave the complainants sufficient time or the opportunity to obtain independent legal or financial advice, or to have the loan contract and guarantee translated into Chinese. The complainants also say the lender did not provide them with copies of the loan contract or guarantee. They say after the guarantee was signed, the lender took all of the loan documents. The lender is unable to provide evidence it gave the guarantors copies of the loan contract or guarantee documents at the time it issued the guarantee documents for signing. … While the lender refutes the complainants' claims [that Mr Bai signed the guarantee in the presence of Mr Lee], it is unable to provide evidence about when, how and to whom the guarantee was provided, when it was returned or when it was signed - it is therefore unable to show it provided the complainants with time to obtain independent advice. The lender's lack of supporting documentation is evidence it has not met good industry practice standards and did not act appropriately when it issued the guarantee. As such, the guarantee and security taken to support it are unenforceable. Furthermore, the lender used the guarantee and the mortgage to demand funds be paid to the loan from the sale of property A. This was a condition imposed upon the complainants by the lender in order to allow the sale settlement to proceed. As the guarantee and the security taken to support it are unenforceable, the funds paid to the lender from the proceeds of the settlement are to be refunded to [Mr Bai] along with interest on this amount from the date it was paid."
AFCA concluded that "[b]ased on the information provided, the lender did not act appropriately when it provided the loan". It then set out the relief that it proposed to give, which substantially corresponds to the relief set out in its final determination.
On 26 May 2020, ACFM's then solicitors, Arnold Bloch Leibler, made extensive submissions in relation to AFCA's preliminary finding. They also supplied AFCA with a statutory declaration made by Mr Lee setting out the circumstances in which he and Mr Bai executed the loan documents. Mr Lee's account differed from that given by Mr Bai.
Following further submissions on 15 and 24 July 2020 by its new solicitors, Mills Oakley, that the complaint should be excluded under mandatory and discretionary grounds (with a response by solicitors then acting for the Complainants), on 29 October 2020, AFCA rejected the jurisdictional objections. It is not necessary to go into the detail of AFCA's rejection of these jurisdictional objections. In issuing its ruling, AFCA indicated that any further submission in relation to jurisdiction would be dealt with in its final determination. In the event, ACFM submitted a largely repetitive further objection on 6 November 2020. In that letter, Mills Oakley stated on behalf of ACFM that: "Whilst ACFM is of the view that AFCA does not have jurisdiction to determine this matter for the reasons submitted, if AFCA remains of the view that it does have such jurisdiction, then ACFM welcomes that this matter is now to be determined by a panel and reiterates all of its earlier submissions contained in our letters dated 15 and 24 July 2020."
AFCA made its Determination on 17 February 2021.
The Determination again addressed the various jurisdictional objections which had been raised by ACFM.
AFCA set out its "key findings" in these terms: "The guarantees provided by Mr B and Ms Y were unfairly obtained because they did not understand the purport and effect of the guarantee and did not have the benefit of independent legal advice. The guarantees are invalid and unenforceable. The mortgages over Mr B's properties are also unenforceable as they were obtained to secure Mr B's guarantee."
AFCA's reasons for reaching that conclusion were extensive. Relevantly, AFCA said: "In relation to obtaining guarantees, the lender, having regard to the size and purpose of the proposed loan, and good industry practice at a minimum must meet the following conduct standards: • the lender to provide a prominent notice to the proposed guarantor that: > they should obtain independent legal advice on the effect of the guarantee > there are financial risks to providing a guarantee > they can refuse to enter into the guarantee • the lender must provide to the proposed guarantor a copy of the related loan contract and related security contracts • the lender must permit the proposed guarantor until at least the next day to consider the guarantee and related loan and security contracts, unless the guarantor is legally advised. Where the proposed guarantor is a director of the borrowing entity, the lender must permit sufficient time for the director to consider these documents unless the director waives this requirement • the lender must not give the guarantee to the borrower (or someone acting on behalf of the borrower) to arrange for the signing of the guarantee • the lender must ensure the guarantee is signed by the guarantor in the absence of the borrower."
AFCA noted that the documents were in English and that Mr Bai and Ms Yang did not speak or read English. It considered that that conclusion was corroborated by the fact that ACFM provided Mr Bai and Ms Yang with a loan summary, a loan security summary and a loan draw down summary in Mandarin. In AFCA's view, that would have been unnecessary if Mr Bai and Ms Yang understood written English.
AFCA concluded that Ms Yang was not offered the opportunity to obtain legal advice and did not understand the purport and effect of the guarantee. In reaching the first of those conclusions, it rejected evidence given by Mr Chen, the sole director of ACFM, in the District Court proceedings that at the time Ms Yang executed the guarantee he and she had a conversation in words to the following effect: "Me: 'These are the loan documents you authorised Mr Lee to sign on your behalf. I believe your lawyer has explained them to you.' Ms Yang: 'OK, I understand what those documents are. They have been reviewed by our lawyer.'"
AFCA gave the following reasons for doing so: "The panel does not accept Mr C's evidence that Ms Y had told him that she had obtained legal advice because: • the Acknowledgement of Legal Advice by the Guarantor signed by Ms Y is dated 16 May 2014, not June or July 2014 • the parties agree that Ms Y was in China on 16 May 2014 • the Acknowledgement of Legal Advice by the Guarantor is in English and the panel finds that it is more likely than not that Ms Y did not understand the purport of the document she signed • the Certificate of Independent Advice attached to the Acknowledgement of Legal Advice by the Guarantor has not been completed or signed by a solicitor or any other legal practitioner • Mr C says in his affidavit that he had agreed to Mr L signing the loan documents (including the deed of guarantee and indemnity) on Ms Y's behalf under a Power of Attorney on or about 17 May 2014 while Ms Y was in China • at least $390,000 of the $2,000,000 loan limit had been drawn down by Company A before Ms Y's return from China on 9 June 2014."
On the question whether Ms Yang understood the guarantee, AFCA reached the following conclusion: "The lender also submits that Ms Y would have understood she was providing a guarantee because: • the concept of a guarantee is no different under Chinese law than it is under Australian law, and • Ms Y had prior to 2014 provided guarantees as a director of another company that purchased property in Melbourne. The panel accepts Ms Y would have had a general understanding of what a guarantee was. However, the panel is not satisfied that Ms Y would have understood her actual potential liability as guarantor in this transaction without the benefit of independent advice. The loan transaction in this instance was to provide cash-flow to a cattle and sheep skin exporting business operated by Company A. This is a very different transaction than those for loans to buy real property."
AFCA reached similar conclusions in relation to the guarantee given by Mr Bai. It observed that in giving the guarantee he was a volunteer with the result that the standard of conduct required of ACFM was particularly stringent. On the question whether Mr Bai was afforded time to obtain legal advice, it said: "The lender says Mr B had time to consider the loan documents and in fact obtained legal advice. It has provided an Acknowledgement of Legal Advice by the Guarantor signed by Mr B and dated 16 May 2014 to support its position. However, the panel is not satisfied this document supports the lender's assertion that Mr B obtained legal advice because: • the Acknowledgement of Legal Advice by the Guarantor is in English and it is more likely than not that Mr B did not understand the purport of the document he [sic] signed it • the Certificate of Independent Advice attached to the Acknowledgement of Legal Advice has not been completed or signed by a solicitor or any other legal practitioner. It is unreasonable for the lender to rely on the Acknowledgement of Legal Advice in circumstances where the Certificate of Independent Advice has not been completed and signed by a solicitor or any other legal practitioner."
On the question whether the mortgages granted by Mr Bai were unenforceable, AFCA said: "The panel is satisfied the lender intended that the mortgages over the properties were to effectively to [sic] secure Mr B's guarantee as evidenced by the loan security summary which states: Guarantor: 1) guaranteed by [Mr L] and [Ms Y] of the board of the company 2) guaranteed by [Mr B]; collateral 21, 23 [R Ave, Location P] ... Further, the panel notes the mortgages are listed in the guarantee (which was limited to the specific loan transaction) and not in the loan agreement. As the unregistered mortgages were intended to secure Mr B's guarantee and the guarantee is unenforceable, then the mortgages are also unenforceable."
ACFM challenged AFCA's Determination on a number of grounds including that: 1. AFCA lacked jurisdiction to hear the complaint because it exceeded the $1 million jurisdictional limit in the AFCA Rules and did not involve an application to set aside a guarantee supported by security over the guarantors' primary place of residence (which would have extended the jurisdiction); 2. AFCA did not accord ACFM procedural fairness in concluding that Mr Bai and Ms Yang did not understand the purport and effect of the guarantees; 3. AFCA's conclusion that the mortgages were unenforceable either amounted to a denial of procedural fairness or was so unreasonable that no reasonable decision-maker would have reached it. That is said to be so because the mortgages were independent securities; 4. AFCA's conclusion that ACFM must repay the $254,646.16 was so unreasonable that no reasonable decision-maker could reach it because the payment was a voluntary one; and 5. AFCA's conclusion that Mr Bai and Ms Yang were entitled to recover certain legal costs and non-financial compensation was so unreasonable that no reasonable decision-maker could reach it. Following a request by the Court for supplementary submissions, ACFM also submitted that AFCA did not have jurisdiction to make the costs order it did.

The primary judgment

Not all of the issues dealt with at first instance carried through to the appeal. The matters which did, as dealt with at first instance, are summarised below. The first ground raised in the proceedings at first instance was that AFCA in fact had no jurisdiction to determine the complaint before it. The primary judge noted that the question of jurisdiction raised two issues: first, whether the complaint involved an application to set aside a guarantee supported by security over Mr Bai and Ms Yang's principal or primary place of residence (which AFCA had held that it did, in which case, there was no jurisdictional limit); the second, if it did not, whether the claim was for more than the jurisdictional limit of $1 million imposed by r C.1.2(e).
As we have already noted, the primary judge approached these "jurisdictional" questions on the basis that whether AFCA's decisions were within the terms of the parties' agreement was "a question for the Court, not a question for AFCA", and one to be resolved "on the facts before the Court, not on what was before AFCA" (PJ [36]). As to the first of the issues raised by the question of jurisdiction, the primary judge disagreed with AFCA, holding that the question whether a property is the applicant's principal or primary place of residence is to be determined at the time the claim is made and that, as the complaint was made on 3 March 2019, almost three years after Mr Bai and Ms Yang left Australia, neither of the Complainants had 'resided' in Australia, let alone at the relevant mortgaged property, since the time of their departure.
As to the second of those issues, the primary judge held (at PJ [43]) that: "The original complaint did not exceed the jurisdictional limit. What was claimed was 'monetary compensation' of an unspecified amount that was said to exceed $500,000. Plainly, a claim in those terms did not exceed the jurisdictional limit. The ultimate remedy granted by AFCA appears to have been fashioned by it. But that does not alter the fact that what was claimed fell within the jurisdictional limit and that therefore AFCA was entitled to entertain it."
His Honour went on to note that Section D of the AFCA Rules placed caps on the quantum of compensation that could ultimately be awarded by AFCA and noted ACFM's submission that "the value of the remedies given in this case is at least $1.28 million, consisting of the value of the outstanding loan as at 31 January 2019 of $938,051 together with the order that ACFM repay the sum of $254,646." His Honour rejected this submission, holding at PJ [45]-[46] that: "The submission depends on including interest on the loan to a date not identified by ACFM but which presumably is the date on which the determination was made. ACFM appears to have chosen the date of 31 January 2019 because that was a convenient date for which information on the amount of the loan (including interest) was available. However, in my view, interest should not be included in calculating the value of the remedy declaring the guarantees invalid and unenforceable. That is because the amount of interest cannot "readily be calculated" within the meaning of that phrase as used in r D.3.1. The amount of interest is variable, with the result that it would only be possible to know the value of a remedy that involved release of an obligation to pay interest once the precise date of the determination was known. Before that date is known, the value of the remedy cannot be calculated at all. The conclusion of the previous paragraph could be avoided by reading the phrase "readily be calculated" as meaning "readily be calculated at the time the determination is made". However, there is no reason to add those words, and the addition of the words would lead to impractical results. It would mean that the availability of the remedy to set aside a transaction would depend on the precise date on which the determination was made. That is not what the parties should be taken to have intended. Moreover, interest awarded by AFCA is specifically excluded in calculating the value of a determination for the purpose of applying the jurisdictional limit. There is no reason to distinguish between interest awarded by AFCA and interest payable under the agreement the subject of the complaint in applying that limit. It is more logical to treat both types of interest in the same way."
On the question of procedural fairness, a number of matters were raised by ACFM before the primary judge. One was that it was denied procedural fairness because AFCA failed to adopt appropriate procedures to resolve the conflicts in evidence between Mr Bai and Ms Yang, on the one hand, and Mr Chen and Mr Lee, on the other hand. It was contended that AFCA did not adequately test Mr Bai and Ms Yang's unconscionability claims and their claims that they did not understand the guarantees that they signed.
The primary judge pointed out that AFCA was not required to conduct a hearing, although it was required to give the parties an opportunity to make submissions, which it did in a number of respects. Moreover, it provided a preliminary determination and entertained further submissions after this preliminary determination was provided. In holding that there was no denial of procedural fairness, the primary judge observed at PJ [51] that: "AFCA appreciated that there was a conflict in the account of what happened given by the lender and the guarantors. Conflicts of that type are not uncommon in disputes between lenders and guarantors. As will become apparent, the only real conflict was between the evidence given by Ms Yang and the evidence given by Mr Chen. AFCA chose to resolve that conflict by reference to the objective facts derived from the material presented to it."
His Honour went on to note that reliance upon objective material is an orthodox means of resolving conflicting accounts of oral conversations especially, it might be added, where the disputed conversations occurred many years beforehand. His Honour also emphasised the tension between what ACFM contended was required, with its inevitable attendant expense, and the informal procedure which the AFCA scheme was designed to enshrine.
ACFM also complained, under the rubric of denial of procedural fairness and unreasonableness, about AFCA's conclusion that the mortgages secured Mr Bai's obligations under the guarantees rather than operating as independent securities in respect of the loan.
The primary judge dealt with this argument in short order, noting that ACFM's solicitors in their submissions of 26 May 2020 proceeded on the basis that the guarantees and mortgages stood or fell together. His Honour pointed out, moreover, that that approach was entirely consistent with the language of cl 2.1 of the mortgages of Mr Bai and Ms Yang.
Further, his Honour observed at PJ [59] that: "AFCA was not required to reach a decision strictly in accordance with the law. It was required to consider what was fair in all the circumstances. Those circumstances included the fact that the mortgages were third party mortgages given by the guarantors."

Grounds of appeal

Although the Amended Notice of Appeal contained a raft of grounds of appeal, Mr Cox SC who appeared for the Appellant gathered the various grounds of appeal under what he described as "three broad issues": jurisdiction; procedural fairness; and what he described as the "mortgage issue". There was no challenge to the objective or correctness standard of review which the primary judge applied in relation to jurisdiction. The "mortgage issue" involved a challenge to a finding by AFCA that the mortgages given by the Complainants were effectively to secure the guarantees, and the contention that this finding was unreasonable in the Wednesbury sense: see [81]-[83] above. The conclusion was also said to have entailed a denial of procedural fairness.
Mr Bai and Ms Yang also filed a Notice of Contention. The various matters raised on the Notice of Contention are considered in the course of consideration of the grounds of appeal. The Complainants did not contend that his Honour's decisions in relation to the jurisdiction issue should be upheld by reference to the standard of review applied in Mickovski.

Jurisdiction

The first ground in the Amended Notice of Appeal was that: "The Court erred by finding that the Second and Third Respondents' complaint did not exceed the jurisdictional limit under rule C.1.2(e), and the award of compensation did not exceed the jurisdictional limit under rule D.4, of the rules of the First Respondent in force at the time (the AFCA Rules), including by: a. finding that the value of the Second and Third Respondents' claim did not exceed the jurisdictional limit under rule C.1.2(e) of the AFCA Rules; b. finding that the amount of interest could not be readily calculated at the date the complaint was submitted; c. finding that interest as at the date the complaint was submitted was not included in calculating the value of the remedy at that date; d. finding that interest should not have been included in calculating the value of the remedy of declaring the guarantees invalid and unenforceable; and e. finding that the value of the compensation ordered by the First Respondent did not exceed $1,000,000."
As noted in [42] above, under r C.1.2(e), AFCA must exclude "[a] complaint where the value of the complainant's claim when the complaint is submitted to AFCA exceeds $1 million …" but this limit does not apply to "a complaint to set aside a guarantee supported by security over the guarantor's primary place of residence": r C.1.2(e)(iii).
As also already noted, AFCA treated the guarantees as being supported by security over Mr Bai and Ms Yang's primary place of residence, but the primary judge held that AFCA was wrong to do so because the mortgaged properties had ceased to be the primary place of residence at the time of the making of the complaint to AFCA: see [75] above.
By Notice of Contention, Mr Bai and Ms Yang seek to support the decision of the primary judge in relation to jurisdiction by contending that his Honour should have held, as AFCA had done, that the guarantees were supported by securities over their primary place of residence.
The primary judge's view on this matter has been noted at [75] above. The issue turns on the time at which the question falls to be assessed: at the time of entry into the guarantees and mortgages in 2014 or the time of the lodging of the complaint. The primary judge's reasoning in respect of his conclusion was contained in PJ [39] as follows: "…it is natural to read both r C.1.2(e)(iii) and r D.4.1 and the associated table as requiring the question whether a property is the applicant's principal or primary place of residence to be determined at the time the claim is made. The subject of both r C.1.2(e)(iii) and the table that forms part of r D.4.1 are claims that have particular characteristics. Absent any indication to the contrary in the rules, it is logical in those circumstances to ask whether the characteristics were present when the claim was made. That conclusion is supported by the evident purpose of the exception. The exception means that the beneficial provisions of the scheme are available to anyone who has given a guarantee supported by security over the person's principal or primary place or residence. No doubt that was considered appropriate because of the particular importance attaching to a person's principal place of residence. But unless the question whether a claimant meets those criteria is tested at the time a claim is made, there is a risk that claimants who might be thought deserving of that special protection (because the property over which a mortgage was granted was not the person's principal place of residence at the time the mortgage was granted but has since become so) will miss out. Conversely, it is unclear why a person who has given a mortgage over a property that is no longer the person's principal place of residence should be entitled to the benefits of the scheme irrespective of the value of the guarantee. It is the consequences for the individual who has given the mortgage that are important. But those consequences depend on the circumstances that exist at the time the claim is made, not on the circumstances that existed at the time the mortgage was granted."
The brief submission of Mr Bai and Ms Yang on appeal on this issue was that: "Properly construed, the Rules require that, in assessing whether a guarantee is secured by a guarantor's primary or principal place of residence, the relevant time of reference is the time at which the security was granted. In this regard, given the AFCA Scheme and the Rules are intended to be remedial, a broad interpretation that supports its beneficial purpose should be preferred: New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] 260 CLR 232, [32]. Further, any potential unfairness occasioned by this broad construction is avoided by the requirement under r A.14.2 that AFCA do what it considers fair in all the circumstances."
This argument was not developed orally.
The first aspect of the argument is largely assertion. True it is that the AFCA Scheme and the Rules are intended to be remedial and protective of the consumer, but that intention is given effect no less and arguably more so by the construction afforded by the primary judge. The Scheme gives effect to a free, quick and relatively informal optional dispute resolution process, with the optionality being in favour of the consumer who, unlike the "financial firm", is not bound by the outcome: see r A.15.3 noted at [40] above.
In cases (likely to be most cases) where there has been no change in the guarantor's principal or primary place of residence between the time when the guarantee is given and the time of the claim, the answer to the particular question of construction thrown up for consideration will not matter. But where there has been a change, and the consumer seeks to extricate him or herself from a guarantee, the text of the Rules strongly supports the construction given by the primary judge. The relevant extension of jurisdiction operates by way of exception to an exclusion of jurisdiction. The exclusion expressly looks to the value of the claim "when the complaint is submitted to AFCA". It would be incongruous if one looked to the value of the excluded claim at a particular point in time but had to consider whether there was an exception to that exclusion at a prior point in time. Further, as the primary judge held, there is a symmetry between r C.1.2(e)(iii) and r D.4.1 which supports his Honour's preferred construction.
The second aspect of Mr Bai and Ms Yang's argument as noted at [91] above can be quickly dismissed. Rule A.14.2 was not designed to be and should not be construed as being a general rule dispensing power. It should be construed as a rule authorising AFCA to do what is fair in all the circumstances within the constraints of its carefully delineated jurisdiction.
It follows that the argument based upon the Notice of Contention and summarised in [91] above must be dismissed. Because this conclusion is not dispositive of the appeal, it is not necessary for us to address the question raised by Basten AJA as to the standard of review applicable to a challenge to AFCA's determination as to its own jurisdiction.
The next issue relates to the challenge to the primary judge's finding that the value of Mr Bai and Ms Yang's claim did not exceed $1 million. Again, this aspect of the appeal is squarely met by the language of r C.1.2(e) which expressly and solely focuses upon "the value of the Complainant's claim when the complaint is submitted to AFCA" (emphasis added). The Rules do not address the amendment of a complaint but it is plain that the relatively informal procedure attaching to AFCA's consideration of a complaint, including its information gathering powers, means that the outcome and breadth of a complaint could expand over time. So also AFCA's obligation to do "what is fair in all the circumstances" in determining a complaint (r A.14.2) may mean that, subject to obligations of procedural fairness, the "value" of a complaint may grow from the time it is first filed. This is in fact what appears to have happened in the present case.
The simple answer to ACFM's argument is that whatever may have been the value of the relief ultimately awarded (a separate issue dealt with immediately below), the value of Mr Bai and Ms Yang's claim at the time when it was submitted to AFCA did not exceed $1 million. There is no basis for interfering with the primary judge's decision in this respect. His Honour's reasoning, as reproduced at [76] above, was correct.
Subparagraphs b and c of the first ground of appeal (see [86] above) assert that the primary judge erred by finding that the amount of interest could not be readily calculated at the date the complaint was submitted, and finding that interest as at the date the complaint was submitted was not included in calculating the value of the remedy at that date. The short answer to these two aspects of appeal ground 1 is that the primary judge made no such finding; his Honour's observations in relation to the ability readily to calculate interest and whether to include interest in the assessment of the value of the complainant's claim were made in the context of a consideration of whether or not the cap on the value of the remedy to be given, as provided for by r D.4.1 and the table which forms part of Section D of the Rules, applied. In his Honour's words, his conclusions on this point were directed to AFCA's "jurisdiction to make the orders it did" (emphasis added): PJ [47]; see also PJ [45]. The observations did not apply to the valuation of the claim at the time the complaint was submitted to AFCA, and the question of whether or not such a claim should be excluded.
That leaves for consideration the argument raised in subparagraphs d and e of the first ground of appeal (see [86] above) to the effect that the primary judge erred by finding that interest should not have been included in calculating the value of the remedy of declaring the guarantees invalid and unenforceable; and finding that the value of the compensation ordered by the First Respondent did not exceed $1,000,000.
The primary judge's reasoning in respect of this aspect of the appeals has been reproduced at [77] above.
Both the primary judge and the parties proceeded on the basis that the cap on compensation that could be awarded was not confined to an actual award of money (as the term "compensation" might ordinarily imply) but also included the value of any remedy where that value can "readily be calculated". This interpretation is supported by the terms of r D.3.1 which is set out at [46] above and also by the fact that that rule is followed by the statement, "D.4 sets out the maximum amount that an AFCA decision-maker can award for direct financial loss". This statement in turn points to the table in Section D of the Rules and ties the meaning of "compensation" in that table to what might be described as the extended sense of that term derived from r D.3.1.
On the facts of the present case, the underlying indebtedness together with interest amounted to slightly less than $1 million, although there was also an order that ACFM had to pay compensation to Mr Bai in the sum of $254,646 together with interest.
The point raised by sub-paragraphs d and e of appeal ground 1 is critical in Mr Bai's case as it was common ground that, if interest were included in the calculation of the value of compensation, what was awarded by the AFCA decision maker exceeded the $1 million compensation cap established by r D.4 of the Rules. This was not, however, so in Ms Yang's case, and one point raised on the Notice of Contention was that Ms Yang's complaint was separate to that of Mr Bai or at least should have been treated as separate. In our view, that point was well made.
It follows that the question whether interest on the underlying indebtedness should be included in calculating the value of the compensation available to Mr Bai remains alive in respect of him.
Ordinarily we would be inclined to accept ACFM's submission that interest on an underlying guaranteed indebtedness should be included and ordinarily would be readily calculable at the date of any determination by AFCA, particularly where, as in the current case, interest was capitalised under the loan. On the other hand and consistent with the conclusion of the primary judge, the value to Mr Bai of setting his guarantee aside overall was not readily calculable for the reason that the underlying indebtedness was also guaranteed by Ms Yang from whom Mr Bai could have sought contribution in the event that the guarantee had been called upon by ACFM.
Put shortly, as Mr Bai would have had a right of contribution against his co-guarantor, the value to him of having been relieved of any liability under the guarantee was not automatically the value of the underlying indebtedness including interest due on that amount and was not readily calculable. The value of the setting aside of Mr Bai's guarantee would have depended upon the value of his right to obtain contribution from Ms Yang. That would, in turn, have involved an assessment of Ms Yang's ability to meet any notional contribution as a co-guarantor.
As Mr Bai and Ms Yang submitted: "…each of Mr Bai and Ms Yang made a separate claim in respect of the particular guarantee given by him or her. The table in D.4 provides for a 'compensation amount limit per claim' (emphasis added). Even allowing for joint and several liability under the guarantees, recovery under one guarantee would necessarily reduce any outstanding liability under the other. This is another separate and distinct reason why it could not be said that the value of a remedy declaring each guarantee to be invalid and unenforceable was capable of being readily calculated."
For these reasons, we do not consider that the value of setting aside Mr Bai's guarantee was readily calculable, with the consequence that the value of compensation awarded to him as direct financial loss cannot be said to have exceeded the $1 million limit and was not beyond the limit of compensation able to be awarded by AFCA.
It follows that appeal ground 1 should be dismissed.

Procedural fairness

The grounds of appeal asserting that the primary judge ought to have held that ACFM had been denied procedural fairness related to two matters. First it was contended that AFCA denied the Appellant procedural fairness by not declining to exercise jurisdiction and in effect referring the matter for determination by the District Court of New South Wales in which proceedings had in fact been commenced. This was said to have been especially critical because of differences in the accounts between the parties as to what was understood by the two Complainants at the time they executed the guarantees, questions of independent advice and the like, coupled with the fact that ACFM was not able to cross-examine the Complainants in the context of AFCA's investigation.
This was an ambitious argument. It was, in effect, a challenge to a discretionary judgment made by AFCA not to decline to exercise jurisdiction and exclude the complaint but which was dressed up as a denial of procedural fairness. It was open to AFCA to decline to exclude the complaint in favour of conventional litigation, as the primary judge held. To do so was not only open to AFCA but entirely understandable given the length of time that had passed since the guarantees had been entered into and the diminishing quality of individual witness recollections over time. It would also be anathema to the relatively informal procedure permitted by the AFCA Rules to insist that in every case involving a potential dispute between witnesses, AFCA should exclude a complaint and decline to hear it so as to allow cross-examination in a court. Indeed, ACFM disavowed the existence of any such obligation.
Further, ACFM was given the opportunity to make submissions in support of its contention that AFCA was not the appropriate forum for the determination of the disputes, and took up that opportunity in particular in its detailed written submission of 15 July and 6 November 2020: see [62] above.
AFCA considered the jurisdictional objection on more than one occasion including in its Determination of 17 February 2021. This leads in to the second aspect of the alleged denial of procedural fairness claim, namely that AFCA had failed to engage with a detailed submission that had been made on 26 May 2020 by Arnold Bloch Leibler, the then solicitors for the Appellant, which included as an attachment a statutory declaration by Mr Lee as to his various interactions with the Complainants at the time the underlying loan and associated security guarantee documents were executed.
This aspect of the appeal was rightly abandoned when it became clear that AFCA in its Determination had in fact had regard to aspects of Mr Lee's Statutory Declaration of 22 May 2020.

Mortgage Issue

This issue is identified in [81] above. In essence, the Appellant re-agitates the argument, rejected by the primary judge, that AFCA's determination that the mortgages were given to support the guarantees was unreasonable within the Wednesbury sense and was made in circumstances entailing a denial of procedural fairness.
As to the asserted denial of procedural fairness, the Recommendation referred to at [59] above set out a proposed finding that the "guarantee and security taken to support it [i.e. the mortgages] are unenforceable". In other words, that ultimate finding was clearly foreshadowed and ACFM afforded an opportunity to make further submissions in relation to it. In those submissions, ACFM described the guarantees and mortgages as related documents.
This last point is also relevant to the challenge to the primary judge's rejection of the unreasonableness claim. It stretches credulity for one party to complain that a finding is so unreasonable that no reasonable decision maker could have reached it when that self-same party made submissions consistent with the subsequently impugned finding. The primary judge was correct in holding that it would be "unrealistic to treat the mortgages and guarantees as entirely separate". They were executed simultaneously, being third party mortgages given by guarantors.
AFCA's conclusion was open to it. The primary judge was correct to reject the suggestion that the high hurdle presented by a challenge on grounds of legal unreasonableness had been surmounted. To the extent that the primary judge's decision was sustained by AFCA's ability to reach a determination by reference to what was "fair in all the circumstances", so much was consistent with r A.14.2, and the interpretation of an equivalent rule in Patersons Securities Ltd v Financial Ombudsman Service Pty Ltd [2015] WASC 321; (2015) 108 ACSR 483 at [90]-[95].
The grounds of appeal in relation to what was described as the "mortgage issue" should be rejected.

Additional ground - Code of Banking Practice

A further ground of appeal, not addressed orally before this Court (or the primary judge) was to the effect that the primary judge erred by failing to decide whether, or alternatively by not finding that: 1. the First Defendant applied the Code of Banking Practice in making its decision; and 2. its decision to do so was a decision that was so unreasonable that no reasonable decision-maker could have made it.
It was perhaps not surprising that this particular contention was not sought to be developed orally. That is because the Code of Banking Practice was described by AFCA in its Determination as "reflective of good industry practice" and, under the AFCA Rules (r A.14.2), AFCA was required to take into account "good industry practice". That approach was open to AFCA which did not proceed under any misconception that ACFM subscribed to the Code of Banking Practice.
Further, the fact that the primary judge did not deal with the argument was of no material significance given the peripheral and passing role it played in the proceedings before him, not being the subject of any oral argument. That ground of appeal should therefore also be rejected.

Conclusion and orders

The appeal against the Second and Third Respondents should be dismissed with costs.
The appeal against the First Respondent (AFCA) should be dismissed but, consistent with its submissions and the approach AFCA adopted, there should no order as to costs in relation to its participation in the appeal.
BASTEN AJA: I agree with the orders proposed by the Chief Justice and Meagher JA. Further, subject to two qualifications, I also agree with their reasons.
The first qualification relates to the limits on the characteristics of complaints which can be considered by AFCA; that is, as to the scope of its functions. As the joint reasons explain, the rules under which AFCA operates constitute a tripartite contractual arrangement in relation to a complaint. (Given the inappropriate connotations of using a term which defines the authority of a court or tribunal, it is preferable not to describe the scope of AFCA's functions and powers as its "jurisdiction".) From the perspective of a court, the question is on what grounds the court may set aside a determination reached by AFCA that its power to determine the substance of a complaint was engaged. While the parties did not take issue with the approach of the primary judge to the scope of the Court's powers, there may be difficulties in the Court deciding an issue as to the meaning of AFCA's contractual rules which, arguably according to authority, is a matter for AFCA, acting reasonably. In this case the Court and AFCA agree on a sufficient ground to allow the rejection of the appeal.
As Leeming JA has written, extrajudicially, the statement that parties cannot confer jurisdiction by consent is apt to mislead. [1] The Court undoubtedly has jurisdiction to determine the limits of the contractually-conferred powers of AFCA, but the operation of those limits is arguably for AFCA to determine, acting reasonably. This was not the subject of direct argument in this case.
The second qualification relates to a specific limitation on AFCA's functions. It arises from an issue raised on a notice of contention by the complainant respondents, to the effect that the monetary limit on their complaint did not apply because the loan was secured against a principal place of residence. As the complaints were otherwise held to fall within the monetary cap, that point did not need to be resolved. In the circumstances, and for the reasons which follow, I prefer not to resolve the issue. Nevertheless, if it is to be resolved, I am not attracted to the approach of the primary judge.

The courts' power to set aside a determination

The Complaint Resolution Scheme Rules (the "Rules") involve a number of mandatory exclusions, the legal operation of which cannot be varied by AFCA in exercising the decision-making mandate under rule A.14.2 to do what is "fair in all the circumstances": that rule assumes that the dispute resolution function was in fact engaged. The parties and AFCA may agree to the limitations being ignored (rule A.4.7), but that did not happen in this case.
There is a question as to whether the factual basis upon which AFCA operates can be determined by it, in the exercise of its functions. It does appear to have been assumed that AFCA's determination as to whether the complaint fell within the monetary cap was a matter which could be reviewed by a court according to a correctness standard. In the present case, both the primary judge and this Court are satisfied that the complaint fell within the cap. The question is whether that is an available finding, or whether the court is constrained to a determination that AFCA's understanding of the complaint was open to it.
The principles to be applied in determining the jurisdiction of the Supreme Court to review decisions of a body such as AFCA were addressed at length by the Victorian Court of Appeal in Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd. [2] The Court [3] accepted that a decision of the respondent, operating under relevantly identical terms of reference to AFCA, could only be reviewed on the basis of principles applying to review of private domestic bodies resolving disputes between members. The majority concluded: "93 In summary, we consider that the relevant standard for review under the [terms of reference], and in contracts of this type by reference to reasonableness is the standard set in Wednesbury. We do so on the basis that there is long standing authority in this Court and in other jurisdictions, that where parties contract into an arbitral process with a third party, a court should only intervene where the decision is plainly unjust. The decision can only be reviewed if it is 'one to which no reasonable tribunal could properly come on the evidence'. [4] To set the standard of positive reasonableness, as Cromwell submitted, would defeat the intention of the contract and potentially play havoc with a scheme that is meant to be efficient, cost effective, and informal."
Those principles reflect principles applicable to judicial review of administrative decisions, and those applicable to the review of decisions by trustees. [5] Nevertheless, they are applied in this area on the basis that the tripartite contractual arrangements require such constraints. The application of those principles cannot be derived from the express terms of the contract, nor are they implied terms which comply with the principles established in BP Refinery (Westernport) Pty Ltd v Shire of Hastings. [6] Those principles, sometimes described as "ad hoc implied terms", [7] are distinguished from implied terms which constitute a legal incident of a particular class of contract. [8] Importantly in this context, AFCA operates a dispute resolution service as part of a scheme recognised by the Corporations Act 2001 (Cth) as a requirement of the statutory scheme regulating financial service providers. [9] AFCA itself is independent of the parties to the disputes it resolves.
While there can be no doubt that the principles of restraint apply to judicial review of decisions of AFCA made in accordance with its rules, there is a separate question, relevant in the present context, as to whether the principles of restraint apply to decisions of AFCA as to the scope of its functions and as to whether a particular dispute falls within the scope of those functions. In other words, if AFCA determines, acting in good faith and with procedural fairness, that it has power to resolve a particular dispute, is that decision immune from review, in circumstances where it was not manifestly unreasonable?
Cromwell Property Securities was a case involving the scope of the functions of the Financial Ombudsman Service. However, it was concerned with a criterion which did not preclude the exercise of the dispute resolution function, but which permitted the Service a discretionary power to refuse to entertain the complaint. Nevertheless, it was not suggested that any different principle applied to that discretionary exercise of power, involving, as it did, an evaluative criterion, than would have applied to the resolution of the dispute itself.
More relevantly for present purposes, Mickovski v Financial Ombudsman Service Ltd [10] involved a mandatory exclusion identified in the following terms: "11 Clause 14.1(p) excludes complaints where the complainant knew or should reasonably have known of all of the relevant facts more than six years before first notifying FOS of the complaint. It provides that: 14. What types of complaint are excluded? 14.1 The Service [FOS] cannot deal with the following complaints: … (p) where the complainant knew or should reasonably have known of all the relevant facts more than six years before first notifying the Service about the complaint."
On the facts, it was clear that the complainant, Mr Mickovski, did not know of a significant aspect of his total and permanent disability (TPD) policy under which he had made a claim, which was rejected, because the term of the policy had been changed by a judicial order made some time after his claim was dismissed. Nevertheless, the relevant decision-maker, a panel chair within the Service, rejected the complaint. The Court of Appeal held: "47 As was earlier noticed, the panel chair held that, although the correct interpretation of the SCI policy was a relevant fact, it was of no more than theoretical significance. He so concluded on the basis that he could not conceive of a set of circumstances in which the medical evidence would be sufficient to satisfy a member that an insured employee was totally and permanently disabled for the purposes of paying TPD benefit when, as a matter of objective fact, that insured was not totally and permanently disabled within the meaning of the SCI policy. 48 In our view, that process of reasoning confused relevance with probative value and resulted in the panel chair coming to the wrong conclusion."
The Court then set out the reasoning of the primary judge who had upheld the decision of the panel chair. The Court of Appeal continued: "50 With respect, however, that was not the way in which the panel chair reasoned and it would not have been correct if he had. As has been noted, the panel chair proceeded correctly up to the point that knowledge of the correct interpretation of the SCI policy was a relevant fact because it could have (as opposed to necessarily would have) affected Mr Mickovski's failure to apply for SCI policy benefits until after he learned of the correct interpretation of the SCI policy. The panel chair's error was to go on in effect to hold that, because he regarded it as inconceivable that Mr Mickovski might succeed in his claim for SCI policy benefits, FOS had no jurisdiction to determine whether the claim should succeed. The consequences of the error 51 In one sense, the panel chair's error may be described [as] a jurisdictional error in that it went to the question of whether FOS had jurisdiction under cl 14.1(p) to determine the dispute in the circumstances which obtained. In the sense which matters for the purposes of cl 15.3, however, it was not a jurisdictional error but rather an error made in the exercise of jurisdiction or more accurately within the ambit of decision-making power conferred on the panel chair by cl 15. That is to say, the panel chair was not guilty of fraud or lack of good faith; he was not prejudiced; and he did not misconceive the task which he was required to undertake. He simply made an error in the process of reasoning which he adopted in the execution of his decision-making responsibility. 52 In view of the terms of cl 15.3, such an error is not reviewable."
Clause 15.3 rendered decisions "final" and therefore not appealable. It is not clear that such a clause adds any additional protection. [11] It does not preclude review on the constrained grounds. [12] In any event, because a determination as to whether to accept a complaint or exclude it fell within the ambit of the powers conferred on the Service, the constraints on judicial intervention were applied to that decision.
In principle, a similar approach should apply with respect to AFCA. Thus, rule C.1.2 commences, "AFCA must exclude:" followed by a list of designated complaints. An ordinary reading of this rule is that it imposes on AFCA an obligation to satisfy itself that none of the designated criteria is engaged and, if one or more is engaged, to exclude the complaint. It is clear that some of the criteria involve elements of evaluative judgment, whilst others may require a degree of investigation in order to determine whether the facts are within the particular criterion or not. On this view, the mandatory exclusions in Part C.1 of the Rules confer on AFCA an obligation to decide the admissibility of the complaint. According to the approach accepted in Mickovski, the constraints on judicial intervention will apply to any attempt to review the decision of AFCA with respect to the operation of the exclusions. It is not the function of a court to exercise a de novo jurisdiction to determine whether a complaint falls within a particular excluded category or not.
Although, in principle, it might be suggested that those criteria which involve a mechanical determination of whether a fact exists or not could be distinguished from those requiring an evaluative judgment, such a distinction is unattractive. If the intention is that the former are open to be determined by the Court exercising original jurisdiction, whereas the latter are to be reviewed on the constrained basis, such a distinction would be hard to apply and therefore impractical. It should not be adopted. In any event, the present case involves the exclusion in par (e) which requires a determination of "the value of the Complainant's claim when the complaint is submitted to AFCA". The "value" of a claim is not necessarily simply the amount of money which the claimant seeks, although no doubt that is a factor to be considered. It will often (perhaps usually) involve an evaluative exercise.
It follows that, in my view, the preferable result is that neither the primary judge nor this Court can engage in a de novo assessment of the value of the claim at the relevant time. The proper conclusion is not that the claim was not excluded under par (e), but rather that there was no reviewable error on the part of AFCA in determining that the claim was not excluded under par (e).

The principal place of residence exception

As noted above, the operation of the exception to the exclusion required by par (e) only arises if AFCA erred in finding that the exclusionary criterion was engaged (which it did not). My tentative view is that the exception applied in the present case, for reasons given below. The better view may be that because it need not be determined, it should not be. Further, on the reasoning set out above as to the scope of the review available in a court, it is a matter which was determined by AFCA, favourably to the respondents, in a way which was not open to review by the primary judge, or this Court.
The exclusion in rule C.1.2 (e) reads as follows: "e) A complaint where the value of the Complainant's claim when the complaint is submitted to AFCA exceeds $1 million …. This jurisdictional limit does not apply to: (i) a Superannuation Complaint; or (ii) a complaint by a borrower arising from a credit facility provided to a Small Business … ; or (iii) a complaint to set aside a guarantee supported by a security over the guarantor's primary place of residence."
The question is whether the exceptions are each to be assessed at the same time as the value of the claim, namely when the claim was made. The primary judge thought it both "logical" and in conformity with the purpose of the exception to provide an affirmative answer. [13] For the reasons set out below, I would not accept that approach.
First, the argument based on logic (or perhaps consistency) is weak if it does not apply to each exception. As to (i), there is no temporal element as the definition of "Superannuation Complaint" turns on whether the complaint relates to superannuation, as defined in s 1053 of the Corporations Act. That will direct attention to the underlying insurance policy.
The exception in (ii) did not apply in this case because the complaint was by a guarantor and not "by a borrower", although the borrower was in fact a small business. However, the reason for the exception is that there is a separate cap in relation to a small business credit facility described in the following terms: "C.1.3 AFCA must exclude: … b) A complaint about a Small Business … credit facility: (i) of more than $5 million …; and (ii) where the complaint is submitted by the borrower or a guarantor of the borrower's debt." (Emphasis added.)
The harmonious operation of these provisions with respect to small business credit facilities is not without its difficulties. However, relevantly for present purposes, the question whether the claim is about a small business credit facility is to be determined, like the value of the claim, "when the complaint is submitted to AFCA". The consistency argument suggests that the chapeau to par (e) also provides an answer to the date at which the operation of exception (ii) must be addressed.
There is no reason to assume that the temporal element governing the timing of the value of the claim flows through to the exception; indeed, it clearly does not. The term "Small Business" is defined in rule E.1.1 to mean a business that had fewer than 100 employees "at the time of the act or omission by the Financial Firm that gave rise to the complaint." Thus, if the complaint related to the conduct of the credit provider at the time the credit facility was provided, then the number of employees should properly be calculated as at that time, and not at the time the complaint is made. At least in relation to exception (ii), the logic that the temporal element in the exclusion should apply to the exception cannot be accepted. Should a different conclusion be reached with respect to exception (iii)? The element of consistency with the chapeau provides little support for such a conclusion.
It is at least arguable, on the ordinary meaning of exception (iii), that because a complaint seeking to set aside a guarantee supported by security over the guarantor's primary place of residence will be addressed by reference to the giving of the guarantee and the security, the exception should also be addressed at that time. That would be consistent with exception (ii).
Secondly, it is said that a purposive reading of the exception requires that the protection be removed if the property ceases to be a principal place of residence. However, that identifies a single purpose and assumes it to be the only purpose of the exception, or at least the one which impliedly controls its operation. One can envisage circumstances in which the property ceased to be the principal place of residence because of the conduct complained of, but before the complaint was lodged. One can also envisage a purpose that seeks to place an additional cause for caution on a credit provider obtaining security over a principal place of residence. Such a purpose would necessarily operate at the time the impugned transaction was entered into, not the date of the complaint. If the complaint was about subsequent conduct, the same rationale might require attention to the character of the security at the time of the impugned conduct.
Further, while it is no doubt consistent with the apparent purpose of the exclusion that a property which becomes a principal place of residence after the conduct complained of may be the subject of the exception, it is by no means clear that such a change in the status of the property would bring it within the terms of par (iii). For present purposes, it suffices to say that even if a property, not originally a principal place of residence of a guarantor, becomes one before the complaint was made and thus engages the exception, it does not follow that a property which was a principal place of residence when the guarantee was given, but thereafter ceased to be, thereby lost the relevant protection. Clearly that is not the case where a small business ceases to be a small business after the conduct complained of occurred, but before the complaint was made.
Finally, applying the constraints on judicial intervention, the question is not whether this Court thinks that AFCA's construction of the rule was wrong, unless determining the operation of its own Rules was not within the scope of its functions, as I consider it was. Rather the question is whether the decision was not reached in good faith or was manifestly unreasonable.
In these circumstances, I would not determine the point raised by the notice of contention, it otherwise being unnecessary, and arguably inappropriate, to do so. But if it is to be determined, the preferable outcome is that for which the respondents contend.

Endnotes

M Leeming, Authority to Decide - the Law of Jurisdiction in Australia (2nd ed, 2020, The Federation Press), p 185-186.
(2014) 288 FLR 374; [2014] VSCA 179.
Warren CJ and Osborn JA; Tate JA dissented, but not as to the statement of principle.
Mickovski (see below at fn 9), at fn 26.
Karger v Paul [1984] VR 161 (McGarvie J).
(1977) 180 CLR 266 at 283; [1977] UKPCHCA 1.
H K Lücke, "Ad Hoc Implications in Written Contracts" (1973-76) 5 Adel Law Rev 32; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, 256 (Priestley JA).
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 345 (Mason J); [1982] HCA 24; Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468, 486-489 (Hope JA, Samuels and Priestley JJA agreeing).
Corporations Act, ss 912A(1)(g), 1050.
(2012) 36 VR 456; [2012] VSCA 185 (Buchanan and Nettle JJA, and Beach AJA).
Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335-336 (McHugh JA); WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489; [1999] WASCA 10 at [41] (Ipp J, Kennedy and White JJ agreeing); Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2013] VSCA 179 at [18(4)] (Maxwell P, Ashley and Redlich JJA agreeing); Cromwell Property Securities at [84].
Australian Football League v Carlton Football Club Ltd [1998] 2 VR 546, 568-569 (Hayne JA).
Australian Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Limited [2021] NSWSC 1577 at [39].

Amendments 19 October 2022 - Revisions made as follows:

Coversheet - counsel for the Appellant S Lee corrected to S Lees; Headnote p 4 - Appellant's name Australian Capital Financial Management Pty Ltd corrected to Australia Capital Financial Management Pty Ltd; Headnote pp 5 & 6 - Appellant's name AFCM corrected to ACFM; Headnote p 7 - Respondent's name ACFA corrected to AFCA; Judgment [6] - Australian Capital Financial Management Pty Ltd corrected to Australia Capital Financial Management Pty Ltd. 17 March 2023 - corrected footnotes 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. Decision last updated: 17 March 2023

Mills Oakley (Appellant) Becketts Lawyers (First Respondent) SLF Lawyers (Second and Third Respondents) File Number(s): 2022/00050536 Publication restriction: N/A Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity - Commercial List Citation: [2021] NSWSC 1577; [2022] NSWSC 94 Date of Decision: 7 December 2021; 11 February 2022 Before: Ball J File Number(s): 2021/00090220

HEADNOTE [This headnote is not to be read as part of the judgment] Australia Capital Financial Management (ACFM) appealed against a decision of Ball J (the primary judge) dismissing a challenge to a determination made by the Australian Financial Complaints Authority Ltd (AFCA) in favour of Mr Bai and Ms Yang (the Complainants). AFCA is the operator of a financial services dispute resolution scheme authorised under s 1050 of the Corporations Act 2001 (Cth). The manner in which AFCA resolves disputes is prescribed by the AFCA Complaint Resolution Scheme Rules (AFCA Rules). Once a complaint is made to AFCA, the AFCA Rules form a binding tripartite contract between the complainant, AFCA, and the subject of the complaint. In 2014, Mr Bai and Ms Yang, together with Mr Lee, established a sheepskin export business in Australia which was to be conducted through an Australian company, Australian Sheepskin & Hide Pty Ltd (ASSH). In May 2014, ASSH entered into a loan agreement with ACFM, by which ACFM agreed to lend ASSH an amount of up to $2 million. Mr Bai and Ms Yang agreed to guarantee ASSH's obligations under the loan agreement, and at the same time, granted mortgages over two properties which they owned in Point Cook, Victoria (the Point Cook properties). One of those properties had been used as a place of residence when Mr Bai and Ms Yang were in Australia. By about July 2014, ASSH had run into financial difficulties. ASSH subsequently defaulted on the loan agreement. In February 2015, ACFM commenced proceedings in the District Court against Mr Bai and Ms Yang to recover $742,800 owing under the loan agreement. In March 2016, the Complainants departed Australia following a refusal to grant Ms Yang a Business Owner (Residence) Visa. There was no appearance by the Complainants in the District Court proceedings, as a result of which, in June 2016, judgment was given in favour of ACFM against each of the Complainants in the amount of $738,876.29. In October 2018, the District Court made orders by consent setting aside the judgment of June 2016. In March 2019, Mr Lennon, retained by Mr Bai and Ms Yang under a litigation funding agreement, purported to lodge a complaint with AFCA against ACFM. As a part of that complaint Mr Bai sought compensation "[o]ver $500,000". The complaint was amended over time, and essentially involved a claim that ACFM had acted inappropriately or unconscionably in taking a guarantee from Bai and Yang and, as result, that the guarantees and mortgages were unenforceable. ACFM subsequently wrote to AFCA seeking that AFCA exclude the complaint pursuant to r C.2 of the AFCA Rules, which gives AFCA discretion to exclude complaints in certain circumstances. ACFM made several arguments for exclusion, including that there was a more appropriate forum to deal with the complaint, namely the District Court. In June 2019, AFCA informed ACFM that it had rejected ACFM's application for AFCA to exclude the complaint, and that it did not consent to a continuation of the District Court proceedings. AFCA carried out its investigation into the complaint and made its final determination in February 2021. That determination included the following "key findings": "The guarantees provided by Mr B and Ms Y were unfairly obtained because they did not understand the purport and effect of the guarantee and did not have the benefit of independent legal advice. The guarantees are invalid and unenforceable. The mortgages over Mr B's properties are also unenforceable as they were obtained to secure Mr B's guarantee." In proceedings before the primary judge, ACFM challenged AFCA's determination on a number of grounds. The primary judge rejected the challenge and dismissed the proceedings. Several of the issues raised before the primary judge were reagitated on appeal, and are summarised as follows. First, the primary judge rejected ACFM's contention that AFCA had no jurisdiction to entertain the complaint, or to award the remedy that it did. Relevantly, r C.1.2(e) of the AFCA Rules provided that AFCA must exclude a complaint where the value of the claim exceeds $1 million, but that this limit did not apply to a complaint to set aside a guarantee supported by security over the guarantor's primary place of residence. Further, r D.4 provided that, in complaints such as the present, the maximum amount of compensation that AFCA may award for direct financial loss is $1 million. The primary judge held that the question whether a property is a primary place of residence is to be determined at the time the claim is made and that, as the complaint was made several years after the Complainants had left Australia, the relevant property could not be their primary place of residence. His Honour held that the value of the claim nonetheless did not exceed the jurisdictional limit of $1 million. Further, his Honour rejected ACFM's submission that interest should be included in calculating the value of the compensation awarded by AFCA for the purposes of r D.4, and found that the value of the remedy did not exceed the limit of $1 million. Further, the primary judge found that ACFM had not been denied procedural fairness as a result of AFCA's decision to determine the dispute without conducting a hearing, rather than allowing the matter to proceed in the District Court. Finally, his Honour rejected ACFM's submission that AFCA's finding that the mortgages over the Point Cook properties were given to secure the guarantees was unreasonable within the Wednesbury sense. ACFM appealed from the primary judge's decision. The main issues on appeal were:

whether the primary judge ought to have found that the guarantees of the Complainants were supported by security over their primary place of residence;
whether the primary judge ought to have found that the value of the claim exceeded the jurisdictional limit of $1 million;
whether the primary judge ought to have found that the value of the compensation awarded exceeded the maximum amount of $1 million;
whether the primary judge ought to have found that ACFM was denied procedural fairness; and
whether the primary judge ought to have found that AFCA's finding that the mortgages over the Point Cook properties were given to secure the guarantees was unreasonable in the Wednesbury sense. The Court held (Bell CJ, Meagher JA and Basten AJA agreeing), dismissing the appeal and ordering ACFM to pay the costs of the Complainants: As to the first issue, per Bell CJ and Meagher JA
The text of the AFCA Rules supports the construction given by the primary judge, namely that whether a property is the complainant's primary place of residence is to be determined at the time the claim is made. The extension of jurisdiction operates by way of exception to the exclusion of jurisdiction on the basis of the value of a claim. That exclusion expressly looks to the value of the claim "when the complaint is submitted to AFCA". Because this conclusion was not dispositive of the appeal, it was not necessary to decide what standard of review is to be applied to a challenge to AFCA's determination as to its own jurisdiction: [94]-[96] (Bell CJ and Meagher JA). As to the first issue, per Basten AJA
It is unnecessary to determine whether the guarantees were secured against the Complainants' primary place of residence, as the complaint was otherwise held to fall within the $1 million monetary cap. If the issue were to be determined, the preferable outcome would be that for which Mr Bai and Ms Yang contend, namely that the guarantees were supported by security over their primary place of residence: [154] (Basten AJA). As to the second issue, per Bell CJ and Meagher JA
The language of the relevant rule expressly and solely focuses upon the value of the Complainants' claim "when the complaint is submitted to AFCA". The value of the Complainants' claim at the time when it was submitted to AFCA did not exceed $1 million. Accordingly, there is no basis for interfering with the primary judge's decision in this respect: [97]-[98] (Bell CJ and Meagher JA). As to the second issue, per Basten AJA
The judicial review of a decision by AFCA as to whether a complaint falls within the scope of its functions is subject to constraints on judicial intervention of the kind discussed in Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 288 FLR 374; [2014] VSCA 179 and Mickovski v Financial Ombudsman Service Ltd (2012) 36 VR 456; [2012] VSCA 185. Accordingly, neither the primary judge nor this Court can engage in a de novo assessment of whether the complaint falls within a particular exclusion or not. The proper conclusion is not that the claim was not excluded under r C.1.2(e), but rather that there was no reviewable error on the part of AFCA in determining that the claim was not excluded under r C.1.2(e): [134]-[142] (Basten AJA). Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 288 FLR 374; [2014] VSCA 179; Mickovski v Financial Ombudsman Service Ltd (2012) 36 VR 456; [2012] VSCA 185; Karger v Paul [1984] VR 161; Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314; WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489; [1999] WASCA 10; Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2013] VSCA 179; Australian Football League v Carlton Football Club Ltd [1998] 2 VR 546, considered. As to the third issue

JUDGMENT

BELL CJ AND MEAGHER JA: The Australian Financial Complaints Authority Ltd (AFCA) is a company limited by guarantee and is the operator of the "AFCA scheme", which is a financial services external dispute resolution scheme authorised under s 1050 of the Corporations Act 2001 (Cth) (the Act).
Section 1051(4) of the Act specifies various operational requirements for the scheme which include that, pursuant to s 912A(1)(g)(i), a financial services licensee that provides financial services to persons as retail clients is required to have a dispute resolution system complying with s 912A(2) of the Act, which relevantly requires membership of the AFCA scheme.
AFCA's Constitution cl 3.2(g) provides that each member of AFCA agrees to be bound by the AFCA Complaint Resolution Scheme Rules (AFCA Rules). Once a complaint is made to AFCA, the AFCA Rules form a binding tripartite contract between the complainant, AFCA and the member the subject of the complaint (referred to in the Rules as the "Financial Firm"): see AFCA Constitution, cl 12.1(d); AFCA Rules, r A.1.2. This in turn has ramifications for the bases upon which any determination ultimately made by AFCA can be challenged in Court proceedings, as shall be explained below.
Section B of the AFCA Rules, which are set out in further detail later in these reasons, provides the requirements that must be met in order for AFCA to be able to consider a complaint that is submitted to it by a person eligible to make a complaint. Section C and rr C.1.2 - 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.
Sections B and C of the AFCA Rules collectively may be described as going to AFCA's "jurisdiction" to resolve complaints by eligible persons about AFCA members. Those Rules provide that a "complaint is within AFCA's jurisdiction provided it meets the requirements (as set out in section B) unless it is outside jurisdiction (as set out in section C)".
AFCA made a determination in relation to a complaint (or, more correctly, two related but separate complaints) against Australia Capital Financial Management Pty Ltd (ACFM or the Appellant) which is an AFCA member (the Determination). The relevant outcome of the Determination for present purposes was as follows: "This determination is in favour of the complainants. The complainants have 30 days to accept the determination. If they accept the determination: • the guarantees provided by the complainants are invalid and unenforceable • the lender must, with 14 days of the complainants' acceptance: > provide Mr B with an executed discharge of mortgage form for 21 R Ave, Location P > remove any caveat registered on the title for 21 R Ave, Location P > pay $254,646 compensation to Mr B with interest at 2.05% per annum, compound calculated monthly from 1 October 2014 to the date of payment".

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