4 December 2020
The NSW Supreme Court has recently considered AFCA's jurisdiction to determine certain complaints: D H Flinders Pty Ltd v Australian Financial Complaints Authority Ltd [2020] NSWSC 1690.
In this matter the Court found that AFCA had no jurisdiction to determine a dispute against an AFSL holder – where the complaint arises from the conduct of its representative acting outside their authority.
The circumstances of the matter were such that AFCA was determining a series of complaints against an AFSL holder, DH Flinders, where it was alleged that one of its corporate authorised representatives, EFSOL, provided inappropriate and wrongful advice to several complainants.
There was no dispute that EFSOL gave the alleged wrongful advice, and further that it was not authorised by DH Flinders to give that advice. However EFSOL became insolvent and the claimants could not recover from it.
Evidence before the Court was that AFCA then suggested to some of the claimants that they should join DH Flinders as respondent to the AFCA complaints.
DH Flinders subsequently objected to AFCA's jurisdiction and handling of the complaints, asserting that the AFCA rules did not give AFCA jurisdiction to hear complaints against representatives acting outside the scope of their authority. It also said that the conduct of AFCA in suggesting to the claimants that they bring a claim against DH Flinders was unfair, inappropriate and not impartial. Justice Stevenson of the NSW Supreme Court agreed.
His Honour found that the manner in which the AFCA rules have been drafted meant that AFCA only has jurisdiction to hear complaints against a licensee in respect to the conduct of a representative acting within its authority. His Honour noted that AFCA is a complaints-handling body, not a regulator and its authority to determine complaints comes solely as a matter of contract. Accordingly while there was no argument that a licence holder has responsibility pursuant to the Corporations Act for the conduct of a representative, whether or not the representative's conduct was within authority – there was no jurisdiction given to AFCA to determine a complaint for conduct outside the scope of a representatives authority.
It followed that where the alleged conduct of the representative is outside that authority, AFCA has no jurisdiction and his Honour granted an injunction preventing AFCA from considering the complaints further.
His Honour also made a number of comments concerning the method and manner by which AFCA assists claimants, with his Honour agreeing with DH Flinders that AFCA had “entered the fray” and was acting in an advisory relationship with the complainants, which was not consistent with AFCA's obligation to be independent and impartial to all parties.
As a result of the decision, a complainant wishing to bring an action against a representative for acting outside its authority will need to be pursued through the Courts.
For further information, please contact:
David Amentas, Partner, Clyde & Co
david.amentas@clydeco.com
