AFCA's Authority, jurisdiction or power to deal with the Complaints
- AFCA is a complaints-handling body, not a regulator, and it derives its authority to determine complaints solely as a matter of contract.
- The tripartite contract represented by the AFCA Rules defines the limits of AFCA's authority.
- The AFCA Rules are divided into a number of sections including:
1. Section A - Complaint Resolution Processes
2. Section B - Requirements
3. Section C - Exclusions
4. Section D - Remedies
5. Section E - Defined Terms
- The rules provide that:
"A complaint is within AFCA's jurisdiction provided it meets the requirements (as set out in section B) unless it is outside jurisdiction (as set out in section C)." [9]
- It is common ground that the exclusions in Section C are not relevant to the matter before me.
- Rule A.4.2 provides, under the heading "Complaints that AFCA considers":
"A complaint must be about a Financial Firm that is an AFCA Member at the time that a complaint is submitted to AFCA (even if not an AFCA Member at the time of the events giving rise to the complaint)."
- Rule A.4.3(a) provides:
"The complaint must arise from a customer relationship or other circumstance that brings the complaint within AFCA's jurisdiction."
- The requirements for AFCA's authority, jurisdiction or power to deal with a complaint are set out in Section B, the relevant provision of which is cl B.2.1 which provides:
"A complaint…must arise from or relate to:
(a) the provision of a Financial Service by a Financial Firm to the Complainant." [10]
- There is no dispute that the Complaints relate to a "Financial Service", namely, the EFSOL Ameen Investment Program.
- The critical question is whether the Complaints relate to the provision of that Financial Service "by" DH Flinders "to" Dr Khan and the other complainants.
- DH Flinders did not itself provide the EFSOL Ameen Investment Program to Dr Khan and the other complainants so it did not, itself, provide the Financial Service "to" those complainants.
- The question is, whether by reason of the extended definition of "Financial Firm" to which I will shortly refer, DH Flinders is taken to be the Financial Firm that provided financial service "to" those complainants.
- "Financial Firm" is defined to mean, first, "an AFCA Member".
- Thus there is no doubt that AFCA has authority, jurisdiction or power to deal with complaints against EFSOL because, on any view of the matter, EFSOL provided the relevant Financial Service "to" the complainants.
- Mr Sulan submitted that, because there is no dispute that DH Flinders did not, itself, provide that financial service "to" those complainants, that the enquiry as to AFCA's authority, jurisdiction or power to deal with the Complaints ends at this point.
- I think that submission begs the question of the effect of the extended definition of Financial Firm to which I now turn.
- Subclause (d) of the definition of Financial Firm provides that, for relevant purposes, "Financial Firm":
"…also includes any employee, representative, agent or contractor of the Financial Firm including any person who has actual, ostensible, apparent or usual authority to act on behalf of the Financial Firm… in relation to a financial service."
- The effect of subclause (d) of the definition of Financial Firm is, amongst other things, to include as Financial Firm a "representative" of the Financial Firm.
- AFCA's position is that the effect of this provision is that, because EFSOL was DH Flinders' corporate authorised representative during the period when EFSOL made the impugned representations to the complainants, EFSOL is taken to be DH Flinders for the purposes of Rule B.2.1 and DH Flinders is thus taken to be the Financial Firm that provided the impugned financial services "to" the complainants.
- In effect, this involves reading the word "representative" in subparagraph (d) of the definition as including, by reason of s 917B of the Act, a representative acting without authority.
- Indeed, that is AFCA's precise point as was made clear when Mr Wise and I had this exchange during submissions:
"[WISE] …The first argument is that the complaint falls within the terms of the rules for contractual jurisdiction on a plain reading on those rules. That's the first point. The second point is that the attribution of liability arising under s 917B to E, we say that those provisions inform the meaning of the word representative in the definition of financial firm in the rules for the purposes of determining whether under r B2.1 the complaint relates to the provision of a financial service by the financial firm to the complainant. It's a second …
HIS HONOUR: It's extrinsic material, do you say, that [is] available to construe the contract. That is, are the statutory provisions - 917A ,et cetera - extrinsic material available to construe the tripartite contact?
WISE: That is one way of putting it. Yes, it informs the meaning of the word representative in …
HIS HONOUR: What other way could there be?
WISE: I think your Honour is right. It's a good way of putting it. That's the broad outline of the argument." [11]
- I do not accept that submission.
- Many of the defined terms in Section E of the AFCA Rules are expressed by references to provisions in the Act.
- Thus:
1. "Foreign Collective Investment Scheme" is defined to mean, amongst other things, "a managed investment scheme under section 9 of the Corporations Act";
2. "Incorporated" is defined to mean "registered under the Corporations Act…"; and
3. "Regulated Superannuation Fund", "Related Body Corporate", "RSA Provider", "Superannuation Provider", and "Traditional Trustee Company Service or Services" are defined to have "the meaning in the Corporations Act."
- Section E makes no separate provision for the definition of "representative" and thus does not suggest it has a meaning "informed" by s 917B of the Act. The absence of any such provision, when contrasted to the numerous incorporations by reference of definitions from the Act, suggests that "representative" has its usual meaning: "a person chosen or appointed to speak or act for another or others" [12] . That is, a person acting with authority.
- There are no words in the definition of "Financial Firm" itself which suggest that "representative" includes a representative acting without or beyond authority.
- The words in subclause (d) of the definition of "Financial Firm" following the word "including" expand the extended definition of "Financial Firm" beyond any "employee representative, agent or contractor of the Financial Firm" to "any person who has actual ostensible or apparent or useful authority" to act on behalf of the Financial Firm. Their effect is to include as a Financial Firm any person who has authority to act on behalf of the Financial Firm, whether or not that person is an employee, representative, agent or contractor of the Financial Firm.
- The words do not, in my opinion, have the effect of including as a Financial Firm any employee, representative, agent or contractor of the Financial Firm which or who or that did not have such authority.
- Indeed, in my opinion, those words emphasise that, in order to be deemed to be the Financial Firm in question, the entities named in subparagraph (d) must be acting within authority.
- The construction of subclause (d) for which AFCA contends would involve reading it as if it provided:
"…also includes any employee, representative, agent or contractor of the Financial Firm whether or not that person who has actual, ostensible, apparent or usual authority to act on behalf of the Financial Firm…in relation to a financial service."
- Mr Wise drew my attention to Rule E.2.4 of the Rules which provides:
"The words 'including', 'such as' or 'for example', when introducing an example, does [sic] not limit the meaning of the words to which the example relates, that example or examples of a similar kind."
- I do not see that this provision takes the matter any further. Its effect so far as concerns subclause (d) is that what follows in subclause (d) beyond the word "including" does not limit the meaning of that which precedes it, namely "any employee, representative, agent, or contractor of the Financial Firm".
- For these reasons, my opinion is that, on the proper construction of these provisions, a "representative" of a Financial Firm is only taken to be that Financial Firm if the representative was acting within authority.
- Accordingly, in circumstances where the Financial Firm in question did not itself provide the relevant Financial Service "to" the complainant for the purposes of Rule B.2.1 it is only taken to do so by reason of the conduct of its representative if that conduct was within the representative's actual, ostensible or apparent use of authority.
- There is no question here that EFSOL had authority from DH Flinders to make any representations to the Complainants concerning the EFSOL Ameen Investment Program.
- Thus, the Complaints are not with respect to the provision of the Financial Service "to" the complainants "by" DH Flinders.
- Accordingly, AFCA Rule B.2.1 is not enlivened and AFCA has no authority, jurisdiction or power to deal with the Complaints.
- Mr Wise submitted that "even an error by an AFCA decision maker regarding jurisdiction is one within the ambit of the decision-making power pursuant to the tripartite contract [comprised by the Rules] and is not reviewable" because the appropriate standard of review of a decision of AFCA, including a decision not to exercise its discretion to exclude a complaint (and thereby assert jurisdiction), is legal unreasonableness.
- In support of that proposition, Mr Wise referred to Cromwell Property Securities Ltd v Financial Ombudsman Services Ltd [13] , Mickovski v Financial Ombudsman Service Ltd [14] , and Patersons Securities Ltd v Financial Ombudsman Service Ltd [15] .
- However, unlike those cases, this is not a case where AFCA is said to have:
1. wrongly exercised its discretion, for example to not entertain a complaint (as was the case in Cromwell), or
2. determined that a complainant ought reasonably have known of relevant facts prior to the expiry of a time limit (as was the case in Mickovski); [16] or
3. determined a particular basis upon which a licensee should compensate the complainant (as was the case in Patersons).
- For that reason, the observations made in those cases concerning judicial restraint and intervention only in the case of legal unreasonableness are not to the point.
- Here, the question is whether AFCA had authority to consider the Complaints. It could only have such authority under the AFCA Rules and, in my opinion, on their proper construction, it does not.
- Having come to that conclusion, it is not necessary for me to consider DH Flinders' alternative case concerning procedural fairness. However, in deference to the detailed submissions made by counsel, I will do so, albeit briefly.