Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd [2013] VSC 333

By leave did not appear or take an active part at trial

1 The plaintiff ("Cromwell") is a financial services provider and is responsible for the Cromwell Property Fund ("Fund"). Pursuant to s 912A of the Corporations Act 2001 (Cth), Cromwell was obliged to be a member of an "external dispute resolution scheme". As a result of this requirement, Cromwell became a participating member of a dispute resolution regime operated by the Financial Ombudsman Service Ltd ("FOS").

2 The current constitution of FOS establishes Terms of Reference ("TOR") which regulate the dispute resolution processes undertaken by it. Under the terms of the TOR agreed by Cromwell and FOS, FOS has power to refuse to consider a referred dispute if FOS considers this course of action appropriate.

3 The second and third Defendants ("the Radfords") have a dispute with Cromwell, their financial services provider. Cromwell has sought to have FOS invoke the power under paragraph 5.2 of the TOR to refuse to consider the subject dispute between the Radfords and Cromwell.

4 FOS has decided that it will not refuse to consider the dispute between the Radfords and Cromwell.

5 In proceeding S CI 2012 3570, Cromwell seeks a declaration that the first defendant's decision not to invoke the power to refuse to consider the subject dispute is in breach of the contract between Cromwell and FOS. Further, Cromwell seeks an injunction restraining FOS from hearing and determining the dispute.

6 Cromwell no longer pursues its claims for judicial review in proceeding S CI 2012 3570 nor its claims, including those under the Administrative Law Act 1978 (Vic) ("the ALA") in proceeding S CI 2012 3573 (Plaintiff's Reply Submissions, 17 December 2012, [37]).

7 Cromwell is the holder of an Australian Financial Services Licence under the Corporations Act. It is the Responsible Entity of the Fund.

8 Approximately $183 million has been invested in the Fund. Of that amount approximately $10.8 million has been invested by investors advised by the financial advisor Garnaut Private Wealth Pty Ltd ("Garnaut"), formerly Garnaut Private Client Advisers Pty Ltd.

9 In March 2007, the Radfords, who were clients of Garnaut, invested in the Fund.

10 In about July 2008, pursuant to s 912A of the Corporations Act and the conditions of its Licence, Cromwell became a member of an "external dispute resolution scheme" approved by ASIC and operated by FOS.

11 The FOS scheme is regulated by the Constitution of FOS and the TOR, as amended from time to time, and from about 1 July 2008 the contract between Cromwell and FOS included the terms set out in the Constitution of FOS and the TOR, as amended from time to time (the FOS Contract).

12 Under the FOS Contract an eligible applicant may apply to FOS to resolve a dispute between the applicant and Cromwell. Cromwell is bound by any such resolution, though the applicant is not.

13 Under the FOS Contract, FOS has a power to refuse to consider, or to continue to consider, a dispute if FOS considers this course of action appropriate.

14 The power to refuse to consider, or to continue to consider a dispute, is stipulated in paragraph 5.2 of the TOR, as amended on 1 January 2012.

15 In December 2011 the Radfords lodged a complaint against Cromwell, in essence relating to alleged inadequacies, non-disclosures and misrepresentations by Cromwell including by way of Product Disclosure Statements, in relation to certain investment products (the Dispute).

16 On 4 April 2012 the Radfords lodged a notification of the Dispute with FOS.

17 To this point in time, the Radfords have not made a complaint against Garnaut. Further, Garnaut has been authorised to act on the Radfords behalf in the Dispute against Cromwell.

18 On about 16 April 2012, Cromwell applied to FOS to have FOS exclude the Dispute pursuant to the Power to Exclude contained in paragraph 5.2 of the TOR, on the basis that a court was a more appropriate forum for the determination of the Dispute.

19 On 24 May 2012, pursuant to paragraph 5.2 of the TOR, FOS decided not to exclude the Dispute and provided its reasons for that Decision to Cromwell.

20 These proceedings arise from the decision made by FOS on 24 May 2012 to refuse to exclude the Dispute between the Radfords and Cromwell so as to allow that Dispute to be dealt with in Court.

21 Cromwell seeks to set aside FOS's 24 May 2012 decision and to restrain FOS from continuing to hear and determine the Dispute.

22 In its initial Originating Motion of 22 June 2012, Cromwell framed its claims in proceeding S CI 2012 3570 in three ways: breach of contract; judicial review by way of orders in the nature of prerogative writs and Cromwell also sought judicial review under the ALA. However, ultimately, Cromwell pursues relief only on the basis of the case as pleaded in its Statement of Claim dated 3 August 2012 in proceeding S CI 2012 3570, namely in relation to the contractual relief in Part C (Contract) in Cromwell's said Statement of Claim and preceding Originating Motion dated June 2012.

23 In a related proceeding number S CI 2012 3573 Cromwell, as applicant, applied on 25 June 2012 for an order for review pursuant to ss 3 and 4(1) of the ALA.[1] FOS and the Radfords are also the respondents to that proceeding, in respect of which there is no originating process, but rather process initiated by the filing of affidavit material and a subsequent oral application for relief. That application was adjourned to the date for trial.[2]

24 The orders made by Mukhtar AsJ on 25 July 2012, contemplate the two proceedings (S CI 2012 3570 and S CI 2012 3573) being heard and determined together, with evidence and submissions in each to be evidence and submissions in the other.[3] However, Cromwell and the Defendants have not sought to advance the claims made in proceeding number S CI 2012 3573 and no relief is presently sought in that proceeding.

25 It is also to be noted that subsequent to the institution of both the above proceedings, the Victorian Court of Appeal handed down its decision in Mickovski v Financial Ombudsman Service Ltd,[4] ("Mickovski") holding that decisions of FOS are not amenable to judicial review by way of orders in the nature of prerogative writs. The unsuccessful appellant in that matter had filed an application for special leave to appeal to the High Court which Counsel for FOS noted has been the subject of a settlement in those proceedings. In the circumstances Cromwell, in this matter, respectfully submitted that the Court of Appeal's conclusion in Mickovski was incorrect and, under cover of that submission, advanced no further submissions in support of its claim in proceeding number S CI 2012 3570 for judicial review by way of orders in the nature of prerogative writs and has made no submission in support of the relief sought in proceeding number S CI 2012 3573.[5]

26 The affidavit material before the Court in these proceedings comprises:

(i) Exhibit "P1": an affidavit of Daryl John Wilson sworn 20 June 2012 (DJW) in proceeding number S CI 2012 3570 on behalf of Cromwell, together with exhibits;

(ii) Exhibit "P2": an affidavit of Daryl John Wilson sworn 21 June 2012 in proceeding number S CI 2012 3573 on behalf of Cromwell;

(iii) Exhibit "D1": an affidavit of Nicolas Crowhurst sworn 20 September 2012 in proceeding number S CI 2012 3570 on behalf of FOS, together with an exhibit; and

(iv) Exhibit "D2": an affidavit of Nicholas Crowhurst sworn 4 October 2012, in proceeding number S CI 2012 3570, on behalf of FOS, and exhibits.

27 All of the above affidavits were received as tendered in both above-mentioned proceedings.

28 I note that the second and third defendants have communicated to the Court that they did not intend to participate in the hearing of this matter, or attend Court. The second and third defendants have also communicated to the Court that they agree to abide the outcome of this proceeding.

29 The parties are in substantial agreement as to the facts relevant to the issues in this matter as set out in the plaintiff's written Submissions dated 11 October 2012 paragraphs 11 to 27 (inclusive), 30 and 31, as follows -

(i) Cromwell is the Responsible Entity of the Fund.[6] It is the holder of an Australian Financial Services Licence and is engaged in the business of providing financial services to retail clients.[7] As such, it is required by s 912A(1)(g) of the Corporations Act to have a dispute resolution regime complying with s 912A(2) of that Act. That sub-section requires the dispute resolution regime to consist of, inter alia, membership of one or more external dispute resolution schemes that is, or are, approved by ASIC. Condition 21 of Cromwell's present licence, in effect from 4 January 2011, imposes an equivalent requirement.[8] FOS is the operator of an external dispute resolution scheme approved by ASIC for the purposes of s 912A of the Corporations Act.[9] It is one of only two such approved schemes.[10]

(ii) On or about 28 May 2008, Cromwell applied for membership of FOS and participation in the dispute resolution scheme operated by FOS in accordance with the applicable TOR, and acknowledged and agreed to be bound by the Constitution of FOS and the applicable TOR, as amended from time to time.[11] On or about 1 July 2008, FOS accepted Cromwell's application and Cromwell became a member of FOS.[12]

(iii) It is common ground between Cromwell and FOS that, from on or about 1 July 2008, there has been a contract between Cromwell and FOS containing the terms set out in the Constitution and the TOR as amended from time to time (the FOS Contract).[13]

(iv) The version of the Constitution relevant to these proceedings is the version as at 25 November 2010.[14]

(v) The version of the TOR relevant to these proceedings is the version amended on 1 January 2012 (the TOR).[15] The TOR is expressed to be binding upon "Financial Service Providers" (FSP) (paragraph 1.3(a)). That is, defined so as to include providers of financial services that are members of FOS (paragraph 20.1), such as Cromwell.

(vi) The TOR sets out a process whereby certain Applicants (paragraph 4.1) may lodge with FOS certain kinds of dispute between the Applicant and FSP (paragraphs 4.2-5.1) for determination by FOS.

(vii) Following lodgement of the dispute, the FSP cannot instigate legal proceedings relating to the subject matter of the dispute (paragraph 13.1).

• require a party to a dispute to provide or procure for FOS any information that FOS considers necessary and the party must comply with the request except in certain circumstances (paragraph 7.2);

• require a party to a dispute to do anything else that FOS considers may assist its consideration of the dispute, including attending an interview (paragraph 7.3);

• take the steps it considers reasonable in the event of a failure to comply without reasonable excuse, including drawing an adverse inference or, in the case where it is the Applicant in default, refusing to continue consideration of the dispute (paragraph 7.5).

(ix) The process for deciding disputes is set out in paragraph 8.5, as follows.[16] After giving the parties a reasonable opportunity to make submissions and provide information, FOS makes an assessment called a "Recommendation". If that is accepted, the dispute is resolved on that basis. If not, FOS proceeds to a "Determination", prior to which both parties may make submissions. FOS may decide on a broad range of remedies, including compensation up to a maximum cap ($280,000 (Schedule 2)), costs and interest (paragraph 9).

(x) In determining a dispute, FOS is not bound by any legal rule of evidence (cl 8.1) -

"FOS will do what is fair in all the circumstances, having regard to ... (a) legal principles; (b) applicable industry codes or guidance as to practice; (c) good industry practice; and (d) previous relevant decisions of FOS or a Predecessor Scheme (although FOS will not be bound by these)" (paragraph 8.2).

(xi) In order to accept a Recommendation or Determination, an Applicant must provide the FSP on request with a binding release from liability in respect of the matters resolved (paragraph 8.8). The Applicant may choose not to accept the Recommendation or Determination and, if it so chooses, it is not bound thereby (paragraph 8.9). If the Applicant does accept the Recommendation or Determination, the FSP is bound thereby and may not pursue court proceedings inconsistent with that decision (paragraphs 13.1(c), 13.2).[17]

5.2 Discretion to Exclude Disputes

FOS may refuse to consider, or continue to consider, a Dispute, if FOS considers this course of action appropriate, for example, because:

1. there is a more appropriate place to deal with the Dispute, such as a court, tribunal or another dispute resolution scheme or the Privacy Commissioner;
2. the Applicant is not a retail client as defined in the Corporations Act 2001;

1. the Dispute relates to a Financial Service Provider's practice or policy and does not involve any allegation of either Maladministration or inappropriate application of the practice or policy;

1. the Dispute being made is frivolous or vexatious or lacking in substance; or
2. after the Dispute is lodged with FOS, the Applicant commences legal proceedings against the Financial Services Provider that are related to the Dispute.

(xiii) If FOS decides to exercise the Power to Exclude, it must advise the Applicant and any other parties that are involved in and have been informed about the Dispute, and must provide reasons (paragraph 5.3(a)). The Applicant may object, in which case FOS will review the matter if satisfied the objection may have substance (paragraph 5.3(b)). The TOR provides no process by which an FSP may object to a decision by FOS not to exercise the Power to Exclude.

(xiv) By a document entitled "Investment Application Form" dated 15 March 2007, the Radfords applied to Cromwell for units in the Fund.[18] On or about 20 March 2007, Cromwell issued to the Radfords 99,661.1520 units in the Fund.[19]

(xv) On or about 4 April 2012, by a document entitled "Dispute Form" and an attached document entitled "Dispute", together with a statement on behalf of the Radfords, the Radfords lodged with FOS, for resolution by it, the Dispute between the Radfords and Cromwell concerning the Radfords' investment in the Fund.[20]

(xvi) The Radfords' claim was that disclosure documents associated with their investment were misleading and the subject of non-disclosures. The Radfords allege that they relied on those documents and, but for the alleged misrepresentations or non-disclosures, they would not have invested in the Fund or would have withdrawn from the Fund and, as a result of not doing so, they suffered loss and damage.

(xvii) The Radfords' Dispute is within the scope of the TOR.[21] It is common ground between Cromwell and FOS that Cromwell will be bound, on the terms and conditions of the TOR, by the resolution by FOS of the Dispute.[22]

(xviii) It is also common ground that, subject to the Court's decision in these proceedings, FOS intends to consider and determine the Dispute.[23]

(xix) On or about 16 May 2012, by a document entitled "Application to Exclude Dispute", Cromwell applied to FOS for FOS to exclude the Dispute, pursuant to the Power to Exclude, on the basis that a court was a more appropriate forum for the determination of the Dispute.[24]

Cromwell's application for exclusion under paragraph 5.2 of the Terms of Reference

30 In support of its Application to Exclude Dispute dated 16 May 2012 (AED), Cromwell identified, and continues to rely on, the following features of the Dispute resolution processes available to FOS (the FOS Process) and the subject Dispute including potential third party claims , as bases for exclusion and as to why the dispute should be resolved by a court, namely:

(a) because of the implication of a party outside the TOR, in this case Garnaut, there is a real risk that all the evidence necessary for FOS to fairly decide the Dispute will not be available to FOS (AED at [5(a)]);

(b) the inability of Cromwell to join Garnaut to the FOS Process (AED at [5(b)(i)]);

(c) the inability of Cromwell, within the FOS Process, to compulsively obtain documents, and other evidence, from Garnaut and documents in relation to Garnaut (AED at [4(p)]-[4(v)], [5(b)(ii)]);

(d) the inability of Cromwell, within the FOS Process, to limit pursuant to statutory proportionate liability regimes any liability it may have to the Radfords, having regard to the liability of Garnaut to the Radfords (AED at [4(g)], [4(j)], [4(k)], [5(b)(iii)]);

(e) the inability of Cromwell, within the FOS Process, to claim contribution or indemnity from Garnaut in respect of any liability Cromwell may have to the Radfords (AED at [4(j)], [4(l)], [5(b)(iv)]);

(f) the inability of Cromwell to have the dispute resolution process bind all relevant parties by the rules of disclosure (AED, [4(n)], [5(a)(v)]);

(g) the inability of Cromwell, within the FOS Process, to cross-examine witnesses of or associated with Garnaut (AED at [4(p)]-[4(v)], [5(b)(ii)]);

Cromwell's Submissions dated 11 October 2012 and 17 December 2012 expand upon these asserted heads of disadvantage and point out certain hypothetical disadvantages Cromwell might experience.

Cromwell's Advisor - Garnaut Private Wealth Pty Ltd

31 Central to its argument in support of Cromwell's application to exclude was the role of Garnaut the financial advisor to the Radfords at the time of their investment in the Fund. Cromwell also points out that at the time of the lodgement of the Dispute, Garnaut continued to be the Radfords' financial advisor. Cromwell notes that the Radfords have authorised Garnaut to act on their behalf in relation to the Dispute, which Garnaut has agreed to do without fee, and as part of these arrangements between the Radfords and Garnaut the Radfords have elected not to pursue Garnaut for its responsibility for their investment in the Fund. Cromwell also says these circumstances give rise to a conflict of interest on the part of Garnaut.

32 On 24 May 2012, by email to Cromwell of that date, FOS decided not to exclude the Dispute (the Decision) and gave reasons for that Decision.[25]

33 The reasons, given by a "Dispute Officer" on behalf of FOS, comprised the following (omitting formal parts):

I refer to your response dated 16 May 2012 requesting to exclude the dispute.

FOS has reviewed the matter and advise that FOS will not exclude the dispute on this basis at the current stage. Please note that you are free to make this assertion again when a merit assessment is [sic] been conducted by a Dispute Analyst. However, as FOS has the ability to demand required information from all parties, and the ability to test this information for validity, it is unlikely that we would consider excluding the dispute on this basis.

FOS will be able to determine what, if any, loss is attributable to either party and it is up to the Applicant as to whether they wish to pursue losses against the advisor directly. It is also up to the Applicant's discretion as to who they have acting as their representative.

34 It is common ground between Cromwell and FOS that the Power to Exclude in paragraph 5.2 of the TOR constituted an express term of the FOS Contract.

35 Further to the express terms of paragraph 5.2 of the TOR, Cromwell argues that by implication:

(a) FOS is obliged to exercise the paragraph 5.2 power to exclude 'reasonably', or alternatively, that it will not exercise the power to exclude 'in a manner in which no reasonable decision-maker in the position of FOS could exercise [it]'.[26]

(b) In exercising the power FOS must take into account 'relevant considerations'.[27]

(c) FOS will not exercise the power 'upon the basis of any error of law'.[28]

36 FOS does not admit these alleged implied terms. However, in its written submission and in oral argument FOS altered and clarified its position as follows:

(a) FOS now accepts that, as a matter of construction of the TOR, FOS is obliged to exercise the power 'reasonably and honestly'.[29] However, it contends that the requirement as to reasonableness means only that FOS's decision 'must not be so unreasonable that it's not open to a reasonable decision maker'.[30] That is, FOS's decision must not be unreasonable as was referred to in Associated Provincial Picture Houses Ltd v Wednesbury Corporation[31] ("Wednesbury").[32]

(b) FOS accepts that it was obliged to consider the matters on which Cromwell relied in its application to exclude the dispute. FOS submits that this obligation does not arise out of any implied term but is merely a consequence of the requirement of reasonableness. In this regard FOS submits, 'it would be unreasonable to completely ignore a proper submission that was made'.[33] As I understand this contention, by 'unreasonable', FOS again means Wednesbury unreasonable.

(c) FOS argues that where a decision as to whether to exclude a dispute requires FOS to decide a question of law, FOS is not required to decide it correctly. FOS asserts that it is permitted to decide a question of law wrongly so long as 'the particular interpretation of law ... adopted by FOS is [not] so aberrant that no honest or reasonable decision maker could have adopted it'.[34] In this contention it appears that FOS in substance draws on the statement of Tadgell JA in Australian Football League v Carlton Football Club Ltd ("Carlton Football Club")[35] which is considered later.

37 Cromwell does not contend that in making its decision FOS did not act bona fide. That is, Cromwell appears to accept that FOS honestly held the view that it was not appropriate to exclude the Dispute. Similarly, Cromwell does not suggest that in making the decision it did FOS acted dishonestly.

38 For reasons that follow, I conclude that in deciding whether to exercise the power to exclude, FOS was required to:

(2) Consider proper submissions put to it by a party as to whether it is appropriate to exclude the Dispute.

(3) Consider whether the FOS process or a court process was more appropriate for the determination of the Dispute.

(4) Correctly decide any question of law in relation to the meaning of a law which it is the function of FOS to interpret, were that to arise.

39 I am also of the view, contrary to FOS's argument on this point, that there is no impediment to the implication of terms into the FOS written express TOR.

40 FOS submits terms cannot be implied into the TOR because the TOR are required to be approved by ASIC and implying terms would usurp ASIC's power to control those terms. ASIC's supervisory role arises as a result of the requirement imposed upon it, and its power to approve the terms and conditions upon which its entities, such as FOS, bind contracting parties in relation to a dispute resolution process is clear.

41 However, ASIC's supervision of express terms does not preclude implication. Just as parties to a contract, no matter how careful and well advised may fail to turn their mind to an issue, which can nevertheless be identified by a court as subject to an implied term, so also can ASIC. Without an implied term to deal with some issue, a contract may be unworkable. It is here apposite to note that at all events, to be implied, a term must be necessary. Furthermore, clear language would be required to impute to Parliament an intention to preclude implied terms in the circumstances here argued by FOS. No such language can be called in aid by FOS here.

Cromwell contends FOS must exercise the power to exclude reasonably/alternatively not exercise the power in a manner no reasonable decision-maker could do

42 In relation to the exercise of the Power to Exclude arising under paragraph 5.3 of the TOR , FOS is required to decide reasonably in the Wednesbury sense

43 FOS concedes that it is required to exercise its power to exclude (or not to exclude) a dispute in a manner which is not Wednesbury unreasonable. This concession is rightly made because the Court of Appeal in Mickovski held that a decision of FOS can be challenged on the ground that 'the decision is one to which no reasonable tribunal could properly come on the evidence'.[36] See also the consideration of Wednesbury unreasonableness in Minister for Immigration and Citizenship v Xiujuan Li & Anor.[37]

44 However, Cromwell contends that FOS is subject to a more onerous reasonableness requirement. Cromwell submits that FOS's decision must be positively reasonable as distinct from being merely not Wednesbury unreasonable.

45 As a matter of construction, FOS may only exercise the Power to Exclude when in its view that exclusion is appropriate and reasonable. The implied term for which Cromwell contends addresses the obverse situation, namely where FOS forms the view that exclusion is not appropriate. The effect of the implied term is that FOS may not form such a view unless it is reasonable to do so.

46 Pursuant to paragraph 5.2 of the TOR the Power to Exclude is expressly conditional upon FOS considering that exclusion is appropriate. Further, the exercise of that power is likely to significantly affect the interests of a relevant Financial Services Provider. Depending on whether FOS exercises or refuses to exercise the power in response to an application, the Financial Services Provider is either able to assert its rights in court in the ordinary course or is bound to the radically different FOS Process.

47 In support of its submission, Cromwell relies on the following passage from the decision of Gummow J in Service Station Association Ltd v Berg Bennett & Associates Pty Ltd:[38]

Where one party has an express power the exercise of which will significantly affect the interests of the other party (e.g. by cancellation of their supply contract) if the holder of the power is satisfied that a certain state of affairs exists, the words of the contract are fairly readily construed (and the more so when the parties have given such a power to a third party) as requiring a reasonable as well as honest state of satisfaction... But this is a result arrived at by a process of construction of the express terms in the setting of the contract as a whole. It is best not seen at all as the implication of a further term.

48 Cromwell also relies on numerous other cases where a contractual power was held to be subject to an implied requirement of reasonableness.[39]

49 In my view, in order to successfully impugn a FOS decision whether to exclude a dispute, Cromwell needs to establish Wednesbury unreasonableness. This is so for at least four reasons.

50 First, it is, with respect, not clear what Gummow J meant by 'reasonable' in the above passage in Berg Bennett & Associates. Cromwell concedes[40] that it only puts its submission as high as to observe that Gummow J may have meant 'reasonable' in the Wednesbury sense. Consistently with that view, one of the authorities cited by Gummow J in support of the reasonableness requirement is the judgment of Priestley JA in Renard Constructions (ME) Pty Ltd v Minister for Public Works.[41] In that judgment Priestley JA made it clear that the reasonableness requirement is undemanding and is easily satisfied.[42]

51 I note, however, that in Hughes Aircraft Systems International v Airservices Australia (No 3),[43] a decision to which the parties did not refer, Finn J noted in passing that he did not regard Wednesbury unreasonableness as a relevant standard in a contractual setting:[44]

I should also add that I do not regard the question of reasonableness in this commercial contract setting as raising in any relevant way those considerations associated with Wednesbury unreasonableness. They belong to a field of discourse different to that of the construction of a commercial tender process contract: for a critical recent examination of Wednesbury see the judgment of Thomas J in Waitakere City Council v Lovelock (CA(NZ), 12 June 1997, unreported).

52 The present Dispute arises in the context of a commercial contract, albeit one which is regulated, here relevantly so as to require agreement to the TOR as the framework for dispute resolution. However, Finn J's observations do not, in my view, overcome the other considerations set out below pointing to Wednesbury unreasonableness as the applicable standard for review in this case.

53 Secondly, even if what Gummow J meant by 'reasonable' is a positive obligation to exercise a contractual power reasonably (as distinct from merely not exercising it in a manner that is Wednesbury unreasonable), it appears that in order to establish a breach of that obligation the challenging party would have to show that the impugned decision could not have been made by a reasonable decision-maker. The requirement that a decision must be 'reasonable' (as distinct from 'correct') suggests that there may be more than one reasonable decision. Different decision-makers may reasonably disagree on the decision. It follows that the challenging party would probably not be able to show that the decision is not reasonable without demonstrating that no reasonable decision-maker could have made it. To put it differently, an obligation to act reasonably probably here leads to Wednesbury unreasonableness as the standard of review.

54 Thirdly, the question of whether it is appropriate to exclude a dispute has no clear cut answer by reference to fixed rules able to be applied to the prevailing facts but rather is matter of value judgment. The question is discretionary both as understood in the context of paragraph 5.2 of the TOR and in the sense explained by Mason and Deane JJ in Norbis v Norbis:[45]

'Discretion' signifies a number of different legal concepts (see, for example, the discussion in Pattenden, The Judge, Discretion, and the Criminal Trial (1982), at pp.3-10). Here the order is discretionary because it depends on the application of a very general standard - what is 'just and equitable' - which calls for an overall assessment in the light of the factors [prescribed by the statute], each of which in turn calls for an assessment of circumstances. Because these assessments call for value judgments in respect of which there is room for reasonable differences of opinion, no particular opinion being uniquely right, the making of the order involves the exercise of a judicial discretion. The contrast is with an order the making of which is dictated by the application of a fixed rule to the facts on which its operation depends.

55 If a discretionary decision of this nature was made by a court, an appeal against it would be governed by the principle in House v The King:[46]

It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

56 In the absence of clear language, a contract should not be construed as permitting a more generous scope of court review of a contractual discretionary decision-making power than the scope of review that would apply on appeal if the power were exercised by a court. It follows that the test of reasonableness on review of a FOS decision must be at least as deferential to the decision-maker as the House v The King test. The House v The King test is, in turn, closely related to the Wednesbury standard.[47]

57 In relation to Cromwell's arguments that FOS should have exercised the power to exclude because, in the circumstances, it was unreasonable to preclude Cromwell from having available to it certain statutory proportionate liability and contribution claims against the Radfords and or Garnaut (or by way of responses to claims made by Garnaut) which may be available in court proceedings, FOS argues the principle claims outlined by the Radfords are not subject to any proportionate liability regimes. Further, FOS contends that Cromwell mischaracterises the Radfords' claims as claims which appear to be based on an action for loss under Part 7.10 of the Corporations Act 2001 and for negligence, potentially enlivening Cromwell's ability to limit its liability pursuant to ss 1041L and 1041M of the Corporations Act.

58 FOS also contends that in reality the Radfords' claim relating to nondisclosure and misrepresentation is in the nature of an allegation by the Radfords (as expressed in their complaint to Cromwell, dated 16 December 2011), that the PDS (Product Disclosure Statement) was "defective" and not compliant with ss 1012A-1016E of the Corporations Act. FOS points out that the Corporations Act defines "defective" in s 1022A and further submits that there is no proportionate liability regime applicable to a claim made under s 1022B of the Corporations Act: Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450.

59 These factors, argued by Cromwell as clear contradictions to FOS concluding that it did not need to exclude the Dispute from the TOR process, are in my view, at this point of time, contingent and only arguable on Cromwell's behalf. Prospective claims against Garnaut by the Radfords or by Cromwell and/or by Cromwell against the Radfords, including claims by Cromwell for apportionment and contribution (see: Cromwell's complaints referred to in paragraph 30 (a)-(g) above and 123 below) are hypothetical and contingent. FOS is entitled to make its assessments of these circumstances and make its evaluation judgements as to whether, in all the relevant circumstances, these factors (were they to eventuate) render it inappropriate to consider, or to continue to consider, the subject Dispute.

60 Fourthly, and probably most importantly, Mickovski and Carlton Football Club are binding authorities for the proposition that, whatever may be the position with respect to contractual powers generally, the applicable standard on review of a FOS decision is Wednesbury unreasonableness. In Carlton Football Club Tadgell JA held that the court is not entitled to review, on the merits, the correctness of a domestic tribunal's decision on a question of fact. His Honour held that the applicable standard is whether an honest and reasonable decision-maker could have reached the impugned decision.[48] I also observe that it is most unlikely that the standard on review of a discretionary decision would be less onerous than the standard on review of a finding of fact.

61 In Mickovski the Court of Appeal approved the statements of principle in Tadgell JA's judgment in Carlton Football Club and held that they were applicable to FOS. The Court specifically noted that a decision of a domestic tribunal such as FOS can be challenged on the ground that 'the decision is one to which no reasonable tribunal could properly come on the evidence'.[49] To hold that, in the absence of some contractual provision altering the position, a decision of FOS could be challenged on some less onerous ground would make superfluous the Wednesbury ground approved by the Court of Appeal. Further, to so hold would be inconsistent with the decision in Mickovski.

62 Accordingly, for these reasons, I conclude that in deciding whether to exercise the power to exclude a dispute FOS is required to act reasonably in the Wednesbury sense.

FOS must exercise the power to exclude taking into account considerations relevant to its exercise

63 FOS concedes that, as a matter of reasonableness, it is required to consider proper submissions put to it by a party.[50] That concession is, in my view, rightly made. I agree with FOS's submission that it would generally be unreasonable in the Wednesbury sense for a domestic tribunal not to consider proper submissions made to it by a party in accordance with the proper procedure applicable to the tribunal.

64 FOS does not allege that the submissions put to it by Cromwell in its application to exclude were not proper submissions in the relevant sense. At all events, I consider that the Cromwell submissions were clearly proper. It follows that FOS was required to consider them.

65 However, the matters that Cromwell had put to FOS are not identical to those argued in this application, and appear to be less extensively and clearly articulated than the matters that Cromwell now says constitute 'relevant considerations' that FOS had wrongly failed to take into account. Accordingly, it is necessary to consider whether, as Cromwell submits, FOS was required to take into account 'relevant considerations' in making a decision whether to exclude a dispute.

66 In my view, Cromwell's submission to FOS and the Court were misconceived in some respects. In its submission to FOS, and to the Court, Cromwell submitted that FOS must take into account relevant considerations, including at the least those expressly identified in the TOR. Cromwell appears to have borrowed the concept of 'relevant considerations' from administrative law. Yet, in administrative law, 'relevant considerations' does not mean all considerations that, as a matter of logic, may bear on the decision in question. Rather, 'relevant considerations' in administrative law mean mandatory considerations, that is, matters that the relevant statute on its proper construction requires the decision-maker to consider.[51] Relevant considerations are therefore a subset of all matters that could, as a matter of logic, be relevant to the decision.

67 Cromwell has not made clear what it means by 'relevant considerations'. If what it means is all considerations that are logically relevant including those expressly identified in the TOR, Cromwell's submission must be rejected. To require the decision-maker to consider all considerations that may be logically relevant would impose on him or her an impractical burden and one which the law does not impose. Not only would the obligation be extremely burdensome objectively, but its effect would be that the contract would be imposing a more onerous obligation on a contractual decision-maker than administrative law imposes on statutory decision-makers. In the absence of clear language, the FOS TOR should not be read as imposing such an obligation. Nor could a term imposing this obligation be implied, principally because such an implication, amongst other possible contradictions, is not necessary or reasonable.

68 If, by contrast, Cromwell also uses the expression 'relevant considerations' in the same way in which it is used in administrative law, that is, as meaning mandatory considerations, then the implied term proposed by Cromwell is tautological. The term would require FOS to consider those matters which the contract requires FOS to consider.

69 It follows that the question of whether the contract requires FOS to consider 'relevant considerations' is likely meaningless. The real question is what, if any, are the considerations that the TOR require FOS to consider in making a decision whether to exclude a dispute.

70 Once the question is reformulated in this way, the answer appears to be fairly clear. Paragraph 5.2 of the TOR in terms requires FOS to decide whether it is 'appropriate' to refuse to consider a dispute. It then lists examples of reasons why it may be appropriate to exclude. One of these examples is, as provided in paragraph 5.2(a), namely that 'there is a more appropriate place to deal with the Dispute, such as a court'. This was the reason focused on by Cromwell in its submissions.

71 Accordingly, I reject the Cromwell submission that an implied term should be found in relation to paragraph 5.2 of the TOR, namely that in exercising the Power to Exclude FOS must take into account considerations relevant to its exercise of the power to exclude (Statement of Claims, dated 3 August 2012 [10(c)]). In addition to the implied term being unnecessary, for the reasons I have referred to above, I consider that an implied term of the scope pleaded would be unreasonable and contradictory to the express terms of paragraph 5.2 of the TOR which, in a non exhaustive manner, describe the types of considerations which are to be taken into account.

72 I also note that FOS acknowledges that paragraph 5.2 requires it to decide the course of action which is appropriate, that is suitable or fitting in relation to either a decision to exclude or retain. FOS argues that when appropriateness is so specified, it is not necessary to import reasonableness. I also accept this argument as an additional basis for concluding that the implied term sought is unnecessary. Consequently, I reject Cromwell's associated contention that to fail to imply the requirement that FOS must exercise the relevant power reasonably risks FOS being able to form a view about exclusion which it believes is appropriate when that view is objectively unreasonable.

73 Further, I consider that, for the reasons which I refer to below, FOS appear, in any event, to have given consideration to all considerations made relevant by paragraph 5.2.

74 It follows that, as a matter of construction, at least where a party seeks to have FOS refuse to consider the relevant dispute on the ground that another forum is more appropriate, FOS is required to consider the relative appropriateness of the FOS process against the appropriateness of the other forum and in this exercise take into account the proper submissions of the parties and the considerations which the terms of paragraph 5.2 indicate are relevant to the issue. That would include FOS considering the advantage and prejudice to each party from having the dispute determined by FOS and by the other forum. Indeed, FOS itself emphasised in its oral submissions that FOS is required to consider the effects of its decision on both parties.[52]

75 For these reasons, I conclude that FOS was required to consider proper submissions put to it by Cromwell. FOS was also required to take into account those considerations made relevant by paragraph 5.2 of the TOR including the advantage and prejudice to each party arising from having the dispute determined by FOS in accord with all the features and benefits and requirements of the TOR rather than in a court, or other potentially suitable forum.

76 However, the task of evaluating that advantage and prejudice, assigning them weight, and balancing them including against other factors going to appropriateness, is a matter for FOS in the exercise of the discretion which the parties have expressly agreed to repose in FOS. So long as FOS has considered the question of comparative prejudice and advantage, and considered Cromwell's proper submissions, its decision cannot be challenged on the merits. Leaving aside grounds which are not presently relevant, such as bad faith, to mount a successful challenge to the FOS decision under paragraph 5.2 Cromwell would need to establish that FOS has either failed to consider these matters, made an error of law about the exact meaning of a law which it is the function of FOS to determine (were that to arise), or reached a conclusion that is Wednesbury unreasonable. It will however not be sufficient to impugn FOS's Decision of 24 May 2012, that FOS applied a construction of paragraph 5.2 that was arguably wrong: Carlton Football Club (Hayne JA) [564].

FOS is required to correctly decide any question of law

77 The starting point for the analysis should be the decision in Mickovski[53] where the Court considered the grounds on which a FOS decision can be challenged in a court.

78 The appellant, Mr Mickovski, applied to FOS to resolve a dispute with his insurer. The FOS Panel Chair held that FOS did not have jurisdiction over the dispute.

79 Mr Mickovski then instituted a proceeding against FOS in the Supreme Court, seeking judicial review of the FOS decision and also alleging a breach of contract. The trial judge found against Mr Mickovski who then applied for leave to appeal to the Court of Appeal.

80 The Court of Appeal held that FOS did not fall within the scope of the Datafin[54] principle and was therefore not amenable to judicial review (the Court however left open the question of whether the Datafin principle represents the law in Australia).[55] With respect to the contract claim, the Court held that there was a tripartite contract between FOS, Mr Mickovski and Mr Mickvoski's insurer, the respondent in the FOS dispute.[56] Datafin, concerned a situation where that company was bidding in competition with another company for control of a third corporation. Datafin, complained to the United Kingdom Panel of Take-overs and Mergers that its take-over competitor had breached the applicable Code regulating take-overs and mergers. In Datafin the Court of Appeal recognised the jurisdiction of the Court to review the panel's decision to dismiss the applicant's complaint. The Court's decision to recognise jurisdiction, was based on reasons including that the panel performed or operated as an integral part of a system undertaking public law duties and that its source of power was not simply the consent of those over whom it exercised that power, but also as a result of it operating as an integral part of a government framework supported by a periphery of statutory powers and penalties. The Panel was therefore under a duty in exercising what amounted to public powers to act judicially.

81 The Court of Appeal in Mickovski also held that the FOS decision in question (holding that the dispute fell outside its jurisdiction) was based on an error of law.[57] However, the Court was of the view that this error of law could not itself provide a valid basis for challenging the decision because cl 15.3 of the TOR (as applicable in Mickovski) provided that the particular decision in question was 'final'.[58] This, the Court held, limited the grounds on which the decision could be challenged:[59]

[W]here parties agree that a determination is to be 'final', they are taken to have agreed that the determination will not be subject to review unless affected by fraud or dishonesty or lack of good faith or (by analogy with jurisdictional error) unless it is otherwise apparent that the determination has not been carried out in accordance with the agreement.

82 The error of law in question, while going to the question of jurisdiction, fell outside these narrow grounds of review:[60]

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 ... to determine the dispute in the circumstances which obtained. In the sense which matters for the purposes of clause 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 clause 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

83 It followed in Mickovski that the error of law in question was 'not reviewable'.[61]

84 Importantly, the Court of Appeal expressly stated that but for cl 15.3 making the relevant decision 'final', the decision could have been challenged on the basis of an error of law[62] (emphasis added):

[A]lthough it is not open to turn what should be a hearing before a domestic tribunal into a hearing before the court, and of course there is no right of appeal as such from the decision of a domestic tribunal, if there is a doubt about the exact meaning of a law which it is the function of the domestic tribunal to interpret, a party to the contract is entitled to seek the opinion of the court about it.

Here, the question is whether the Panel Chair proceeded in accordance with the rules and there is a dispute as to whether the Panel Chair erred in the interpretation of clause 14.1(p) of the rules. In those circumstances, we should have thought that, but for clause 15.3, it would be open to either party to seek a declaration of right as to the correct interpretation of that clause.

85 While the error of law committed by FOS in Mickovski was an error in relation to a jurisdictional decision, the first quoted paragraph above is expressed in general language. Nothing in Mickovski suggests that the principle expressed in that paragraph is confined to errors of law going to jurisdiction.

86 In reaching its conclusion the Court of Appeal adopted and applied[63] the statements of principle of Tadgell JA in Carlton Football Club.[64]

87 In my view, Mickovski stands for the following propositions:

(1) Tadgell JA's analysis in Carlton Football Club of the grounds on which a decision of a domestic tribunal can be challenged applies to FOS.[65]

(2) The grounds on which a FOS decision can generally be challenged 'include a declaration of invalidity for restraint of trade, or as the result of the decision being plainly contrary to the agreement from which it purports to draw its authority, or as the result of bad faith, bias, dishonesty or breach of natural justice, or because the decision is one to which no reasonable tribunal could properly come on the evidence'.[66]

(3) In the absence of a provision making a particular decision 'final', a FOS decision can be challenged on the basis of an error of law were that error to arise in relation to the meaning of a law which it was the function of the domestic tribunal to interpret.[67] That is, except where the rules expressly provide that the decision in question is 'final', or there is some other stipulation to like effect, FOS is obliged to correctly decide a question of law which it is required to decide. Failure to do so would amount to a breach of contract that is actionable in a court of competent jurisdiction.

88 Mickovski, in my view, impugns FOS's submission that an error of law is not a valid ground for challenging its decisions unless the decision adopts a view of the law that is so 'aberrant' that it demonstrates bad faith or Wednesbury unreasonableness. Mickovski clarifies that error of law in circumstances analogous to those in that case may provide a valid ground for challenging a decision of FOS.

89 In support of its 'aberrant' limitation FOS relied on the judgment of Tadgell JA in Carlton Football Club. That reliance is, in my view, misplaced for two reasons. First, Mickovski is a later decision of the Court of Appeal dealing specifically with FOS and is to be preferred for that reason. To the extent that Mickovski is inconsistent with Carlton Football Club, if that be the case, Mickovski should be followed in the circumstances of this case. Secondly, in any event, Carlton Football Club does not stand for the proposition that a decision of a domestic tribunal can be challenged for an error of law only if the tribunal adopts an 'aberrant' view of the law.

90 Carlton Football Club concerned a challenge to a decision of the AFL Tribunal. The AFL, the player and the player's club were parties to a contract requiring the player to submit to the jurisdiction of the Tribunal, the task of which was to, inter alia, hear and determine charges relating to breaches of the relevant rules. The Tribunal found the player guilty of 'unduly interfere[ing]' with an umpire. The player and the club brought an action against the AFL, claiming that the Tribunal's decision was made in breach of contract. This action succeeded at trial but the Court of Appeal, by majority (Tadgell and Hayne JJA, Ashley AJA dissenting) upheld the appeal and found for the AFL.

91 Justice Tadgell's judgment provides a detailed exposition of the grounds on which a decision of a domestic tribunal constituted by a contract or a trust can be challenged in a court. As the Court of Appeal held in Mickovski, the principles expounded by Tadgell JA in Carlton Football Club apply to the decisions of FOS.

92 His Honour noted that decisions of domestic tribunals must be 'consonant' with the contract or trust that confers power on the tribunal:[68]

Statutes aside, the courts have been disposed to interfere in a limited way with decisions of private or domestic tribunals in order to protect private rights that have been adjudged to deserve protection, including rights in property. The concept of property has been broadly interpreted for this purpose and, in cases within that category, I believe that there is no decision of a private or domestic tribunal with which the courts will refuse to interfere if interference be considered necessary for the attainment of justice. If a tribunal's decision purports to owe its binding quality, for example, to a contract or a trust the courts, exercising jurisdiction in respect of contracts and trusts, will recognise that the making of the decision is to be consonant with the contract or trust before it is binding. If it is not so consonant a declaration may be made accordingly and any appropriate injunction granted upon the suit of an aggrieved person whom the tribunal's decision wrongly purports to bind.

93 His Honour then listed what he considered to be established, non-exhaustive, grounds for challenging the decision of a domestic tribunal:[69]

There are various bases on which the courts may adjudge a decision of a domestic tribunal to be inconsistent with an express or implied contract or a trust or other arrangement (or whatever consensual basis it is) upon which the decision must depend for its binding quality. If, for example, the effect of the decision is unreasonably in restraint of trade the courts will declare it invalid... If the decision is plainly contrary to any agreement on which its binding nature depends it will meet the same fate... If it is a decision that is seen not to be made in good faith, or to be the product of bias or other dishonesty, or not to be made in accordance with the principles of natural justice, the courts will upset it...

...

[T]he courts will interfere if the conclusion reached by the tribunal is plainly absurd or unreasonable; or such that no reasonable man could come to the conclusion; or that 'no reasonable man could honestly arrive' at it; or that the conclusion was reached in disregard of 'one of the fundamental principles of natural justice'...

94 His Honour emphasised that this list of grounds is not exhaustive:[70]

The basis on which the courts will assume jurisdiction to interfere in an appropriate case with the decision of a domestic tribunal on limited grounds - for example bias, ulterior motive or other dishonesty - has never, I believe, been exhaustively stated.

95 His Honour held that the court could intervene in relation to the Tribunal's finding that the player engaged in 'undue' interference with an umpire only if the finding was 'so aberrant that it cannot be classed as rational':[71]

Not only is an examination of the correctness of the tribunal's appraisal of the facts outside the court's purview: the court was in my opinion not entitled to say that the tribunal took, or that it probably took, an impermissible view of the meaning of [the rule prohibiting undue interference with an umpire]. No reasons for its decision having been given by the tribunal, it is impossible to know what meaning it gave to the [rule]. What is 'undue' is always, I should think, dependent largely on a subjective view of the relevant facts. What is undue interference with an umpire within the meaning of [the rule] is, within wide limits, a matter for the decision of the tribunal; and whether or not the facts as found by the tribunal in a particular case show an infringement is for the tribunal to decide. The criterion of undue interference which is specified by [the rule] to constitute an offence is so imprecise, and its application so much a matter of impression, that different decision-makers, each acting rationally, might reach differing conclusions when applying it to the facts of a given case. When a domestic tribunal is given the task of applying such a criterion to the facts that it finds, a court is entitled to substitute its own opinion for that of the tribunal only if the tribunal's decision is so aberrant that it cannot be classed as rational...

96 The principle that FOS seeks to draw from these passages is that a court is not entitled to review a finding of the tribunal on the merits. A tribunal's finding can only be challenged if it is irrational, that is, if no honest or reasonable tribunal could have made it.

97 In my view, FOS's submission fails to appreciate the distinction between findings on pure questions of law and findings on questions of fact or mixed questions of fact and law. The passage above is concerned with a challenge to a finding that the player engaged in 'undue interference' with an umpire. In making that finding the Tribunal was required to determine two questions. First, as to the facts. Secondly, whether those facts fell within the contractual expression 'undue interference'. The first question was a pure question of fact. The second question was a mixed question of fact and law.[72] The ultimate question of whether, on the evidence, the player had engaged in 'undue interference' was therefore a mixed question of fact and law. The Tribunal's decision did not set out the Tribunal's findings of fact nor did it explain how the Tribunal construed the expression 'undue interference'. It was therefore impossible to know what the Tribunal's conclusions were on any question of law going to the ultimate question. A challenge to the Tribunal's decision on a mixed question of fact and law, in circumstances where it was impossible to discern the Tribunal's view on any intermediate question of law, necessarily engaged the limitations applying to challenges to findings of fact. That appears to be why his Honour concluded that in order to impugn the Tribunal's decision the player had to establish that the ultimate conclusion was 'so aberrant that it cannot be classed as rational'.

98 FOS particularly relied on two passages from Tadgell JA's judgment. In the first of those passages, his Honour made clear that a court is not entitled to review the merits of a tribunal's decision:[73]

[I]f it could be seen that nothing had been brought before the tribunal which could justify in the minds of honest persons the conclusion reached, that would go to show that the inquiry that the tribunal purported to make had not been a due inquiry; but that was not to authorise a court itself to inquire into the question whether there was evidence upon which the tribunal could reasonably arrive at the finding made. ... The distinction is between, on the one hand, a recognition that there was no information available to the tribunal on which reasonable and honest minds could possibly reach the conclusion reached and, on the other, reviewing the material in order to decide whether the tribunal properly appreciated or treated it - i.e. whether the tribunal reached the right result. The first would be permissible...; the second would not. ... [A] court has no jurisdiction to review the findings of a domestic tribunal for the purpose of examining their correctness.

99 Nothing in this passage suggests that Tadgell JA was of the view that the 'aberrant' limitation would apply if it were possible to discern the Tribunal's view on some pure question of law.

100 It follows, in my view, that the judgment of Tadgell JA in Carlton Football Club is not authority for the proposition that a decision of a domestic tribunal on a question of law can only be challenged if the tribunal's view of the law is 'so aberrant that no honest or reasonable decision maker could have adopted it'. On the contrary, an earlier passage in his Honour's judgment suggests that he considered an error of law simpliciter to be a valid ground for challenging a decision of a domestic tribunal: [74]

It by no means follows from what I have said about the A.F.L. Tribunal's jurisdiction to interpret the Laws of Australian Football that it is constituted the final arbiter of their interpretation. If there is doubt about the exact meaning, any of the parties to the contract is entitled to seek the opinion of the court about it.

101 For these reasons, I conclude, that in deciding whether to exercise the power to exclude a dispute, were there to be a question of law, the meaning of which it is the function of FOS to interpret, FOS would be required to correctly decide such a question. However, in this instance there does not appear to be any relevant question of law which FOS was required to address in the exercise of its powers under paragraph 5.2 of the TOR.

102 Therefore, it is unlikely that a question of law analogous to the question arising in Mickovski would arise in the instant case because the obligation imposed by the FOS Contract on FOS is to do what in its opinion is fair in all the circumstances, having regard to four specified sets of matters, including " legal principles " (TOR paragraph 8.2). The primary criteria for decisions are therefore fairness in the opinion of FOS and FOS is only required to have regard to ... legal principles as a component of all the circumstances, rather than applying the law to its letter. FOS is therefore not likely to be required, pursuant to such terms, to decide a question of law.

103 Further, the exercise of FOS's discretion under 5.2 of the TOR is not concerned with deciding the referred Dispute under the TOR and it is clear having regard to that paragraph, and paragraph 8.2 of the TOR which is specifically concerned with the process of deciding the Dispute, that the matters to which regard is to be had under 8.2 are not required to be considered in the exercise of the discretion conferred by paragraph 5.2.

104 Cromwell's fundamental complaint is that, given the nature of the dispute between the Radfords and Cromwell, including in particular the features of that dispute seeking to implicate the Radfords' financial adviser Garnaut, and given the nature and limitations in relation to the processes of dispute resolution under the TOR, the TOR dispute resolution process is much less appropriate to deal with the subject dispute than a court.

105 Cromwell alleges that the FOS decision not to exclude the subject dispute is in breach of the implied terms of the contract between Cromwell and FOS. Notably, Cromwell does not allege a breach of an express term of the contract between itself and FOS.

106 The FOS Contract, including the Constitution and the TOR contain comprehensive provisions regulating the conduct of the dispute resolution process. Cromwell and FOS have agreed to adopt both the Constitution and the TOR. Under s 912A of the Corporations Act 2001, ASIC has also approved the terms of the FOS Constitution and TOR.

107 As parties to the TOR, both FOS and Cromwell recognise that they have agreed to dispute resolution processes which differ from the way in which courts determine disputes. For example, the TOR (exhibit DJW 9 to the affidavit of Daryl John Wilson, sworn 20 June 2012) provides in paragraph 8.2, in substance, that in deciding a dispute and as to remedy, FOS will do what in its opinion is fair in all the circumstances having regard to legal principles, applicable industry codes or guidance as to practice, good industry practice and previous relevant decisions of FOS or a Predecessor Scheme.

108 The parties have agreed pursuant to paragraph 1.2 of the TOR that in dealing with disputes, FOS is required to proceed with the minimum of formality and technicality and must seek to resolve Disputes in a cooperative, efficient and timely manner (TOR paragraph 1.2).

109 Further, the FOS system operates free of charge to any Applicant, and costs are not ordered against an Applicant in the FOS process (TOR 9.4).

110 Further, paragraphs 9.1, 9.2, 9.3 and 9.7 place certain caps on the value of remedies decided upon by FOS in respect of claims the subject of the TOR dispute determination process.

111 Paragraph 8.9 of the TOR provides that if an applicant does not accept a Recommendation or Determination in relation to the Applicant's dispute, the Applicant is not bound by the Recommendation or Determination and may bring an action in the courts or take any other available action against the Financial Services Provider (FSP). However, paragraph 8.7 provides that a Determination is a final decision and is binding upon the FSP if the Applicant accepts the Determination within 30 days of receiving the Determination.

112 In order to accept a Recommendation or a Determination, pursuant to paragraph 8.8 the Applicant must provide the FSP (if the FSP so requests) with a binding release of the FSP from liability in respect of the matters resolved by the Recommendation or Determination.

113 That agreed FOS dispute resolution processes are different to those adopted by courts is well recognised: Wealthcare v Financial Industry Complaints Service Ltd[75].

114 In Wealthcare, Cavanough J described the role of FICS (a body which was a predecessor to FOS) in the following way:

(7) The role of a FICS panel is not equivalent to that of a court. It is not established to hear and determine legal proceedings. For constitutional reasons it could not be so established. FICS, as its name suggests, entertains complaints, rather than causes of action. It conducts an industry based scheme for the resolution of consumer disputes. It offers opportunities for investigation, negotiation and conciliation, as well as for the making of determinations by appointed adjudicators and by appointed panels. The general nature of such schemes is helpfully reviewed in a recent article by O'Shea and Rickett.[76] Having referred to the FICS scheme in particular, the learned authors point out[77] that the various schemes differ in significant ways from courts:

"They are less concerned with the articulation and determination of legal rights than with the simple resolution of disputes."

Decisions under the schemes create new rights and obligations rather than declare existing ones.[78] There is no power to order discovery of documents or to subpoena witnesses. Enforcement of scheme decisions is "not directly sanctioned by the state. No bailiff will execute a warrant issued by an industrybased dispute resolution scheme".[79]

115 FOS is not required to apply the law to facts as found, which is a hallmark of the judicial process.[80] FOS' overriding obligation is "do what in its opinion is fair in all the circumstances" having regard to various matters including "legal principles", "applicable industry codes or guidance as to practice" and "good industry practice".[81]

116 It is clear that in agreeing to a process, the touchstone of which was to be "fair in all the circumstances", and in also agreeing that in doing so FOS will have "regard" to "legal principles" the parties have evinced an intent by paragraph 8.2 of the TOR that FOS was not required to apply the law as would occur in a curial setting. Further, paragraph 8.2 of the TOR fixes the framework within which FOS decides the substantive "Dispute", whereas paragraph 5.2 of the TOR is concerned not with the determination of the substantive dispute referred to FOS but with something analogous to the exercise of an interlocutory discretion by FOS.

117 Adopting with modification the language of Cavanough J in Wealthcare v FICS[82] the central task of FOS is to do what, in its opinion, is fair in all the circumstances. This constitutes a broad discretion which will not be the subject of overactive judicial intervention in the approach adopted by [FOS], in the criteria which [it] develops or in the application of those criteria or of the concept of fairness to the circumstances of the case.

118 In contra distinction to curial process, the features of dispute resolution regime applicable to disputes between Cromwell and FOS under the TOR include processes in which FOS may require a party to provide information (TOR 7.2, 7.3 and 7.5), however FOS is not empowered to compel disclosure of documents or information and is not empowered to compel the attendances of witnesses, although FOS may require a party to do what FOS considers will assist, including attending on interview (TOR 7.3). Similarly, FOS cannot require witnesses to attend for crossexamination.

119 The contractually conferred powers which FOS enjoys do not extend to it being able to invoke the application of the Wrongs Act 1958 (Vic) to proportion liability or to order contribution from a third party not contractually subject to the TOR. Save for what the TOR defines as "Other Affected Party", a term defined in a limited way by the TOR and not relevant in this instance, FOS has no reach over persons not parties to the TOR.

120 The TOR exhibit ("DJW-9" 1 January 2010, as amended 1 January 2012) sets out its purposes, principles and part of its structure as follows:

Section A: Preliminary Matters

1. Introduction

1.1 Purpose of the Service

The Service is conducted by FOS and has been established as an independent forum to resolve Disputes between Applicants and Financial Services Providers. The Service is free of charge for applicants. The costs of the Service are met by the Financial Services Providers.

1.2 Principles that underpin FOS operations and processes

In dealing with Disputes, FOS:

1. must do what in its opinion is appropriate with a view to resolving Disputes in a cooperative, efficient, timely and fair manner;
2. shall proceed with the minimum formality and technicality; and

1. shall be as transparent as possible, whilst also acting in accordance with its confidentiality and privacy obligations.

1. These Terms of Reference set out who is eligible to lodge a Dispute, the types of Disputes that FOS can consider, how FOS resolves Disputes, the types of remedies that FOS can provide and other related mattes. These Terms of Reference are binding upon Financial Services Providers.
2. The Operational Guidelines to the Terms of Reference are intended to assist understanding of the Terms of Reference and to provide further detail as to how FOS will resolve Disputes.

2. FOS Structure

2.1 Appointment of Ombudsmen

The Board of Directors of FOS appoints the Ombudsmen including the Chief Ombudsman. In making appointments, the Board will consider candidates' objectivity, qualifications, experience and personal qualities.

2.2 Powers and duties of the Ombudsmen

1. An Ombudsman has the power to exercise all powers and discretions conferred on FOS by these Terms of Reference and to carry out all responsibilities attributed to FOS under these Terms of Reference. An Ombudsman's duties include:

(ii) resolving Disputes by making Determinations; and

(iii) the chairing of and participation in FOS Panel processes.

121 Thus, it can be seen from the terms of the TOR that the FOS processes and the way in which the parties agree to undertake them, bear a close resemblance to the way in which many parties in other commercial circumstances agree to private arbitration of their disputes and differences. Although important distinctions exist, for example in the context of private arbitration, the legislature has deemed it necessary to provide for supervision and review, Commercial Arbitration Act 2011 (Vic). However, analogously with arbitrations, the FOS processes are consensual and designed and agreed to be less formal, less costly and involve procedures and requirements which seek to strike a balance between minimising processes, promoting expedition, reducing costs and producing fair and appropriate outcomes without stipulating for many of the more involved, costly and timeconsuming steps applicable to court proceedings.

122 I observe at this point that if the assertions by Cromwell in this matter were accepted in relation to the argument relating to appropriate forum, then it is readily foreseeable that the arguable involvement of third parties like Garnaut in relation to many FOS disputes may be raised by financial service providers and FOS may well regard itself as obliged to exclude such Disputes under 5.2 of the TOR, or under similar terms. This scenario has the potential to work a mischief with the FOS dispute resolution processes agreed by the parties and mandated and approved by the Regulator.

123 In the context highlighted above, Cromwell contends that it was unreasonable for FOS not to conclude that it was appropriate that the Power to Exclude be exercised because:

(i) FOS knew or should have known that at relevant times the Radfords were advised by Garnaut;

(ii) the subject Dispute is about alleged nondisclosures and misrepresentations which are said to have induced the Radfords to invest in the Fund and have caused them to suffer loss;

(iii) Cromwell is unable to join Garnaut to the FOS process and the Radfords have at least to this point, elected not to pursue Garnaut for its possible responsibility;

(iv) Cromwell was unable to test the Radfords' claims by obtaining documents from or in relation to Garnaut or to crossexamine witnesses of, or associated with, Garnaut about its advice to the Radfords;

(v) Garnaut was acting on behalf of the Radfords in relation to the Dispute, yet Garnaut is said by Cromwell to be in a position of conflict in that regard;

(vi) under the FOS process, Cromwell is not entitled to invoke statutory proportionate liability regimes to reduce its liability to the Radfords having regard to the responsibility of Garnaut for the loss suffered by the Radfords and would also be able to claim contribution from Garnaut.

124 Cromwell also submits that in court proceedings, Cromwell would be entitled to assert a right to statutory proportionate liability and would be able to claim contribution from Garnaut.

125 Further, Cromwell complains that in any subsequent court proceedings involving Garnaut, Cromwell would not be able to rely upon any assessment by FOS of Garnaut's share of responsibility.

126 Cromwell argues that if Garnaut is subsequently sued by the Radfords, any assessment of Cromwell's liability by FOS will not be an assessment of liability upon which Cromwell will be able to rely to protect itself from claims for contribution or indemnity by Garnaut pursuant to statutory proportionate liability legislation. Cromwell further notes that in this respect s 24(4) of the Wrongs Act 1958 (Vic), is enlivened by a claim by way of "writ" in an "action" which would not be the same status as the claim by the Radfords against Cromwell in the FOS process. Cromwell says that any claim by Cromwell against Garnaut could not be made until the conclusion of the FOS process and the extended period under s 24(4)(a)(ii) of the Wrongs Act would not be applicable by reason of the nature of the process and procedure by FOS.

127 Cromwell points out that it may have a claim against Garnaut for contribution or indemnity in respect of any liability Cromwell has to the Radfords, yet it is uncertain whether the liability "established" by way of the FOS process would found an entitlement to contribution pursuant to s 23B of the Wrongs Act, and, if so, whether such a claim could be made within time or would be susceptible of being statute barred.

128 Finally, Cromwell acknowledges that it is not possible at this point of time to establish that the Radfords have a valid claim against Garnaut which would succeed. Cromwell contends, however, that it is sufficient that there is a basis to consider that they may have a claim, especially because aspects of the FOS process upon which Cromwell relies expose constraints upon steps which Cromwell can take in respect of a third party, such as Garnaut. Cromwell contends that the matters summarised in paragraphs 30 (a) - (g) and 123 hereof and the above matter renders it unreasonable for FOS to conclude that it was appropriate not to exclude the Dispute. Alternatively, Cromwell argues it was so unreasonable to so conclude that no reasonable decision maker in the position of FOS could have so decided. Put another way, Cromwell says in essence that given the matters arising from the involvement and significance of Garnaut, and given disadvantaging features of the FOS process, the determination of the Dispute and associated issues are clearly matters only appropriate for curial determination.

129 In my view, the following considerations render the FOS decision not to exclude reasonable, in the circumstances, and result in FOS's decision being well outside the reach of Wednesbury unreasonableness.

130 Notwithstanding that paragraph 5.2 of the TOR provides that FOS may refuse to consider, or continue to consider, a Dispute, for example because there is a more appropriate place to deal with the Dispute, such as a court, the parties to the Dispute in this case have, as their base position, agreed that a Dispute of the type in issue in this proceeding will be dealt with pursuant to the provisions of the TOR. In this regard, the TOR defines in paragraph 4.2 the type of Disputes which the parties have agreed can be considered by FOS.

131 Further, it would have been clear to the parties, namely the Financial Services Provider, Cromwell, and the Applicant (the Radfords) that the types of disputes which the parties agreed to refer to FOS would likely comprise disputes arising from or relating to the provision of financial services by a party like Cromwell to the Applicant (TOR paragraph 4.2(b)(i)). It would also have been readily foreseeable by the parties that such disputes might well implicate a third party like Garnaut and also might well render relevant documentation and/or evidence in the possession of a third party not bound by the TOR.

132 The terms of the TOR also demonstrate that the parties turned their minds to the sort of disputes and circumstances which should not be dealt with by FOS. Paragraph 5 of the TOR defines the disputes which are outside the scope of FOS, including disputes the FOS service may not consider, namely disputes:

... in relation to which the Applicant commenced legal proceedings before the Dispute was lodged with the FOS except where:

(i) the legal proceedings have been discontinued; or

(ii) the relevant statute of limitation period will shortly expire and the Applicant undertakes in writing not to take any further steps in their proceedings while the FOS is dealing with the dispute (TOR paragraph 5.1(m)).

Legal proceedings on other matters

13.1 Debt recovery or other proceedings

1. Subject to paragraph b), where an Applicant lodges a Dispute with FOS, the Financial Services Provider:

(i) must not instigate legal proceedings against the Applicant or any Other Affected Party relating to any aspect of the subject matter of the Dispute;

...

while FOS is dealing with the Dispute.

1. Notwithstanding paragraph a), with FOS's agreement and on such terms as FOS may require, the Financial Services Provider may:

(i) issue proceedings where the relevant limitation period for such proceedings will shortly expire - but those proceedings may not be pursued beyond the minimum necessary to preserve the Financial Services Provider's legal rights; or

(ii) exercise any rights it might have to freeze or otherwise preserve assets the subject of the Dispute.

1. If the Dispute is subsequently decided by FOS and becomes binding upon the financial Services Provider, the Financial Services Provider will abandon any aspect of proceedings against the Applicant or Other Affected Party that are inconsistent with that decision.

134 The above parts of the FOS Contract are also highlighted to demonstrate that the agreed dispute resolution regime can be seen to recognise there may be potentially relevant third parties outside its reach. The FOS regime is also expressly cognisant of potential related court proceedings and limitation of action constraints.

135 What the TOR provisions clearly reflect is that the parties, like the plaintiff in this proceeding, have contracted to empower FOS to determine a broad ranging scope of disputes, to do so in a manner which in the opinion of FOS is fair in all the circumstances, having regard to the matters listed in the TOR paragraph 8.2, and recognising that parties to the TOR are ordinarily bound to submit to the stipulated dispute determination process notwithstanding that there may be a related legal proceeding which the plaintiff, and/or the Applicant (in this case the Radfords), may wish to pursue, including involving third parties.

136 In my view, given the nature and scope of the dispute determination procedures, the parties to the TOR are bound to accept that the disputes defined as within the jurisdiction of FOS are to be addressed as provided by the TOR and, further, those parties necessarily thereby accept that it is reasonable for FOS to consider, or continue to consider, a dispute falling within its defined jurisdiction notwithstanding that potentially there are, in relation to a given dispute, possible court processes and remedies available which are not within the power of FOS to address.

137 The proper interpretation of the TOR must of course be approached on the basis that the parties intended that paragraph 5.2 had work to do as part of the TOR scheme. However, the consideration by FOS as to whether, in a given set of circumstances, it is appropriate for it to refuse to consider, or continue to consider, a Dispute, for example because in the instant case a court would be a more appropriate place to deal with the Dispute, is a matter for evaluation and judgment by FOS pursuant to the discretion conferred by agreement on FOS by paragraph 5.2 of the TOR. This consideration as to what course of action is appropriate must be undertaken taking into account circumstances of the type provided by way of examples in paragraph 5.2(a) to (e). In my view FOS is also required to take into consideration the nature and scope of the TOR processes and the advantages and disadvantages of the TOR processes compared to court proceedings.

138 It is clear that the parties' intention was to confer a broad discretion on FOS in this regard. That intention is amply conveyed by the following language of paragraph 5.2 "FOS may refuse to consider, or continue to consider, a Dispute if it considers this course of action appropriate, for example, because: (a) There is a more appropriate place to deal with the Dispute, such as a court, tribunal or other dispute resolution scheme or the Privacy Commissioner."

139 The inclusion in paragraph 5.2 of the pivotal verb "may" and also the parties' empowerment of FOS to so decide, "... if it considers this course of action appropriate ...", clearly connotes the bestowal of broad discretion by Cromwell on FOS. See also Cavanough J in Wealthcare at [24], [25] and [26] as to the discretion in relation to determinations at the Dispute resolution level by equivalent panels.

140 It is also to be noted that the parties have agreed in relation to the power to exclude in paragraph 5.2 of the TOR that it is only if FOS decides to exclude a Dispute that it is required to provide its reasons for doing so. Furthermore, it is only the Applicant which is given the right to object in relation to a decision made by FOS under paragraph 5.2 (TOR 5.3).

141 The Dispute here is the dispute between Cromwell and the Applicants and is not at this time clearly intertwined with potential disputes between those parties and any disputes they may ultimately in the future have with third parties, including Garnaut. The Dispute is a dispute which the parties have agreed to have determined (or the subject of a Recommendation) pursuant to the TOR. It is clear that the parties have so agreed, notwithstanding that they appreciated that the FOS processes were materially different from the Court processes and, further it is clear that the parties appreciated that the FOS processes would not extend to the enforcement of procedures or remedies against or in respect of potential third parties like Garnaut.

142 Cromwell's issues with the Dispute being dealt with by FOS are hypothetical and contingent at this point in time. Notwithstanding that it is possible that the Radfords have a valid claim against Garnaut which may succeed and that there may be apportionment and contribution claims which in due course could be available to Cromwell, FOS was in my view acting reasonably in not regarding the possible significance of apportionment and contribution proceedings (as described in paragraph 30(a) to (g) and 123 and above) as rendering it unreasonable to refuse to exclude the Dispute from the FOS process. In the exercise of its discretion, weighing these hypothetical and contingent claims for apportionment and contribution in the balance with the many other factors I have referred to above which weigh in favour of FOS deciding that the Dispute should be determined as agreed under the TOR Processes, I consider that FOS cannot be said to have exercised the Power to Exclude unreasonably nor exercised that power in a manner which no reasonable decision-maker could have done.

143 Further, it is not possible for this Court to determine, at this point, whether any of the above hypothetical claims referred to by Cromwell as potentially prejudicing it are in fact available or meritorious. Similarly, it is not possible for the Court to determine at this point whether any decision resulting from the FOS process will, or will probably, create real difficulty or prejudice for Cromwell in the ways in which it argues might be the case. I have therefore characterised Cromwell's assertions on these aspects as arguable and hypothetical at this point of time. In my view Cromwell's arguable and hypothetical difficulties and disadvantages identified in paragraph 30(a) to (g) and 123 above, as developed in Cromwell's submissions, by reason of their uncertain and contingent nature (save for Cromwell's arguments about the disadvantageous TOR procedural processes which I have separately addressed see paragraphs [118], [144], [154], [169], [173], [175] and [176] hereof), do not individually or collectively render FOS's decision not to exclude the subject Dispute pursuant to paragraph 5.2 of the TOR unreasonable, nor do these matters raised by Cromwell, individually or collectively, render FOS's decision so unreasonable that no reasonable decision maker in the position of FOS could have so concluded.

144 I am not persuaded that by Cromwell being subject to the Dispute determination process which it has bound itself to, Cromwell will necessarily, or even probably, suffer material prejudice, and add that I am of the same view as to the effect on Cromwell in relation to the limitations of the TOR processes for disclosure and to compel evidence.

145 Although Cromwell will, at the election of the Radfords pursuant to paragraph 8.8 of the TOR, be bound by the FOS Determination in due course, this will only occur in circumstances where the Radfords (as Applicant) provide Cromwell (as the Financial Services Provider), if Cromwell so requests, with a binding release of Cromwell from liability in respect of the matters resolved by the Recommendation or Determination by FOS. Subsequent to any such Recommendation or Determination by FOS, in accordance with the terms of the TOR, Cromwell is free to commence proceedings by which it seeks to obtain relief, including from Garnaut.

146 Furthermore, subject to the limitations of paragraph 13.1(a) and (b) and (c) of the TOR, Cromwell may presently issue proceedings, including against Garnaut, with a view to preserving its rights and entitlements. In this regard however, I recognise that the FOS Contract paragraphs 8.7(b), 8.8 and 13.1(c) may be argued by the Radfords to give rise to limitations on Cromwell's apportionment or contribution claim against them. Similarly, I am cognisant of the possible limitation which Cromwell argues could arise as a result of the nature and status of the FOS processes in respect of Cromwell's present ability to initiate a claim against Garnaut under s 24(4) and 23B(1) of the Wrongs Act.

147 However, I consider Cromwell could issue contribution proceedings against Garnaut in order to preserve its rights and withhold serving such process until a Determination issued under the FOS process. Such a claim under s 23B of the Wrongs Act can be asserted as soon as Cromwell was in a position to plead its claim, in the limited way referred to in Arthur Young v Brunswick N.L..[83]

148 Cromwell also argues that following a determination by FOS it is possible that the Radfords might sue Garnaut, leaving Cromwell in a position where it could not rely upon any determination of liability by FOS to protect itself against a claim for contribution or indemnity pursuant to the statutory proportionate liability schemes.

149 In response, FOS submits firstly, that proportionate liability regimes do not apply under the relevant provisions of the Corporations Act and secondly, that even if claims were proportional, the prospect of the Radfords making a claim against Garnaut is remote given that the Radfords (were they to wish to accept the FOS Determination) would be required to provide a release to Cromwell (TOR paragraph 8.8) and therefore the Radfords could not recover any amount beyond that already recovered from Cromwell (Wrongs Act, s 24AK(2)).

150 FOS also submits that any FOS Determination that Cromwell compensate the Radfords would be in full and final settlement of the loss and damage attributable to Cromwell's conduct and that it is obscure and unlikely that there would be any additional claim which the Radfords could pursue against Garnaut which might in turn expose Cromwell to a claim from Garnaut under statutory proportionate liability regimes.

151 Although the TOR provides for limits in relation to compensation which FOS may decide should be paid by the FSP (TOR paragraph 9), I acknowledge it is conceivable that the Radfords might have an additional monetary claim (beyond the sum recovered via FOS from Cromwell) which they could pursue against Garnaut. This might in turn lead to Garnaut claiming proportionate contribution or indemnity from Cromwell in other proceedings. However, such a scenario is also speculative at this point. I also acknowledge that there could possibly be scenarios in which Cromwell might ultimately have rights of contribution and indemnity, however I add that those rights are contingent an hypothetical at this point which I consider justifies FOS in giving them little weight in making its paragraph 5.2 decision.

152 Further, the claim by the Radfords against Cromwell is not unique or exotic in nature, but rather is in the nature of a complaint by an investor that an investment fund has failed to disclose material matters in its Product Disclosure Statement, or otherwise made misrepresentations to induce the investor. The amount invested by the Radfords was in the order of $100 000. Accordingly, there is good reason with claims concerning an investment of this magnitude to regard it as desirable to have FOS deal with the relevant dispute in the way the parties have agreed and with minimal formality, technicality and associated cost, although it is to be noted that the applicant's potential to recover its own legal costs expended in the FOS process is also limited by paragraph 9.4 of the TOR. It is also reasonable to expect, at the time they entered into the TOR, both Cromwell and the Radfords would have been concerned about the alternative of litigating matters in issue, including with additional parties in a more timeconsuming, costly, technical and formal context, namely in court.

153 I am also of the view that the considerations of minimal formality and cost constitute additional matters which go to negative Cromwell's submission that it was wholly unreasonable for FOS to refuse to exclude the Dispute from the FOS process pursuant to paragraph 5.2 of the TOR.

154 Accordingly, for the reasons I have identified above the Cromwell arguments that FOS's lack of ability to bring to bear those rights of apportionment and contribution, and the FOS procedures not including the court like powers in respect of discovery and cross-examination and the like, do not in my view require FOS to exclude the Dispute under paragraph 5.2 of the TOR, nor do Cromwell's argument render it unreasonable for FOS to decide as it did in relation to the Cromwell application to exclude.

155 Similarly, I am unpersuaded for the above reasons that the way in which FOS is likely to determine the Dispute, and/or the status of that Determination is likely to materially prejudice Cromwell beyond the FOS process and Determination.

156 For the above reasons I do not consider that FOS's refusal to exclude was an exercise of power (or failure to exercise power) which no reasonable decision maker in FOS's position could have perpetrated.

157 If my earlier conclusion rejecting the identification of the implied term argued for by Cromwell and referred to in paragraph [44] above is incorrect, I find in any event that for the above reasons FOS would not be in breach of the implied term contended for by Cromwell and further that for the following reasons FOS properly considered the factors made relevant by the TOR, paragraph 5.2, in the exercise of its discretion .

Failure to take into account relevant considerations

158 Cromwell relies heavily on the potential example referred to in clause 5.2(a) of the TOR, that the exclusion of a Dispute may be appropriate because "there is a more appropriate place to deal with the dispute, such as a court".

159 Cromwell argues that in considering whether there was a more appropriate place to deal with a particular dispute, FOS "... was required to engage in an active intellectual process and give the matter real and genuine consideration". Cromwell submits that for FOS ... "to give real and genuine consideration to such a question necessarily required consideration of how, given its particular features, the dispute would respectively be dealt within FOS and in a court, and of whether the differences in those regards were such that the FOS Process was inapt for the dispute" (Cromwell's Submission [50]).

160 Cromwell further argues that in breach of the implied term which it asserts, FOS did not give real and genuine consideration to whether it was more appropriate that the dispute be decided in a court and that such failure is indicated by the failure of FOS to consider each of the many differences between the FOS process and court processes referred to in Cromwell's Submission dated 11 October 2012, [29] (a)-(h). These differences were, in essence, the distinctions between the FOS process and the court processes, in relation to discovery, compellability of witnesses and available crossexamination and the absence of proportionate contribution and indemnity claims in the FOS process.

161 Cromwell submits that none of the differentiating matters set out in paragraph [29] of its Submission dated 11 October 2012 is mentioned in FOS's reasons for its decision communicated by FOS's email dated 24 May 2012 (3:33 pm) (Exhibit "DJW-15" to the affidavit of Daryl John Wilson, sworn 20 June 2012). This communication, Cromwell concludes, provides such a paucity of reasons, and makes such a general reference to Cromwell's application stating that "FOS has reviewed the matter", that it is "... insufficient to dispel the conclusion that the matters not mentioned were not taken into account ".

162 The FOS email of 24 May 2012 is in the following terms:

Subject: Case Number: 279 980

Dear Ms Riethmuller,

I refer to your response dated 16 May 2012 requesting to exclude the dispute.

FOS has reviewed the matter and advise that FOS will not exclude the dispute on this basis at the current stage. Please note that you are free to make this assertion again when a merit assessment is been conducted by a Dispute Analyst. However, as FOS has the ability to demand required information from all parties, and the ability to test this information for validity, it is unlikely that we would consider excluding the dispute on this basis.

FOS will be able to determine what, if any, loss is attributable to either party and it is up to the Applicant as to whether they wish to pursue losses against the advisor directly. It is also up to the Applicant's discretion as to who they have acting as their representative.

As such, please provide your response to the issues raised by 7 June 2012.

If you have any further questions, do not hesitate to contact me at 03 8623 2098.

Kind Regards,

Joelle Lim Dispute Officer

Investments, Life Insurance and Superannuation

Financial Ombudsman Service Limited

163 Cromwell also argues that the "reasons" in the email dated 24 May 2012 from FOS to Cromwell portray a misunderstanding of a number of the matters referred to in paragraph [29] of Cromwell's Submission of 11 October 2012, for example, the statement in the 24 May 2012 email that "FOS has the ability to demand required information from all parties". Cromwell submits that this statement does not address Cromwell's inability in the FOS process to obtain information from a nonparty such as Garnaut.

164 Cromwell also cites as a manifest inadequacy the statement in the email of 24 May 2012 from FOS to Cromwell that "FOS will be able to determine what, if any, loss is attributable to either party". Cromwell contends that this statement is directed (at least in part) to Garnaut's responsibility for any loss suffered by the Radfords. Cromwell complains that this statement does not address the issue, namely that the FOS process does not accommodate claims relating to the proportionate responsibility of a third party such as Garnaut or claims for relief against Garnaut by Cromwell, nor does it address the possibility of ensuring Cromwell is protected from any subsequent contribution or indemnity claim by Garnaut in the event that it is sued by the Radfords

165 In my view however, it is not logical or appropriate to impugn FOS's decision of 24 May 2012 by criticising it for not referring to or explaining why Cromwell's points of distinction between the two paths for dispute determination are accepted or rejected. This is because, as I have held above, the points of distinction in the processes (as argued by Cromwell) do not, in the circumstances, constitute bases on which FOS should have decided it was appropriate to exclude the subject Dispute under paragraph 5.2 of the TOR.

166 In relation to Cromwell's allegation that FOS did not give real and genuine consideration to whether it was more appropriate that the subject dispute be decided in a Court rather than pursuant to the agreed TOR, Cromwell submits that the nature and significance of the matters it lists in paragraph 29 of its Submission dated 11 October 2012 was such that the conclusion which FOS in fact reached is incompatible with it having given real and genuine consideration to whether a Court was a more appropriate forum for the Dispute.

167 In considering the adequacy of FOS's determination of 24 May 2012 and, what can be inferred from it, I note that paragraph 5.2 of the TOR does not mandate or imply that FOS's refusal of an application to exclude must be communicated in a way which exposes the considerations which it has taken into account or its reasoning. FOS's decision to refuse under paragraph 5.2 of the TOR is not in the nature of a "Determination" of the substantive Dispute which it is empowered to deal with under paragraph 8.2 of the agreed Terms of Reference. A Determination of the substantive Dispute by FOS must be in writing and "must set out reasons for any conclusion about the merits of a dispute..." (TOR paragraph 8.7(a) (iii)). No such form or formality is required in relation to FOS deciding to refuse to exclude a Dispute under paragraph 5.2 of the TOR. In contrast to paragraph 8.2, paragraph 5.3 of the TOR requires FOS to give reasons only in relation to a decision to exclude under paragraph 5.2. In my view FOS was therefore not required to provide reasons for its decision not to exclude under paragraph 5.2.

168 I reject Cromwell's argument that it can be inferred from the FOS decision of 24 May 2012, that this communication from FOS is on its face incompatible with FOS having given real and genuine consideration to whether a court was a more appropriate forum for the Dispute. I am not satisfied that Cromwell has made this argument out on the face of the email of 24 May 2012 which by clear inference refers to Cromwell's arguments about FOS's inability to require discovery and cross-examination in its references to what FOS can do in relation to demanding required information and testing information for validity. This was the email of 24 May 2013 alludes to Cromwell's arguments about procedural distinctions between FOS and a court. Further, I consider the reference in the email of 24 April 2012 to its powers in relation to "all parties' (which I have concluded is intended to refer to the parties to the TOR) is, when read together with Cromwell's communication dated 16 May 2012, a response from which I infer that FOS has considered but rejected Cromwell's arguments about potential claims relevant to Garnaut and by Garnaut.

169 In my view Cromwell's further criticism that FOS's email of 24 May 2012 wrongly states that "FOS has the ability to demand required information from all parties". In my view, FOS's statement is generally accurate with respect to the parties to the TOR and reflects appropriately the position agreed pursuant to paragraph 7.2-7.5 of the TOR.

170 Similarly, the Cromwell criticism that FOS says it "will be able to determine what, if any, loss is attributable to either party" is unsustainable.

171 In this regard the FOS email of 24 May 2012 appears to be referring to "either party" by way of reference to the Radfords and Cromwell. The words "either party" is apposite to refer to the two parties, the Radfords and Cromwell, and would be an unlikely reference to potential third parties like Garnaut. The word "party" is unlikely to have been used by FOS in reference to Garnaut, which is not in fact a party to the TOR. Further, reference in the email of 24 May 2012 to the possibility of the applicant wishing to pursue losses against "the advisor directly" appears to clarify that the FOS reference to being able to determine what, if any, loss is attributable to either party is intended to be a reference to the parties contractually bound by the TOR and is consistent with FOS appreciating that its processes are confined in application to the parties which have agreed to submit to the TOR dispute determination process.

Cromwell's claim that FOS made errors of law in reaching its decision

172 I refer to my above observation as to the very limited circumstances in which a tribunal like FOS may be susceptible to review based on an error of law. I also refer to my earlier conclusion that FOS was not required to make a decision as to any relevant question of law in relation to the exercise of its discretion under paragraph 5.2 of the TOR. However, if I am incorrect in this conclusion I would in any event not uphold Cromwell's arguments concerning asserted errors of law by FOS, for the following reasons.

173 Cromwell argues that it is apparent from the reasons given by FOS (FOS email dated 24 May 2012 (exhibit "DJW-15")) that FOS erred in law in the following three respects:

(i) FOS misconceived its ability to compel the provision of documents and information by or relating to third parties, such as Garnaut.

For the same reasons which I have advanced above in relation to upholding the adequacy of the FOS decision made on 24 May 2012, I reject Cromwell's argument that FOS has erred in law because it failed to understand the ability of FOS to compel the provision of documents and information by, or relating, to third parties, such as Garnaut.

FOS appears to have well understood that third parties were not compellable in relation to disclosure of documents and information, however, FOS quite appropriately came to the view that it was not appropriate to exclude the Dispute because of this limitation in the agreed TOR processes undertaken by FOS.

174 Further, I do not consider that it is of any moment that there is a possibility that Garnaut, having apparently been willingly engaged by the Radfords to assist in putting forward their case to FOS, could be in a position of conflict of interest or that there might be a possibility that Garnaut would, as a result of its role in representing the Radfords, "remain in control of the process by its representation of the Radfords". Both points appear to be irrelevant to FOS considering what course was appropriate in relation to the exercise of its discretion under paragraph 5.2 of the TOR and further, both points are factually speculative.

(ii) FOS misconceived its ability to test documents and information provided by or relating to third parties, such as Garnaut.

175 Cromwell submits that although FOS asserted in its reasons of 24 May 2012 that it had "the ability to test this information for validity", it was not in fact empowered to do so. Cromwell says that this is indicative of FOS not properly understanding the scope of its powers.

176 In relation to the assertions by Cromwell concerning the FOS processes in relation to disclosure and the power to compel witnesses and require crossexamination, FOS points to the terms of the contract between the parties to the dispute, namely Cromwell and the Radfords, in particular the terms contained in the TOR, clauses 7.2-7.5. These clauses provide, in substance, that the parties to a dispute are subject to FOS being entitled to require a party to provide or procure any information which FOS considers necessary, except where the subject party satisfies FOS that such information would breach confidentiality to a third party (and despite the subject party's best endeavours the third party does not consent to confidential information being provided) or where the provision of such information would breach a Court order or prejudice investigations in the ways defined in paragraph 7.2(b) of the TOR or the required information no longer exists or is not in the possession or control of the party required to provide it. The FOS communication of 24 May 2012 reflects FOS's sound understanding of its ability to test information for validity, confined to the parties to the TOR. I again refer to the fact that Cromwell has accepted the TOR and thereby the limited discovery and witness compellability processes available to FOS. I also again refer to there being no likely material prejudice arising to Cromwell as a result of the somewhat limited FOS interlocutory processes (see [ 144 ] above).

177 I also reject Cromwell's arguments in relation to this suggested error of law for the same reasons identified above in relation to Cromwell's failure to properly consider matters relevant to the exercise of its power, including the TOR limitations in relation to discovery and cross-examination.

178 Further, the reference in FOS's email dated 24 May 2012 to " ... the ability to test this information for validity..." is in my view properly characterised as an ability possessed by FOS and correctly recognised by FOS as within its powers (TOR 7.22, 7.3 and 7.5).

(iii) FOS misconceived the manner in which and the extent to which, the proportionate responsibility of Cromwell and a third party, such as Garnaut, for any loss suffered by the Radfords, was to be assessed and taken into account by FOS.

179 Cromwell again relies on FOS's statement in its email dated 24 May 2012, that "FOS will be able to determine what, if any, loss is attributable to either party", as suggesting that FOS considers that liability will be assessed by it, taking into account the comparative responsibility of Cromwell and Garnaut, in the manner required by the proportionate liability regime. Cromwell submits that this is wrong both in practice and in law.

180 I reject this suggested error of law on the part of FOS. I again refer to my above reasons for considering FOS did not state, or suggest, that it will deal with liability, taking into account the comparative responsibility of Cromwell and Garnaut, in the manner required by the proportionate liability regime.

181 Further, Cromwell's assertion that it has a present right to initiate a claim to have any liability on its part reduced by reference to the share of responsibility of a concurrent wrongdoer, rather than the possibility of reduction by the decision maker under the TOR processes, is not unqualified because Cromwell has agreed to the resolution of the subject dispute via the TOR processes. Further, Cromwell's related point that any assessment of comparative responsibility by FOS would not protect Cromwell if a future claim for contribution or indemnity is made by Garnaut is, at all events, a matter of conjecture at this point, there being no claim by Garnaut.

182 Accordingly, I reject Cromwell's argument that it has a basis for impugning the FOS decision under paragraph 5.2 of the TOR founded on errors of law.

183 For these reasons I dismiss Cromwell's applications for the declaration and injunction it seeks by the Prayer for Relief in its Statement of Claim dated 3 August 2012.

184 Cromwell accepts that the Court should dismiss the summons in proceeding number S CI 2012 3570 so far as it seeks the orders set out in paragraph A and should also dismiss the application for an order for review in proceeding number S CI 2012 3573. However Cromwell contends that the costs should abide the result in the remaining claims in proceeding number S CI 2012 3570 (Cromwell Reply Submissions 17 December 2012 [37] and [58]). Cromwell observes that each claim in each proceeding seeks relief directed towards the same substantive end, namely setting aside the decision by FOS to refuse to exclude a dispute between the Radfords and Cromwell. Cromwell says the costs of each proceeding should follow that event.

185 Taking into account the above, including Cromwell's submissions on costs and my above decision, subject to any further submissions as to costs by the parties, I propose to order that the costs of proceedings S CI 2012 3570 and S CI 2012 3573, including reserved costs, be paid by the Plaintiff to the First Defendant and that there be no order for costs in relation to the Second and the Third Defendants.

[1] Cromwell initially contended that separate proceeding and oral applications were required because s 4 of the ALA prescribes the procedure for commencing a proceeding under that Act and r 1.12(2) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) providing that such proceeding shall not be commenced by writ or originating motion. Cromwell noted that by contrast, a proceeding for judicial review by way of orders in the nature of prerogative writs must be commenced by originating motion pursuant to r 56.01(2).

[2] Orders of Mukhtar AsJ made on 25 July 2012 in proceeding number S CI 2012 03573.

[3] Orders of Mukhtar AsJ made on 25 July 2012 in each proceeding.

[4] [2012] VSCA 185.

[5] Cromwell submitted that it took this position in relation to its proceeding under the ALA having regard to the decision of the Full Court in Monash University v Berg [1984] VicRp 30; [1984] VR 383 as to the scope of the ALA, and taking into account the decision in Mickovski. Cromwell also formally reserved its position in relation to the correctness of Monash University v Berg.

[6] Statement of Claim at [1]; Defence at [1].

[7] Statement of Claim at [1]; Defence at [1].

[8] Statement of Claim at [5]; Defence at [5]; DJW-2 at pg 35.

[9] Statement of Claim at [2]; Defence at [2]; DJW-5 at pg 67.

[10] The second approved scheme is that operated by the Credit Ombudsman Service Ltd: ASIC class order CO 09/340 in DJW-5 at pg 68.

[11] Statement of Claim at [6]; Defence at [6]; DJW-5A at pg 71.

[12] Statement of Claim at [7]; Defence at [7]; DJW-7 at pg 106.

[13] Statement of Claim at [8]; Defence at [8].

[16] Clause 8.5 applies unless the expedited process provided for in cl 8.6 is followed, in which case the matter proceeds to a Determination, without a Recommendation.

[17] Statement of Claim at [9]; Defence at [9]; DJW-9 at pg 172.

[18] Statement of Claim at [3]; Defence at [3]; DJW-3 at pg 51ff.

[19] Statement of Claim at [4]; Defence at [4]; DJW-3 at pg 56ff.

[21] Statement of Claim at [11]; Defence at [11].

[22] Statement of Claim at [12]; Defence at [12].

[23] Statement of Claim at [18]; Defence at [18].

[24] Statement of Claim at [13]; Defence at [13]; DJW-14 at pg 416ff.

[25] Statement of Claim at [14]; Defence at [14]; DJW-15 at pg 424.

[26] Statement of Claim (3 August 2012) para 10(b).

[27] Statement of Claim (3 August 2012) para 10(c).

[28] Statement of Claim (3 August 2012) para 10(d).

[31] Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223.

[35] [1998] 2 VR 546.

[36] Mickovski [2012] VSCA 185 fn 26.

[37] [2013] HCA 18 at [27]- [28], [30] and [68].

[38] [1993] FCA 445; (1993) 45 FCR 84, 94.

[39] Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 257 per Priestley JA, Handley JA at 279, 280 (CA); Hughes Bros Pty Ltd v Trustee of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91 at 92-93 per Kirby P, 98-102 per Priestley JA (CA); WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489 at [46] per Ipp J (the rest of the Court agreeing) (FC); Onesteel Manufacturing Pty Ltd v United KG Pty Ltd [2006] SASC 119; (2006) 94 SASR 376 at [32]- [49] per Debelle J.

[40] Written Submissions of the Plaintiff/Applicant (11 October 2012) para. [44].

[41] (1992) 26 NSWLR 234.

[43] [1997] FCA 558; (1997) 76 FCR 151.

[45] [1986] HCA 17; (1986) 161 CLR 513, 518-519.

[46] [1936] HCA 40; (1936) 55 CLR 499 at 504-505

[47] Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24, 41-42 (Mason J) ('Peko-Wallsend').

[48] Carlton Football Club [1998] 2 VR 546, 558. See also 568-569 (Hayne JA). The High Court has recently cast doubt on the applicability of the Wednesbury test in judicial review of findings fact made by administrative decision-makers: Minister for Immigration and Citizenship v SZMDS [2010] HCA 16 [128]-[129] (Crennan and Bell JJ). However, the test of irrationality or illogicality is, it appears, just as onerous because it probably requires that the impugned finding of fact 'be one that could be [made] by a reasonable person': Minister for Immigration and Citizenship v SZMDS [2010] HCA 16 [130] (Crennan and Bell JJ). Further, the distinction, if any, between the two tests is not presently relevant because the impugned decision in this case is not a finding of fact.

[49] Mickovski [2012] VSCA 185 fn 26.

[51] Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24, 39-40 (Mason J).

[53] [2012] VSCA 185

[54] R v Panel on Take-overs & Mergers; Ex parte Datafin plc [1986] EWCA Civ 8; [1987] QB 815.

[64] [1998] 2 VR 546.

[65] Mickovski [2012] VSCA 185 [38].

[68] [1998] 2 VR 546, 550.

[69] Ibid 550, 552 (citations omitted).

[72] The question of whether a particular set of facts falls within a statutory or contractual expression can be either a pure question of law or a mixed question of fact and law. It is a pure question of law if the words of the expression are used in some technical legal meaning. It is a mixed question of fact and law if the words are used in their ordinary English meaning or some non-legal, technical or trade meaning: NSW Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation [1956] HCA 80; (1956) 94 CLR 509, 511-2 (Kitto J); Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1, 7-8 (Mason J, Gibbs, Stephen and Aickin JJ agreeing); Vetter v Lake Macquarie City Council (2001) 202 CLR 439, [24]-[27] (Gleeson CJ, Gummow and Callinan JJ); Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389, 394-396. Here, it appears that Tadgell JA was of the view that the words 'undue interference' were not used in a technical legal meaning and therefore that the question of whether particular facts fell within the expression was a mixed question of fact and law. This can be seen from his Honour's conclusion that the application of the expression to the facts was 'a matter of impression' and that 'different decision-makers, each acting rationally, might reach differing conclusions when applying it to the facts of a given case'.

[74] [1998] 2 VR 546, 554.

[75] [2009] VSC 7.

[76] P O'Shea and C Rickett, In Defence of Consumer Law: The Resolution of Consumer Disputes [2006] SydLawRw 7; [2006] 28 Syd L Rev 139 at 152.

[80] [2009] VSC 7 at [26].

[82] [2009] VSC 7 at [23-[24].

[83] [1998] VSCA 87; [1999] 1 VR 387 at 393 [18].