Australian Timeshare and Holiday Ownership Council Limited and Australian Securities and Investments Commission

[2008] AATA 62

CATCHWORDS – CORPORATIONS – dispute resolution system - external dispute resolution scheme – identification of EDR scheme – features of EDR scheme – role of ASIC and relevance of other EDR schemes in considering an EDR scheme – role of an EDR scheme in regulating time-sharing industry - status of ASIC’s Policy Statements – decision affirmed.

Administrative Appeals Tribunal Act 1975 ss 2A, 3 and 37(1)
Australian Securities and Investments Commission Act 1989 ss 7, 12FA, 12FA(1) and 12FA(2)
Australian Securities and Investments Commission Act 2001 ss 1, 1(2), 12A(2) and 261

Corporations Act 2001 ss 9, 140, 601EA, 601EB(1), 601ED, 601ED(1) and (2), 601ED(5), 601FA, 601FB, 601GA, 601GB, 601HA, 601HC, 601HG, 601QA(1), 601QA(1)(a), 601QA(2), 601QA(3), 601QB, 707, 761A, 761G, 761G(1), 761G(2), 761G(4), 761G(5)-(7), 761GA, 766A, 766A(d), 766A(1), 766A(2),766A(3), 911A, 911A(1)-(6), 911B, 911D, 912, 912(1)(g), 912A, 912A(1)(b), 912A(1)(g), 912A(2), 912A(2)(a), 912A(2)(a)(i), 912A(2)(b), 912A(2)(b)(i), 912A(3), 912B, 912B(1), 912B(2), 912B(3), 912B(4), 912C, 912CA, 912D, 912F, 913B(1)(b), 915C(1)(aa), 926A(1), 926A(2), 926A(3), 980A, 992B, 1017G, 1019B and 1020F

Corporations Regulations 2001 rr 7.6.02, 7.6.02(g), 7.6.02(1), 7.6.02(2), 7.6.02(3), 7.6.02(3)(f), 7.6.02(3)(g), 7.6.02(4), 7.6.02(4)(a), 7.6.02(4)(b) and 7.6.02(4)(c)

Financial Services Reform Act 2001, s 3, Schedule 1, Part 1, item 1 and Part 2, item 27

Migration Act 1958 ss 33(1)(b) and (c), 353, 420, 420(1) and 420(2)(b)
Retirement Savings Accounts Act 1993
Social Security (Administration) Act 1999 s 141
Superannuation Industry (Supervision) Act 1993

Asrat v Vrachnas [1966] 874 FCA 1
Courtney v Peters (1990) 27 FCR 404; 98 ALR 645
Czarnikow v Roth, Schmidt & Co [1922] 2 KB 478
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577; 2 ALD 60
Eshetu v Minister for Immigration and Multicultural Affairs (1997) 71 FCR 300
Financial Industry Complaints Service Ltd v Deakin Financial Services Pty Ltd [2006] FCA 1805; (2006) 238 ALR 616
Freeman v Secretary, Department of Social Security (1988) 19 FCR 342; 87 ALR 506
Lorimer v Smail [1911] HCA 44; (1911) 12 CLR 504
Masu Financial Management Pty Ltd v Financial Industry Complaints Service Ltd (No. 2) [2004] NSWSC 829
Masu Financial Management Pty Ltd v Financial Industry Complaints Service Ltd and Another [2004] NSWSC 826; (2004) 186 FLR 289
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24; 66 ALR 299
Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611; 162 ALR 577
R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Re Gray and Australian Securities and Investments Commission [2004] AATA 1235

Re Singh and Minister for Immigration and Citizenship [2007] AATA 2023

Regina v Panel on Take-overs and Mergers; Ex parte Datafin PLC [1987] 1 QB 815
Sagnata Investments Ltd v Norwich Corporation [1971] 2 QB 614
Sullivan v Department of Transport (1978) 1 ALD 383; 20 ALR 323
Sun v Minister for Immigration and Ethnic Affairs (1997) 81 FCR 71
Sun v Minister for Immigration and Ethnic Affairs [1997] FCA 324
Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492

DECISION AND REASONS FOR DECISION [2008] AATA 62

ADMINISTRATIVE APPEALS TRIBUNAL     )          
  )          V2004/700
GENERAL ADMINISTRATIVE DIVISION     )          

Re                AUSTRALIAN TIMESHARE & HOLIDAY OWNERSHIP COUNCIL LIMITED

Applicant

AndAUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Respondent

DECISION

Tribunal:                   Deputy President S A Forgie
Date:  23 January 2008
Place:  Melbourne

Decision:The Tribunal has affirmed the decision under review.

S A FORGIE
  Deputy President

REASONS FOR DECISION

Operators and others involved in time-sharing schemes must hold an Australian financial services licence (AFSL) under the Corporations Act 2001 (Corporations Act). One of the obligations of the holder of an AFSL providing financial services to retail clients is to have a dispute resolution system complying with s 912A(2) of that legislation. Such a system comprises both an internal dispute resolution system and membership of one or more external dispute resolution schemes (EDR schemes) approved by the Australian Securities and Investments Commission (ASIC). Timeshare and Holiday Ownership Council Limited (ATHOC) applied to ASIC for approval of the Australian Timeshare Industry Complaints Scheme Limited (ATICS) as an EDR scheme in relation to disputes arising in relation to time-sharing schemes. ATHOC is a peak time-share representative body in Australia. Its members are drawn from various elements of the time-share industry including developers, marketers, exchange companies, responsible entities, management companies and associated professional advisers. Its members must abide by a Code of Practice and a Code of Ethics and membership is not automatic.

1. ASIC refused to give its approval and notified ATHOC to that effect on 10 May 2004 with reasons following in a letter dated 20 May 2004. Since ATICS was lodged with ASIC for approval, it has been revised on several occasions. I have reviewed the matter with regard to the latest revision together with a particular revision relating to conciliation in s 12 of ATICS’s Rules (Rules). After the hearing, ASIC indicated that it was changing its policy with regard to the relief it would consider giving to time-sharing schemes in relation to their obligations to comply with s 912A. ASIC lodged that document with the Tribunal on 29 June 2007 and I have also taken that into account. I have decided that ATICS does not meet the requirements of an EDR scheme and should not be approved. Therefore, I have affirmed ASIC’s decision.

BACKGROUND

1. In this passage of my reasons, I set out the findings that I have made in relation to some of the facts forming the background to the matters in issue. I have made them on the basis of the material in the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents) and the evidence, both written and oral, given at the hearing.

ATHOC

1. ATHOC is a not for profit industry body established in 1994 to represent all interests involved in the time-sharing industries.  It has a board of six directors and employs a full-time general manager and a full-time administrative officer.  ATHOC’s mission is to:

   “Foster a high standard of ethics and adherence to industry best practice among its Members and to maintain good standing with all stakeholders. Continually promote the benefits of the industry and to protect the goodwill of Members and consumers.  Assist all Members to achieve growth and profitability in an ever-changing business environment.”[1]

All members must comply with ATHOC’s Code of Practice and Code of Ethics.  Should they breach either or both Codes, they may be subject to penalties.  

[1] Exhibit F at 3 referring to RF 1 (information booklet entitled “Timeshare in Australia”) at 23

1. Through its Code of Practice, ATHOC seeks to establish best practice for its members in the time-share industry in Australia.  When it adopted its Code of Practice, the Complaint Resolution Committee (CRC) was the time-share specific internal and external complaints body for the handling and resolution of complaints by consumers against an ATHOC member and of complaints by one ATHOC member against another.  The CRC and its processes were developed, I find on the basis of the evidence of Ms Elizabeth Clegg, at a time before IDR and EDR processes were mandatory.[2]  Mr Enzo D’Aquino is the independent chairperson of the CRC.

   [2] Exhibit A at [3-4]

Application for approval of ATICS as an external dispute resolution scheme

1. ATHOC has put forward several proposals to ASIC regarding its complaints scheme. ASIC’s response on 20 December 2002 was to the effect that it would need a finalised, or almost finalised, Constitution and Terms of Reference and to have key appointments settled.[3]  Before dealing with the detail of ATHOC’s proposal, ASIC reminded it that:

   “… EDR schemes provide a vital mechanism for securing redress for consumers in the event that they have suffered financial loss.  In approving schemes, our aim is to ensure that high standards of complaints handling and redress are maintained across all sectors of the financial services industry, so that a consumers [sic] can be confident that their complaints will be handled consistently irrespective of the type of financial product or service.  The approval standards are not, therefore, relaxed or varied for different schemes, regardless of their size of the number of complaints they deal with.  Inevitably, there are costs to an industry sector associated with having a sector-specific scheme.  Related to this point, ASIC has publicly stated its policy preference for there to be fewer rather than more schemes in the finance sector.  However, it is ultimately for the members of an industry sector to decide whether to bear the costs of having a separate scheme or to join a more broad-based scheme and take advantage of the economies of scale.”[4]

   [3] T documents at 27

   [4] T documents at 27

The scheme under consideration: identifying the version

1. As I have noted, ATHOC has revised ATICS on several occasions since it first submitted its proposal to ASIC.  On the basis of both the material in the T documents and in the evidence of Ms Elizabeth Clegg,[5] I find that ATHOC first canvassed with ASIC the criteria that ATICS must meet if it was to be approved as an EDR scheme under the Corporations Act. The criteria were drawn from ASIC’s Policy Statement PS 139. ATHOC’s solicitors then sent ASIC a copy of a document that was headed “ATICS Proposal” and that contained “Elements of Constitution and Rules”.[6] The document was intended to address issues that ASIC had raised during discussions but it was drafted broadly and missing detail as to the precise arrangements proposed. That was on 9 December 2001 and was followed by various other versions of the document over the next couple of years. On 24 February 2003, ATHOC’s solicitors sent a draft Constitution and Rules to ASIC for its consideration.[7] In its decision, ASIC considered the fourth draft of ATICS’s Rules and Constitution and that is the version contained in the T documents.[8]

   [5] Exhibit A at 3-13, [5]-[92]

   [6] Documents lodged under s 37(1) of the Administrative Appeals Tribunal Act 1975 (T documents) at 24-26

   [7] T documents at 47-47B

   [8] T documents at 73-136

1. By the time of the hearing, ATHOC had produced a further version of ATICS’s Constitution and Rules dated 24 February 2005.  At the commencement of the hearing, Mr Collins, appearing with Mr Wise for ATHOC, also drew attention to a further revision in the form of a proposed conciliation clause to be inserted in s 12 of the ATICS Rules.[9] He also drew attention to five attachments to the Constitution and Rules. They dealt with ATICS’s annual budget, its resourcing, the Enzo D’Aquino proposal, complaints summary and a letter from Mr Paul O’Shea endorsing the Rules.

   [9] Exhibit K

1. Ms Mortimer, appearing with Mr Knowles, did not submit that it was not open for ATHOC to revise its proposal to some extent.  I agree with her position.  As is often said, “… the function of the Administrative Appeals Tribunal formed part of an administrative continuum …”.[10]  That means that the Tribunal is not necessarily limited to matters as they were when the decision under review was made.  Whether it is or not depends on the nature of the decision under review and the provisions of the enactment under which that decision was made.  I have explored this further in Re Singh and Minister for Immigration and Citizenship[11] where I have taken the most recent authorities into account. 

   [10] Freeman v Secretary, Department of Social Security (1988) 19 FCR 342; 87 ALR 506 at 345; 509-510 per Davies J

   [11] [2007] AATA 2023 at [26-34]

1. In a case such as this, I have taken into account the fact that the approval, if given, will give ATICS a power or privilege to undertake external review of decisions made in the context of time-sharing schemes and affecting retail clients. At the same time, approval would enable ATICS to offer, in effect, a service that would be ongoing. The Corporations Act generally is concerned with the ongoing regulation of the bodies within its compass. It is consistent both with the nature of the approval power given to ASIC and the context of the Corporations Act that I should review the decision on the basis of the current material that is relevant to the issues that must be considered. It is to be contrasted with a decision such as a decision to cancel an ongoing registration or entitlement for that, as Davies J recognised in Freeman v Secretary, Department of Social Security may be the subject of different considerations.

Establishment of ATICS

1. The external disputes resolution scheme proposed by ATHOC begins with its proposal to establish ATICS as a company to act as the complaints resolution body for the time-sharing industry and for various other purposes related to the development of a complaints resolution scheme and to develop “complaints resolution efficiency within the Industry”.[12]  It will have four category of members: promoter and/or developer; resort and resort management; exchange company; and sales and marketing.[13]  Annual subscriptions are payable and a further amount may be charged by way of Special Levy.[14]  The administrative and complaints fees are set in accordance with ATICS’ Constitution.[15]

   [12] Exhibit L at 80-82, cl 3.1.7

   [13] Exhibit L at 84, cl 9.3

   [14] Exhibit L at 85-87, cll 10.1-10.15

   [15] Exhibit L at 88, cll 10.16-10.17

1. The Board of ATICS comprises the Chair, the Industry Member and the Consumer Member.[16] The Chair must be a person who meets the criteria in cl 1.1.16 of the Constitution. Among the criteria are that the person not have any interest or relationship materially affecting the person’s capacity to act in the best interests of ATICS, has no material contractual relationship with it, has not been employed by a member in the previous two years, is not a significant supplier or customer of a member and does not have a substantial holding in a member.[17]  The Consumer Member must be a person “who in some substantial way represents consumers”.[18]  The Industry Member includes a person who is or has been involved in the time-sharing industry and may be a director of ATHOC.[19]  All three members of the ATICS Board must meet the Eligibility Criteria including:

   “1.1.22.1    experience in the Industry and/or consumer movement and/or dispute resolution;

   1.1.22.2knowledge of the Industry and the relevant laws or consumer affairs;

   1.1.22.3independence;

   1.1.22.4integrity;

   1.1.22.5capacity to consult with Industry bodies (for the Industry Member) and with consumer bodies (for the Consumer Member); and

   such further relevant criteria as the Board determines;”[20]

   [16] Exhibit L at 98, cl 20.5

   [17] Exhibit L at 74, cl 1.1.16

   [18] Exhibit L at 75, cl 1.1.20

   [19] Exhibit L at 75, cl 1.1.27

   [20] Exhibit L at 75

1. The inaugural ATICS Board is to be appointed by ATHOC in consultation with ASIC and, in relation to the Consumer Member, the “organised national consumer movement”.[21]  Any subsequent ATICS Board is appointed in accordance with the Board Selection Process set out in cl 1.1.13.[22]  The position of Chair is advertised nationally and the ATICS Board must consult with ATHOC and one or more representatives of the “organised national consumer movement”.  The Industry Member is the candidate nominated by ATHOC.  The Consumer Member is appointed by the ATICS Board after consultation with and nominations have been sought from one or more representatives of the “organised national consumer movement”.

   [21] Exhibit L at 99, cl 20.6

   [22] Exhibit L at 99, cl 20.7

1. The ATICS Board is to administer its Rules and is responsible for, among other matters, their operation and effectiveness and of the complaints handling procedures they set out.  It must report on matters relating to its functions in relation to the complaints scheme it establishes.  In particular, cl 29.3 provides that the ATICS Board will prepare and publish both a quarterly compliance report and an annual report as to the operation of ATICS.  Under cl 29.4, the compliance reports will include, as a minimum, information regarding the nature, extent and effectiveness of the operation and activities of ATICS, particulars as to the administration, operation and effectiveness of the Rules and the number and general nature of all complaints received, whether they were substantiated and their outcome.  The ATICS Board is required to give a copy of the compliance report and of the Annual Report to ASIC within a month of their preparation.  It must also give a copy of the compliance report to ATHOC and to other regulatory bodies and to consumer agencies and make it available to members of the public.  That is the effect of cl 29.5.

1. The ATICS Board will arrange for an independent review of ATICS as often as required but no less regularly than every three years.  The review will involve extensive consultation with the ATICS Board and Panel and ATICS’ employees (if any), ATICS’ members, ATHOC, ASIC, the national organised consumer movement and any other stakeholders thought appropriate by the independent reviewer.[23]  It will focus on the extent to which ATICS meets the requirements of ASIC, whether its procedures are fair and reasonable, the effectiveness of its Rules, the awareness of and satisfaction with ATICS by members and consumers, public awareness of ATICS, whether access to ATICS is equitable and the appropriateness of the scope of the complaints handling procedures.[24]  The ATICS’ Board will also review the Rules no less frequently that every three years.[25]  In doing so, it will consult with the same range of people referred to in the previous paragraph.

   [23] Exhibit L at 113, cl 29.8

   [24] Exhibit L at 113, cl 29.7

   [25] Exhibit L at 114, cl 29.10

1. Clause 29.17 requires the ATICS Board to ensure that the ATICS Panel has procedures in place for dealing with systemic problems and with serious misconduct.  If the ATICS Panel considers that a member has engaged in serious misconduct, it must give the member a written notice requiring it to show cause in writing within 45 days why the Panel should not report the matter to the ATICS Board.  On receiving the member’s response, the Panel must decide whether to refer the matter to the Board and, if it does so, the Board must decide whether to refer it to ASIC.  Clause 29.18 concludes with the statement that “Allegations relating to Serious Misconduct will be dealt with expeditiously.” 

1. If the ATICS Panel considers that there are systemic problems with a member or with the time-sharing industry as a whole, it must report the matter to the Board.[26]  The Board may refer any systemic problems arising in relation to that member for action and remedying.  It will provide information to ASIC as required by any Policy Statement or any undertaking it has given ASIC.  If a member does not address a systemic problem, the ATICS Board will refer the matter to ASIC.[27]  The ATICS Board will report systemic problems to ASIC urgently if the matter is urgent or otherwise through its compliance reports and annual reports.[28]

   [26] Exhibit L at 115, cl 29.19

   [27] Exhibit L at 115, cl 29.20

   [28] Exhibit L at 115-116, cl 29.21

The scheme under consideration: the ATICS Rules

1. The procedures that ATICS will follow in relation to complaints are found in ATICS’ Rules when read with a further clause relating to conciliation.  In this passage of my reasons, I will summarise only the main elements of the scheme but I have had regard to the whole.  Although not apparent from Mr O’Shea’s letter endorsing them, he acknowledged in cross-examination that he had drafted the Rules for a fee of $2,000.[29]

   [29] Transcript at 198

1. The Rules begin by noting that promoters and/or developers of time-sharing schemes, time-sharing resorts and their managers, time-sharing exchange companies or businesses and time-sharing sales and marketing companies or businesses are members of ATICS and are bound by its Constitution. ATICS is, however, independent of its members because its Board and the Complaints Resolution Panel (Panel) consist of an independent Chair, an Industry Member and a Consumer Member and all of its administrative staff, arrangements, communications and publications are controlled independently of its members.[30]

   [30] Exhibit L at 125, cl 3

1. The composition of the Panel is the subject of more detailed provision in ATICS’s Constitution. Clause 28 sets out the persons who may be the Chair, Industry Member and Consumer Member of the Panel and the criteria it establishes match those it sets for the Board members of ATICS itself in the first version of the Constitution found in Exhibit L.[31] In the second version of cl 28, cl 28 provides that neither the Chair, the Industry Member or the Consumer Member may be a Director of ATICS. The Panel Selection Process matches that provided in the Constitution in relation to the selection of ATICS’s Board members.[32]  Each Panel member holds the position for two years or such further period as ATICS’s Board decides.[33]  The Board may appoint Alternate Panel Members.[34]  Panel Members are paid from ATICS’ funds.[35]

   [31] See [12] above

   [32] Exhibit L at 109, cl [28.7] and see [13] above

   [33] Exhibit L at 108, [28.5]

   [34] Exhibit L at 110, [28.14]-[28.17]

   [35] Exhibit L at 109, [28.10]

1. Clauses 4 sets out the complaints that can be taken to ATICS:

   “Any complaint or dispute against an Industry Member which arises out of or in connection with:

   (a)the original contract to purchase a timeshare including but not only how the timeshare was sold to the consumer;

   (b)how the timeshare contract has been administered including but not only whether the consumer has received all the rights and benefits they were promised under the contract;

   (c)how a timeshare resort is being managed to the extent that its management directly affects the consumer and their rights;

   (d)consumer’s rights to exchange, trade, or sell timeshare benefits and the costs and benefits of those rights;”

1. If a complaint involves an amount greater than $50,000, ATICS will not deal with it.  I will not deal with a complaint about a matter that is already the subject of a court or tribunal proceeding unless the consumer undertakes not to take further steps in the matter while ATICS is dealing with it.  A consumer may not make a complaint about a matter which is already being dealt with, or has been dealt with, by ATICS or that has not been the subject of internal dispute resolution procedures set out in cl 6 of the Rules.[36]

   [36] Exhibit L at 126, cl 5

1. Clause 7(a) provides that the industry member receiving a complaint has 30 days within which to “agree” or “disagree” with a complaint.  It would seem that cl 7 is referring to a complaint lodged by a consumer as part of the IDR procedure referred to in cl 6 of the Rules and to the response from the industry member to that complaint.  Having received the response or not having received it in the 30 day period, cl 7(b) provides that a consumer should then “contact” ATICS by either telephone, facsimile, email or post.  All complaints must ultimately be in writing.

1. Having been contacted, the ATICS administrative officer will:

   ask the consumer to complete a form addressing the matters in cl 4 of the Rules.  The administrative officer may do this by asking the consumer questions on the telephone or sending the consumer a copy of a form for completion and return to ATICS;

   ask the consumer to put the complaint in writing;

   ask the consumer to sign a declaration authorising ATICS to consider the complaint and absolving ATICS and its staff from any liability arising out of its doing so;

   send a copy of ATICS’ Rules to the consumer unless the consumer has access to the internet;

   send the consumer a notice:

   “…which will advise the consumer that if they will experience any difficulties in completing the forms and putting their complaint in writing due to language, disability or other reason, they can seek the assistance of:

   (i)the legal aid office in their state;

   (ii)a financial counsellor;

   (iii)a community legal service;

   (iv)other welfare and consumer rights agencies.”[37] and

   send all the above to the consumer within seven days of the consumer’s first contacting ATICS.[38]

   [37] Exhibit L at 128, cl 8(e)

   [38] Exhibit L at 128, cl 8

2. Clause 9 of the Rules tells a consumer what to put in a complaint.  As sell as giving a statement of the consumer’s version of the events giving rise to the complaints, the consumer must also include copies of all documents received from or sent to the ATICS member, copies of the consumer’s initial complaint to that member and any other documents relevant to the complaint.[39] 

   [39] Exhibit L at 128-129, cl 9

1. Within seven days of receiving a written complaint, the administrative officer is to send it to the member against whom the complaint is made[40] and send a written acknowledgement of receipt to the consumer.[41]  The member has 30 days within which to give ATICS a detailed response to all matters raised in the consumer’s complaint, all documents not provided by the consumer and copies of any correspondence between the consumer and the member and that is relevant to the complaint.[42]

   [40] Exhibit L at 129, cl 10(a)

   [41] Exhibit L at 129, cl 11(a)

   [42] Exhibit L at 129, cl 10(b)

1. Thirty days after posting the complaint and relevant documents to the member, the administrative officer must send all the material relating to the complaint to the members of the Panel.  That is so whether the member has sent a response or not.  The administrative officer must inform the consumer in writing that the material has been sent to the Panel.[43]  The Panel may proceed to determine the complaint on the basis of the information available to it.  That is the effect of cl 10(c) of the Rules.

   [43] Exhibit L at 130, cl 11(b)

1. Clause 12 as amended by the addition of two paragraphs directed to conciliation[44] sets out the way in which the Panel will determine complaints.  It reads:

   [44] Exhibit K

   “(a)     The Panel determines its internal procedures for determining complaints including but not only:

   (i)whether to hold face to face or teleconference meetings;

   (ii)whether to communicate by email or post or facsimile or otherwise;

   (iii)any other process it requires.

   (b)If, in the opinion of the Panel more information from either the consumer or the Industry Member is required in order to determine the complaint, then the Chair of the Panel will write to the relevant party requesting such information within 14 days of receipt of the original complaint information from the ATICS administrative officer.

   (c)The Panel will wait another 14 days for a response from either the consumer or the Industry Member before proceeding to determine the complaint.

   (d)The Panel will then determine the complaint by providing its determination with reasons in writing to the consumer and Industry Member within 60 days of receipt of the original information or of any response to a request for further information made under Clause 12(c) above.

   (e)The Panel will attempt as much as possible to reach a consensus but if, in the opinion of the Chair, such consensus is not achievable within a reasonable time then the Chair will call for a vote.  Each Panel member, including the Chair, has 1 vote and the outcome of the determination is made by a simple majority.

   (f)The Panel will determine almost all matters without any personal hearing or meeting between it and Industry Member and the consumer complainant together but may require the parties to attend such a hearing or meeting in the course of determining a complaint.  Such a hearing will only be required if, in the opinion of the Panel, it is necessary for a fair and timely determination of the complaint within these Rules.”[45]

   [45] Exhibit L at 130, cl 12

1. Clause 13 provides that the Panel will determine a complaint on the basis of the information available, in good faith and without bias and having regard to the requirements of the law, the industry Code of Practice and Code of Ethics and what is fair and reasonable between the parties in all the circumstances.

1. The Panel can determine a complaint in favour of either the consumer or the member.  If the Panel determines the matter in favour of the consumer, the Panel may determine to impose one or more of the sanctions specified in cl 14 against the member. The range from censure of the member to requiring the member to remedy any loss or damage suffered by the consumer but not exceeding $40,000.  The consumer may accept or reject a determination.[46]  The member is bound by the determination.  Clause 16(c) of the Rules provides that:

   “… if the Industry Member does not comply with the determination, and this is brought to the attention of ATICS by the consumer, the ATICS administrative officer will report this immediately to the ATICS Board which will then initiate the procedure under the ATICS Constitution to fine, suspend or expel the Industry Member from ATICS.  Under this procedure, the Industry Member is given an opportunity to show cause why it should not be fines (sic), suspended to (sic) expelled from ATICS.  Any such suspension or expulsion shall be reported to ASIC as soon as possible.”[47]

   [46] Exhibit L at 132, cl 16

   [47] Exhibit L at 132

1. ATICS must publish its determinations provided it omits the names of the consumer and the member.  The Chairperson of the Panel must report relevant statistical information to the ATICS Board on a quarterly basis as well as annually.  The Chairperson must also report on any systemic problems identified in relation to a particular member or a part of the time-sharing industry together with any other matter considered to be important to bring to the attention of the ATICS Board.[48]

   [48] Exhibit L at 133, cll 17(b) and (c)

1. It will cost a consumer nothing to complain but a member will pay $100 for each complaint received against it and a further $1,000 for each complaint determined by the Panel in favour of the consumer.[49]

   [49] Exhibit L at 134, cl 18

Related proposals regarding ATICS

1. Budget and accommodation are also relevant matters in relation to the establishment of ATICS.  I will set out the proposal relating to budget and accommodation in the context of the evidence. 

EDR schemes previously approved

1. ASIC has previously approved seven EDR schemes.  They are the Financial Industry Complaints Service (FICS), the Banking and Financial Services Ombudsman Ltd (BFSO), Insurance Ombudsman Scheme Ltd (IOS), Insurance Brokers Disputes Ltd (IBD), Credit Union Dispute Resolution Centre Ltd (CUDRC), Financial Co‑operative Dispute Resolution Service Ltd and the Credit Ombudsman Service Ltd.  The ATICS proposal is the only EDR scheme it has refused to approve.  Together, these schemes deal with approximately 125,000 consumer enquiries each year and 10,000 consumer complaints.  The three largest, FICS, BFSO and the IOS, deal with some 95% of these enquiries and complaints.[50] 

   [50] Exhibit 6 at [54-55] and [58]

Financial Industry Complaints Service

1. FICS is a company limited by guarantee.  Currently, all 13 licensed operators of time-sharing schemes are members of FICS.  It is an external dispute resolution scheme that began in 1991 under a different name and a different regulatory regimen.  It was approved by ASIC on 12 November 1999 as an EDR scheme in accordance with PS 139.  Its Constitution sets out its objectives and its Rules set out details of the way in which it deals with complaints referred to it.  At the end of 2005, 2,500 providers of financial services had joined FICS as their EDR scheme.[51]

   [51] Exhibit 2 at 5

1. FICS is funded from a combination of user pays for complaints determined together with an annual levy paid by members.  It also receives funds from entrance or joining fees paid by members.[52]

   [52] Exhibit 1 at [2.1]

1. FICS has various levels of joining fees depending on the category of membership to which a member is assigned.  In 2006, managed investments were Category C members and brokers, financial and security advisers were Category E members.  Both were required to pay a joining fee of $3,674.  If, however, an applicant for membership would otherwise be a Category E member but had fewer than 50 representatives, it could be regarded as a Category F member.  Similarly, if an applicant would otherwise be a Category C member but had funds under management below $50 million, it could be regarded as a Category F member.  A Category F member is a non-voting member and paid a joining fee of $231.[53]

   [53] Exhibit 1 at [2.2.1] and [2.2.6]

1. In addition to joining fees, members of FICS pay an annual levy.  The amount of that levy varies according to the category of membership and, in the case of Category C members, the amount of funds under management and, in the case of Category E members, the number of representatives.  The levy is calculated on a pro rata basis for applications received during the calendar year in respect of all Category A, C and E voting members.[54]  Category F members pay a flat levy of $767.[55]

   [54] Exhibit 1 at [2.2.3] and see also [2.2.5]

   [55] Exhibit 1 at [2.2.6]

1. Complaint fees are also set at rates that vary according to a member’s Category of membership.  The fees are incurred for each step in the process.  The fees in relation to Category F membership were as at 1 January 2006 set for steps described as the Initial Complaint Fee, the Continuing Investigation Fee, the Adjudicator Fee, the Panel Fee, the Daily Panel Hearing in Person Additional Fee, the Return to Panel Fee and the Panel Chair Ruling Fee.  The amount of the fees were $300, $750, $1,250, $3,500, $1,177, $1,408 and $594 respectively.[56] 

   [56] Exhibit 1 at [3]

1. The complaint fees for Category C, D and E membership were given the same names but the amounts were greater for the Continuing Investigation Fee, the Adjudicator Fee and the Panel Fee.  Those fees were higher again in relation to Category A membership but were again the same as the fees for Category F members in relation to the other fees.

1. The notes to the fees in each Category are also very similar.  Each notes that the Continuing Investigation Fee, for example, is only incurred if FICS is not advised within 21 days of the initial letter that it sent to the member that the member has resolved the complaint directly with the complainant.  The Panel Hearing in Person (per day) Additional Fee is only payable if the Panel Chair determines that the parties should appear in person for the hearing but it is noted that this is a rare occurrence.  The Return to Panel fee is only paid if an administrative decision is made within FICS that a matter already heard by the Panel should be returned to it.  This may arise if the Panel’s decision requires clarification in order to be implemented or the parties disagree about how it should be implemented.  The Panel Chair Ruling Fee is incurred where a matter is referred to a Panel Chair for the resolution of, for example, an issue relating to jurisdiction or a procedural matter relating to the exchange of information.

The Banking and Financial Services Ombudsman

1. BFSO was initially established as the Australian Banking and Industry Ombudsman Limited in 1989.  ASIC approved it as an EDR scheme on 21 September 2001.  The application by BFSO for approval was consistent with its resolution to extend its scope beyond disputes involving bank members to disputes across the whole of a banking group’s retail activity including that of bank-owned finance companies.[57] 

   [57] Exhibit 4 at [9]

1. Ten months passed before ASIC approved BFSO’s application.  During that time, BFSO had to modify its governance structure in order to comply with ASIC’s requirements regarding independence of any EDR scheme.  Previously, BFSO had two tiers of governance.  It was governed by a Council comprising a consumer representative, an industry representative and an independent Chair.  A Board, however, had ultimate sanction over the Terms, or Rules, under which it operated and ultimate approval of its budget.  Originally, that Board comprised member Banks but was later restructured to comprise three bank representatives, three consumer representatives and an independent Chair.  The Council was abolished.  BFSO also redrafted its Terms and developed new procedures to deal with systemic issues and serious misconduct.[58]

   [58] Exhibit 4 at [11]

1. BFSO’s Constitution was changed in August 2003 to permit non-bank members to have access to the EDR scheme.  By October 2005, it had 33 bank members and 41 who were not.  Those who were not bank members included foreign currency exchange services, mortgage brokers, financial planners, non-cash payment facilitators and credit providers.  They include the Australian Postal Corporation, Collection House Limited and PayPal Inc.

1. In terms of volume of complaints, the BFSO is the largest external dispute resolution scheme in the financial services sector.  Its 2004 Annual Report shoes that, in 2003/2004, it received 5,859 new complaints and that BFSO officers answered 36,382 telephone calls.  Its website received 43,687 hits in the same period.  As at 30 June 2005, the BFSO had a staff of 44 consisting of the Ombudsman, the General Manager, 13 case officers, 13 case managers, 3 legal counsel and 13 administrative staff.[59]

   [59] Exhibit 4 at [5-6]

1. Clause 1.3 of the Terms states that the aim of the scheme is to provide an independent and prompt resolution of the disputes that come within them.  Resolution must have regard to the law, applicable industry codes or guidelines, good industry practice and fairness in all of the circumstances.  The BFSO seconds a representative from one of the bank members to act as the Ombudsman’s Banking Adviser.  That person is appointed to advise the Ombudsman on issues of good industry practice.  BFSO also engages a consultant to provide advice on good industry practice in relation to financial planning disputes.

1. The process followed by BFSO in resolving complaints is summarised in the affidavit of Mr Colin Neave, who is the Ombudsman for BFSO:

   “16.     The BFSO dispute resolution process works broadly as follows.  When we receive a complaint from a consumer via telephone call, we will usually refer them in the first instance back to the member’s head office.  If the consumer has already tried to resolve the matter with the member directly, then we will ask them to send a written complaint to us.  When we receive the written complaint, we will first confirm that the BFSO has jurisdiction to deal with the dispute.  By way of example, clause 5.1(a) of the Terms preclude the Ombudsman from dealing with a dispute that relates solely to a member’s commercial judgement in decisions about lending or security.

   17.The dispute is sent to the member who is given an opportunity to resolve the dispute.  The member is usually given 30 days to respond.  There is some discretion to extend this timeline where necessary.

   18.In the usual case, if the matter is not resolved after the first referral, the customer is asked to say why they do not agree with the member’s response.  This may be referred to the member again, who is given a further opportunity to resolve the matter.  While no in depth investigation is carried out by the BFSO at this time, we may express a view on the available information.  About ninety percent of cases are resolved at these early stages, within a median time of 58 days.

   19.If the matter is unresolved after referral to the member, the matter is referred to a case manager for investigation.  This is an inquisitorial, rather than adversarial, process, whereby the case manger (sic) seeks information from the parties.  At all times during the process, the parties are encouraged to reach agreement and this may be achieved through expressing a view about the merits of a party’s case or by holding a case conference, whether in person or over the telephone.  It is up to me, as the Ombudsman, to decide if a conference is suitable.  In the year to 30 June 2005, 19 face to face case conferences were held.

   20.If the matter is not resolved, then the case manager issues a Finding.  A Finding is a written decision on the merits of the case.  Both parties have a right to appeal the Finding to the Ombudsman, who issues his Recommendation.

   21.If the customer does not accept the Ombudsman’s Recommendation, then that is the end of the alternative dispute resolution process and the customer must seek other options for redress.  If the customer accepts the Recommendation, the member has another right of appeal.  However, in 9 years, no members have exercised that right and have accepted the Recommendation.  If a member were to exercise that additional right of appeal, the Ombudsman’s Determination would be binding on the member if accepted by the customer.”[60]

   [60] Exhibit 4

1. In addition to its complaint resolution function, the BFSO also provides member training on topics such as Electronic Funds Transfer Code of Practice and maladministration in lending, particularly in relation to credit cards and hardship as well as in relation to issues relating to the financial sector and dispute resolution.  The BFSO publishes a guide to the Terms and a Policy and Procedure Manual intended to alert consumers and members of the likely approach that the Ombudsman will take.  It publishes quarterly Bulletins giving a report on the BFSO’s activities and discussing emerging or systemic issues and contributes to the development of policy and the promotion of good industry practice.

Credit Union Dispute Resolution Centre

1. The BFSO also manages the operation of CUDRC, which is an EDR scheme approved by ASIC.[61]  The CUDRC was initially established by the Credit Union Services Corporation (Australia) Ltd in 1996 and operated by the Australian Commercial Disputes Centre.  On a day to day basis, it is managed by the CUDRC Dispute Manager.  Its operations are overseen by a board of directors comprising an independent chairperson, two industry directors and two consumer representatives.  Members fund CUDRC by the payment of an annual participation fee, a set fee for each complaint and dispute referred and an additional amount based on the time spent in dealing with a complaint.

   [61] BFSO charges the boards of CUDRC and IBD approximately $500,000 in all for its services: transcript at 241

1. The majority of the complaints made to the CUDRC are similar to those made to the BFSO.  They relate to disputes arising from Electronic Funds Transfer, including withdrawal or deposit errors, unauthorised transactions, ATM or EFTPOS malfunctions, the application of incorrect fees and breaches of the EFT Code of Conduct.  The scheme allows disputes of less than $100,000 in value.[62]

   [62] Exhibit 6 at [87-88]

1. CUDRC investigates complaints and facilitates negotiated settlements.  Where settlement cannot be negotiated, the Dispute Manager makes a decision on the complaint.  That decision is binding on the Credit Union.

1. Since 1992, that Dispute Manager has been the BFSO.  As at October 2005, it had 139 credit union members[63] and, up to August 2005, had received 151 written complaints that year.  BFSO has dedicated one case manager and one case officer to provide services for the CUDRC.  The Ombudsman for BFSO also acts as the Dispute Manager for CUDRC.  The two BFSO staff dedicated to the CUDRC can also obtain advice from other BFSO staff and especially from its legal counsel and its specialist staff who deal with electronic funds transfer disputes.[64]

   [63] Exhibit 4 at [25] but note statement in Exhibit 6 at [86] that it has only 130 credit union members.

   [64] Exhibit 4 at [24-26]

Insurance Ombudsman Scheme

1. The IOS was established in 1991 by the Insurance Council of Australia as the General Insurance Claims Review Panel.  It was approved by ASIC as an EDR scheme on 3 August 2000. 

1. In 2005, IOS had 127 members including general insurance companies, medical indemnity insurers, re-insurance companies and underwriting companies.  The IOS is a company limited by guarantee which is overseen by a board of nine directors.  Four represent the various insurance industries represented in the membership and four represent consumers.  Initially, the chairperson was appointed by the Insurance Council of Australia but is now appointed by the majority of IOS’s Board.  IOS is funded by its members other than those which are re-insurers.  Members pay dispute resolution fees and a member levy.  The levy is based on a formula involving an insurer’s share of premiums and number of referrals in the previous year.[65]

   [65] Exhibit 6 at [72-75]

1. The key function of the IOS is to resolve disputes in the general insurance industry and to monitor industry compliance with the General Insurance Code of Practice and the General Information Privacy Code.  It has a two tier decision-making process.  Case managers deal with a dispute.  If they cannot resolve it, the dispute is referred to one of a range of decision-makers depending on its complexity.  The less complex dispute involving matters up to $5,000 are dealt with at adjudicator level.  Referees deal with the more complex matters and a three member Panel can determine claims up to $290,000.  A Panel’s determination relating to an amount up to $150,000 is binding on the member and the scheme can make non-binding recommendations in matters up to $290,000.[66]

   [66] Exhibit 6 at [77]

Insurance Brokers Disputes Ltd

1. IBD was established in 1996 as a company limited by guarantee.  It deals with complaints involving insurance brokers, underwriting agents and other insurance intermediaries.  At the time of the hearing, the limit of its jurisdiction was $5,000 in relation to claims in respect of “business insurance pak” policies and $50,000 in relation to all others.

1. Its membership comprises mainly insurance brokers and includes underwriting agencies and intermediaries who may offer general insurance as an extra or incidental service, financial planners, building companies and strata title managers.  Over 740 of its members are brokers with some 40 from other categories.  They fund the IBD through an application fee and an annual subscription.  IBD’s Board, comprising two industry and two consumer representatives with an independent chairperson, has the power to levy its members if it considers it appropriate to do so.

1. In the calendar year, the scheme received 124 written complaints.  Approximately 35% of them related to business pak insurance policies and a further 27% to motor vehicle insurance policies.  The scheme decided 32 matters in 2004.[67]

   [67] Exhibit 6 at [97]

1. In 2004, the IBD engaged the BFSO to provide office support services on a needs basis for work such as projects and reviews.  It also arranged for BFSO to provide personnel assistance when IBD staff were on leave.[68]

   [68] Exhibit 6 at [96]

Financial Co-operatives Dispute Resolution Service

1. FCDRS has was approved as an EDR scheme by ASIC on 30 January 2003.  It has approximately 45 members comprising 14 building societies and, of the rest, mainly credit unions.  It is overseen by a council, which operates as a board of directors and which comprises two industry representatives, two consumer representatives and an independent chairperson.  Each member of the board is paid $3000 each year.  It can consider complaints involving amounts up to $100,000.  Most of its complaints relate to unauthorised credit card transactions and EFT transactions.  On the basis of Mr O’Shea’s evidence, I find that it receives approximately 1,000 enquiries each year.[69]

   [69] Transcript at 194

1. FCDRS has no staff of its own and its administrative work is performed by the staff of the National Credit Union Association of Australia (NCUA), which is the industry body for credit unions.  All services related to consumers and the resolution of disputes are performed by Jan Taylor & Associates under contract with FCDRS.  Ms Taylor is a former Commissioner for Consumer Affairs in Queensland and is the FCDRS Ombudsman.  Two case managers sit under the FCDRS Ombudsman and they prepare files for the Ombudsman to conciliate or, if the conciliation is unsuccessful, to make a determination or adjudication.  The FCDRS Ombudsman makes approximately 50 determinations each year.[70]

   [70] Transcript at 189

1. Mr O’Shea is an alternate member of the General Insurance Claims Panel, which is part of the IOS but he has had little work to do for in the last four or five years.  As the former HIH Insurance Limited was responsible for a large number of the complaints previously received by the IOS, there have been fewer since its collapse and its work has been taken over by other entities with more developed IDR procedures.  Changes in the complaints that can be resolved by a referee or an adjudicator have also reduced the number of complaints referred to the General Insurance Claims Panel.  When matters were being referred to it in greater numbers of 12 to 15 each fortnight, the industry member would write determinations for half and the consumer member for the other half.  The files are generally very thin although there would occasionally be a complex matter.  Mr O’Shea would be paid a fee of $700 to $750 per day.[71]

   [71] Transcript at 184

Credit Ombudsman Service Ltd

1. COSL has evolved from the former Mortgage Industry Ombudsman Scheme which covered non-bank mortgage originators and mortgage brokers.  Its coverage now includes finance brokers.  As at 30 June 2005, it had over 6,000 members.  They included many credit entities who were not licensed by ASIC but who joined as a condition of ASIC’s having given them relief from the licensing requirements and/or from the requirements imposed on credit product providers.  COSL was approved as an EDR scheme on 22 December 2003.  It is overseen by a board of directors comprising an independent chairperson and an equal number of directors representing industry and consumer interests.[72] 

   [72] Exhibit 6 at [107]

1. COSL can deal with complaints involving amounts up to $100,000.  The majority of complaints relate to standard loans, lines of credit and offset accounts.  COSL attempts to resolve complaints in the first instance by conciliation undertaken by a Dispute Manager appointed by the Board.  The Dispute Manager is the Australian Commercial Disputes Centre Limited (ACDC).  If conciliation fails to resolve the dispute, it is referred to an Ombudsman for a determination and/or award that is binding on the member.[73]

   [73] Exhibit 6 at [109]

Co-operation and resource sharing between the approved EDR schemes

1. On the basis of Ms Edmondson’s evidence, I find that a number of the approved EDR schemes have come together to streamline the services they offer to consumers and to reduce confusion that could be caused by any overlap in those services.  Together with the Superannuation Complaints Tribunal (SCT), all but the FCDRS have joined together to fund a joint call centre called the Financial Services Complaints (FSC).  FSC gives consumers a single telephone number to call for assistance across all six participating schemes.  During 2003/04, FSC answered 149,710 calls and received a further 2,367 calls to an automated answering service.  FICS, BFSO, CUDRC, IOS, IBD and SCT are all co-located in the one building in Melbourne’s central business district.  At the time of the hearing, FICS, BFSO and IOS were developing a common computer based systems network.[74]

THE EVIDENCE

[74] Exhibit 6 at [111]

The witnesses

1. Ms Clegg is currently Vice President of ATHOC and was previously its President between 1998 and 2003.  She has spent 21 years in the time-sharing industry.  Ms Clegg holds two directorships.  She a director and Compliance Manager of Holiday Concepts Management Limited (Holiday Concepts), which operates nine time-sharing schemes of which four are fully sold.  In addition, she is a director of Traditional Values Management Limited, which holds and AFSL and operates a Mortgage Trust.

1. Mr D’Aquino holds a Bachelor of Economics majoring in Accounting and Economics.  He has worked in a variety of assessing, investigating and inspection positions in the Australian Taxation Office and was seconded to the Costigan Royal Commission.  Later, as a senior Examining Officer with the Victorian Corporate Affairs Commission, part of his responsibilities required him to examine and register prescribed interest documents such as prospectuses for company floats, continuous borrowers, retirement villages and employee share schemes.  After working briefly as a specialist in corporate valuation, Mr D’Aquino became a corporate finance specialist. 

1. In 1986, Mr D’Aquino became Executive Director of a publicly listed company, Corporate Pacific.  He was involved in directing and planning mergers, takeovers, capital raisings and company floats.  In 1988, he established Banco D’aquino Financial Services to provide business broking and financial advice to corporate clients.  Since approximately the same time, he has also been the Managing Director of Rubbertech Industries Pty Ltd (Rubbertech).  That is a family owned business that manufactures rubber textile coatings for use in such things as protective clothing, welding blankets and picnic rugs as well as acoustic insulation materials for use in buses, boats and buildings.  Since 2002, Mr D’Aquino has been the independent Chairperson of the CRC. 

1. Mr Ramy Filo has a Bachelor of Engineering (Mechanical) and has membership of various professional bodies including the Institute of Company Directors and the Institute of Engineers Australia.  He is a director of a number of seven companies, responsible officer and director of three others and managing director of another.  Each is engaged in time-sharing schemes.  Previously, he had been SE Asia Regional Manager for Bently Nevada Corporation, which is a GE company. 

1. Since 2003, Mr Filo has been President of ATHOC and has also chaired the subcommittee on timeshare reforms.  He has also been involved as President, and previously as Director, of ATHOC to establish an EDR scheme and to have ATHOC approved as an Industry Supervisory Body (ISB)[75] for the time-sharing industry in Australia. 

   [75] See [179] below

1. Mr Paul O’Shea was the consumer representative on the CRC of ATHOC from 2002 to 2003.             Mr O’Shea has been a practising solicitor since 1989 and also lectures in business law at the University of Queensland.  He is a member of the Council of the Financial Co-operatives Dispute Resolution Service (FCDRS) and is an alternate member of the General Insurance Claims Review Panel of the Insurance Ombudsman Service.  Mr O’Shea is also a member of the Surveyors Board of Queensland.  Currently, Mr O’Shea is conducting research into industry based dispute resolution schemes in Australia. 

1. Mr John Reghenzani previously practised as a solicitor for six years before joining ASIC as a Senior Lawyer for six years with responsibility for the regulation of managed investments and for providing legal advice and support regarding the introduction of the amendments to the Corporations Act that are now found in Chapter 7. He is now employed as the Compliance Manager and Corporate Counsel to APVC Limited (APVC). APVC is the responsible entity for Accor Première Vacation Club (APVC), which is a managed investment scheme registered with ASIC.

1. Mr Geoffrey James Rice has a Diploma of Education and has been involved in sales, management, resort management and marketing in the time-sharing industry for more than 20 years.  For the past ten years, he has also been the Industry Representative on the CRC.  At the time of the hearing, he was a director and shareholder in “one of Australia’s largest independent timeshare developers”[76] and in a marketing and sales company with multiple offices in Australia selling interests in both points-based and weeks-based multi-destination time-sharing schemes.  Mr Rice has also been involved in marketing and sales venues in Asia, a director of a sold out time-sharing club and a director and shareholder of an independent exchange company.  The sold out time-sharing club is not a member of FICS but he does hold positions with an entity which is a member of it.[77]  He believes that his industry experience has placed him in a unique position to have a working knowledge of the various club structures in Australia, of the responsibilities of directors of time-sharing clubs and of the marketing and sales practices of regulated companies.  His role as a director and his work as the Industry Representative on the CRC means that he is regularly in contact with owners, managers and consumers.

   [76] Exhibit B at [3]

   [77] Transcript at 109 and see also 108

1. Mr Andrew John Shields holds a current practising certificate as a solicitor and, since 1 March 2004, has been employed by Trendwest South Pacific Pty Limited (Trendwest) as its Regulatory Compliance Counsel.  He described Trendwest as Australia’s leading provider of time-share and it holds and AFSL.  As Regulatory Compliance Counsel, Mr Shields’ duties include his handling complaints from owners of time-sharing interests and non-owners as well as addressing any regulatory issues raised by a regulatory body such as ASIC.

1. Mr Colin Neave has been the Ombudsman of the Banking and Financial Services Ombudsman Limited (BFSO) since February 1996.  Prior to that appointment, Mr Neave had been a Deputy Secretary of the Attorney-General’s Department.  He has previously held other positions including Managing Director of the Legal Aid Commission of New South Wales and Director-General of the Department of Public and Consumer Affairs in South Australia.  Since 1999, he has also been Chairman of the Commonwealth Consumer Affairs Advisory Council (CCAAC), which was established in that year to provide independent advice on consumer issues to the Federal Minister with responsibility for those matters.

1. Ms Carolyn Louise Bond has a Post Graduate Diploma in Education and Training and has held various positions including employment as a financial counsellor, teaching and curriculum development (financial counselling) and part-time panel member of the Appeals Committee of the Housing Guarantee Fund (Victoria).  She was employed as a policy officer with the Consumer Credit Legal Service Inc (CCLS) in 1997 and is now its Manager.  Ms Bond is also a former Chair of the Consumers’ Federation of Australia, a Consumer Director of BFSO and a Director of the Victorian Legal Services Board. 

1. Ms Sarah Jane Edmondson holds a Bachelor of Economics and has worked for ASIC since 1998.  She has been a consultant on consumer protection to its Regulatory Policy Branch and, from 2001, was the Assistant Director of the Policy and Education Branch of its Consumer Protection Directorate.  In that position, she has been primarily responsible for providing advice to ASIC and its Commissioners in respect of the approval of EDR schemes.  Her responsibilities included the technical and policy aspects of ASIC’s role in monitoring and promoting consumer protection in the Australian financial system.

Complaints made to ASIC and FICS regarding time-sharing schemes

1. During the period from 2002 until 2005, Ms Edmondson said, ASIC had received complaints about various aspects of time-sharing schemes.  The number of complaints received by ASIC in each of six years were: 2000 (36); 2001 (33); 2002 (34); 2003 (46); 2004 (to October 2004) (42); and October 2004 to October 2005 (34).

1. The complaints ranged across a variety of matters. Those matters included allegations of bad advice, failure to lodge documents or reports, fraud or negligence by office holders, illegal fundraising, breach of licence conditions, misleading offer documents, misleading reports or accounts, misleading advertising, misleading selling and marketing practices, breaches of the anti-hawking provisions of the Corporations Act, poor administration systems, unconscionable conduct, unsatisfactory complaints handling, lack of external or internal dispute resolution procedures and lack of disclosure of documents. Of these, the most common type of complaint is that relating to misleading advice and that is usually connected to the sales of interests in the scheme. The second most common type encompasses allegations of unconscionable conduct and of fraud or negligence including breaches of fiduciary duties by a manager or responsible entity. These complaints often arise from sales methods that are employed at seminars conducted by time-sharing schemes and that are perceived to place undue pressure on the consumer.

1. FICS have advised ASIC that, between January 2001 and September 2005, it received 71 complaints from consumers regarding time-sharing schemes.  Of these, four concerned advice, 47 concerned representations made to the consumer, five concerned disclosure and 15 concerned the standard of service provided.  As FICS does not reveal the name of the complainant, ASIC is unable to ascertain whether any of the complaints made to FICS were duplicated in those made to ASIC.

Complaints made to ASIC regarding EDR schemes

1. Ms Edmondson said that ASIC also receives complaints about EDR schemes.  They may come from both consumers and industry members.  The majority of them relate to dissatisfaction by one or other with the decision made under the scheme.

Financial Industry Complaints Service

1. Ms Clegg was critical of FICS on the basis that its process is:

   “… drawn out, frustrating and extremely costly.

   Even when the matter is found in favour of the timeshare entity, the costs of the complaint are still borne by the FICS member and can be considerable.  As such there is no incentive for the complainant to seek to resolve the dispute with the time share operator.”[78]

   [78] Exhibit A at 14, [95-96]

1. She was also critical of FICS’ staff whom she has found in her dealings to have:

   “… insufficient knowledge of the time share industry, particularly common sales practices of timeshare.  This lack of expertise causes delay, increases cost and is not helpful to the resolution of complaints.”[79]

   [79] Exhibit A at 14, [99]

1. Ms Clegg expressed concern about the costs for sold-out schemes on the basis that membership of FICS could not be borne by such a scheme’s members.  Even though sold-out, disputes can continue to arise regarding matters such as bookings and the condition and availability of the facilities and accommodation.

1. A tentative proposal put by ATHOC to FICS that they share resources has not come to anything.  Although FICS advised ATHOC that it did have such arrangements with other organisations, it declined to give a quote for providing services to ATHOC.  Mr Filo confirmed that this was so.[80]

   [80] Exhibit E at 34, [58]

1. As the holder of an AFSL, APVC is required to be a member of an approved EDR scheme.  Mr Reghenzani said that only FICS is available to it and it is a Category F member.  APVC divides the complaints that it receives into two broad categories: member complaints and non-member complaints.  The non-member complaints category is further divided into three: purely marketing-related complaints received from those invited to attend a sales presentation but who do not necessarily attend; sales-related complaints received from those who do attend a sales presentation but who do not ultimately become members and miscellaneous complaints that fit neither the member complaint category or either of the two sub-categories.[81]  In the first seven months of 2005, APVC had conducted between 5,000 and 6,000 guest tours each month at one or other of its fourteen[82] Australian locations.  In the same period, approximately 10% of those taking the tours made an initial decision to purchase an interest in the scheme.  By the expiration of the five business day cooling-off period that then existed, some of those changed their mind.  In all, approximately 6.6% of those taking a tour became members of APVC in the first seven months of 2005.  In August 2006, APVC had over 15,000 members.

   [81] Exhibit H at [6]

   [82] Transcript at 152

1. In the twelve month period to 30 June 2005, it received 70 member complaints and 169 non-member complaints.  They concerned amounts ranging from $250 to $300 up to about $22,000.  The smaller ones concerned something such as an incentive or a gift and are made by non-members.  The larger ones related to rescission of a contract.  APVC resolved all but seven of these under its IDR procedures.  It referred those seven to FICS in the six months to 30 June 2006.  In the twelve months to 30 June 2006, it received 80 member complaints and approximately 170 non-member complaints.[83]

   [83] Transcript at 153

1. Mr Reghenzani believes that he does not provide APVC with as effective an external complaints resolution system as could be provided by a more specialist service that is capable of tailoring its infrastructure and services to the unique circumstances and needs of the time-sharing industry.  Using APVC’s circumstances, Mr Reghenzani explained that this was so because:

   “Not all complaints initially received by APVC are likely to fall within FICS’ jurisdiction or are practical for FICS to resolve and accordingly FICS is unable to provide APVC an effective ‘one-stop-shop’ complaints resolution process capable of dealing with the full range of complaints generated as a result of APVC’s business activities;

   The costs of complaint referral and resolution before FICS are prohibitively high, and are borne by APVC whether or not the complainant’s complaint is upheld.  This factor alone causes APVC to constantly settle otherwise unmeritorious complaints simply to avoid incurring costs before FICS.  Further since APVC is obliged to refer all unresolved member complaints to FICS regardless of monetary jurisdiction, APVC will invariably seek to avoid referral to FICS and settle all member complaints where resolution of the complaint is likely to cost APVC less than $500;

   The time typically taken from the time of referral of a complaint to APVC to ultimate resolution by FICS can exceed 6 months, at least 4 months of which the complaint will be before FICS.  This may constitute in the mind of at least some consumers an unreasonable period of time in which to receive a final outcome;

   Since FICS only deals with a limited number of timeshare industry complaints, FICS’ case officers appear to often lack of an understanding of the timeshare product or ancillary products and benefits offered by APVC and are therefore not always in a position to fully appreciate the context or issues to which a complaint relates.”[84]

   [84] Exhibit H at 43, [10]

1. He also gave an insight into the part that the fee structure of FICS plays in APVC’s decision whether or not to settle a complaint:

“APVC frequently settles complaints in a complainant’s favour where the resolution of the complaint is likely to cost less than the cost to APVC of an anticipated referral to FICS.  APVC typically regards the impracticality of allowing a complaint to be resolved by FICS as the main determining factor in its resolution of the complaint rather than the complaint’s merits.  In addition to paying an annual membership levy of $616 to remain a Category F member of FICS, APVC, thereafter, pays fees in relation to each complaint referred to FICS.”[85]

Mr Reghenzani said that referral of a complaint to FICS may expose APVC to costs of between $2,400 and $6,500.  The possibility of a matter’s being referred to FICS and the consequent costs remains a substantial determining factor in APVC’s resolving most complaints.  That is particularly so where the resolution of the complaint was likely to cost APVC no more than $400.  At least 85% of all complaints received by APVC fall into that category.  Mr Reghenzani said that he believed this to be an appropriate impetus to the resolution of complaints in some cases but, in most, it merely rewarded undeserving complaints.  The fee structure set by FICS does not contain sufficient flexibility to allow it to adapt them to take account of the nature and level of complexity of complaints or of their monetary value.

[85] Exhibit H at 44, [12]

1. Of the seven complaints that were referred to FICS, Mr Reghenzani said that three were resolved before they were referred for conciliation or adjudication.  That meant that APVC incurred a cost of only $297 for each of them.  The remaining four were referred for conciliation or adjudication and so incurred additional fees.

1. When asked in cross-examination how ATICS would tailor its services to the unique circumstances of the time-sharing industry, Mr Reghenzani replied that he could not talk about it as it is three years since he had read its Rules.  He could say that he understood that:

“ATICS, notwithstanding being independent, will still take cognisance of the unique circumstances of its member base and design a fee structure that would take into account the range of complaints that those members will generate for referral to it and the size of awards that the Tribunal is likely to provide in favour of the consumer.”[86]

[86] Transcript at 155

1. One of the unique circumstances applying to the time-sharing industry is that a member acquires not only an interest in a managed investment scheme but also a number of ancillary rights relating to such matters as entitlements to have access to properties in other schemes around the world.  In Mr Reghenzani’s view, FICS had made a number of anomalous decisions because it had not understood some of the quirky or esoteric time-sharing related issues.  One decision he could think of served the interests of neither the consumer or the time-sharing business.  With one qualification, Mr Reghenzani agreed with Mr Neave’s assessment of the issues that ultimately underlie complaints.[87]  The one qualification is that it is important to understand the context of the contractual promise and what is required to deliver it.  That means understanding the conventions and the unique nature of the contract.  Mr Reghenzani agreed that this depended on the quality of decision-makers appointed to deal with a dispute.  He did not entirely agree that it depended also on the information provided by the industry operator because the capacity of the decision-maker to understand it is also important.

   [87] Transcript at 159

1. Mr O’Shea also took some issue with Mr Neave’s view when he said that:

   “… it is going to be difficult to work out whether a contract, for instance, has been breached …  It is going to be easier to do that if you are familiar with the form layout, statutory requirements, industry code of conduct requirements, etcetera of timeshare contracts than if you are not.  This also applies to administrative or computer errors.  For instance, it is going to be very difficult without some developed knowledge or you could call for it actually on a case by case basis.  I suppose what is an administrative error if you don't know how particular contracts and sales processes are administered.  I mean, they are such general statements, that they are true, but they also are not inconsistent with an improvement on the capacity to deal with those issues by specialist knowledge.”[88]

   [88] Transcript at 223-224

1. Mr Rice is also critical of FICS.  He summarised the procedure and costs that ATHOC members face when dealing with FICS.  He identified them as: Complaint received by FICS; (Member responds); FICS Investigation Fee; (Conciliation meeting); Adjudication meeting; and Panel hearing.  Those steps in brackets do not attract a fee but Mr Rice quoted the fees for the other steps as $297, $649, $1,408 and $5,577 respectively.[89]  They totalled $7,931.  Mr Rice also set out the additional fees as Panel hearing fee in person ($1,777 per day), Return to panel fee ($1,408) and Panel Chair Ruling Fee ($594).  Although he did not refer to the various categories of membership in FICS, Mr Rice would appear to have based his figures on the member’s belonging to Category C.  It is clear that his figures were drawn from FICS’ 2005 scale of fees.[90]  Mr Rice noted that members are bound by the FICS’ determination and to pay the fees whether the determination is in its favour or not.  As the average selling price for a time-sharing interest is $15,000, the FICS fees represent 53% of it.  Clubs that are sold-out are non-profit organisations and so must increase the fees they impose on their members in order to meet the costs.

   [89] Exhibit B at 53, [24]

   [90] Transcript at 108

1. Mr Rice summarised the problems that he sees as FICS being an EDR scheme in relation to time-sharing schemes in this way:

   “i.       The lack of incentive for the complainant to settle the matter because there is no cost to the complainant and they are not bound be the determination of FICS.  As opposed to the consumer, the high cost to the member leads to unrealistic settlement of small complaints at an early stage, regardless of merit, as it is more cost effective.

   iii.There is no timeshare expertise within the FICS process.

   iii.FICS has increased its fees in the past and are likely to do so in the future.

   iv.FICS is not in a position to sanction time share operator members to ensure these people do not continue to operate in an undesirable manner.

   v.The FICS process can be protracted and is expensive.”[91]

   [91] Exhibit B at 54, [28]

1. In his evidence, Mr Rice said that he saw a small complaint as being anything under $500 with the biggest being in the order of $12,000.  A complaint about a marketing matter might arise if the promoter offered an inducement for a person to attend a seminar and the person complains about the quality of the inducement on receiving it.  Other complaints might relate to an unregulated member where a time-sharing scheme has been sold out and they complain about, for example, about a body corporate fee or special levy.  Later, in cross-examination, Mr Rice said that the highest claim that had gone to FICS and that he had been involved with concerned $40,000.[92]  Like Ms Clegg, he said that highest price paid for an interest in a time-sharing scheme with which he is concerned is in the order of $26,000.  The range of prices in the industry is between approximately $12,000 and $25,000.  When complaints involve more than the amount paid for them, the difference lies in the amount claimed by the complainant for additional damage over and above the price.

   [92] Transcript at 109

1. Mr Rice’s attention was drawn to the relatively high number of complaints resolved by the Banking Ombudsman at an early stage and in a median time of 8 weeks.  He said that he “wouldn’t have a clue”[93] how many cases FICS resolved in the same way or within this time.  There would probably be a similarly high number.

   [93] Transcript at 111

1. Mr Rice agreed that the people who make decisions in FICS do so across a range of different financial services industries.  When asked whether this was an advantage because they could compare practices, Mr Rice did not agree because:

   “… In my view, FICS was set up for the big end of town:  the financial planning, superannuation, etcetera, where people are dealing with financial planners, to get advice on some serious investments for their long term livelihood or whatever.  At the end of the day, timeshare is a consumer product that, for a whole bunch of reasons, falls under this financial planning umbrella.  The people that buy this product are buying for lifestyle, holiday product.  They are not buying a financial planning type product.  So I would suggest that the people that are adjudicating or looking at the complaint are still looking at the complaint on timeshare as a financial product, and it is not a financial product, and the practices that are involved by the timeshare industry in the promotion of its product are about 100 per cent different from the practices of a financial planner giving financial advice to a consumer.

   …

   … what I am trying to put across is that timeshare doesn't really fall into any of those categories.  All of these categories here are people that are giving some form of advice on financial matters.  What I am saying is in the timeshare industry, we don't give any financial advice on any financial matters.  In fact, we are not allowed to at all.  We sell a product.  We sell a caravan, if you like.”[94]

   [94] Transcript at 114

1. Mr Shields said that Trendwest had become a member of FICS on 29 December 1999.  Between March 2004 and August 2006, Trendwest had received 481 complaints from members and 21 of those have been referred to FICS.  The majority of complaints forwarded to FICS about Trendwest involve sums ranging from $1,000 to $3,500 but there have been two complaints amounting to $7,000 and $11,000 respectively.  In the lower range of matters, the issues related to allegations that misrepresentations had been made to members regarding, for example, the resale price of credits or availability, maintenance, the quality of the resorts and issues relating to the resorts themselves such as their cleanliness or their rating as resorts.  Eighteen of the complaints referred to FICS were resolved without requiring adjudication.  Two went to adjudication and, at the time of the hearing, the remaining complaint had not gone to conciliation and might be settled because it was not worth the cost of proceeding to an adjudication.

1. In Mr Shields’ view, the fees charged by FICS are disproportionate to the complaints.  He referred to the fees payable in respect of a Category F member, to which I have referred above.[95]  A member is required to pay all charges imposed by FICS regardless of whether the complaint has merit.  For Trendwest to take a complaint over $1,000 to a panel hearing at FICS would cost between $7,931 and $11,110 depending on the procedural steps taken by the parties to the dispute and regardless of whether the complaint has merit in law or fact.  In the past, Trendwest has decided to settle small claims early and regardless of merit as it is cheaper to do so.  It has done so in relation to complaints referred to FICS because it has decided to settle at the conciliation stage rather than at the Mr Shields believes that this is entirely unfair.[96]

[95] See [39] above

[96] Exhibit I at [10]

Banking and Financial Services Ombudsman Limited

1. Mr Neave, the BFSO’s Ombudsman, said that he regarded the effectiveness of an EDR scheme as being due to a combination of things including:

   “that the scheme is independent of industry, and that it is seen to be independent;

   having the confidence of both industry and consumer stakeholders;

   being visible and accessible to individuals and small businesses who wish to avail themselves of the alternative dispute resolution service.  All but one of the ASIC approved external dispute resolution schemes have a common telephone number for users to call;

   having a transparent process for dealing with disputes and systemic issues;

   having well trained staff with appropriate case management capacity and internal processes that provide quality assurance through discussion and review;

   having sufficient resources to promote the scheme, to both industry and consumer stakeholders and the public at large, as well as to conduct the core business of resolving disputes; and

   having clearly set out and understood jurisdiction.”

The CRC provided for by ATHOC as part of its Code of Conduct

1. Mr D’Aquino said that he was asked to accept the position of independent Chairperson of the CRC by a director of ATHOC, Mr Bengasino, who had previously acted as a solicitor for his businesses.  They are friends.  Other than some brief involvement during his work in the Victorian Corporate Affairs Office, Mr D’Aquino knew nothing of the time-share industry.[97]  The role of Chairman appealed to him, it was a role different from his other work and he thought that he could do a good job.

   [97] Transcript at 123

1. In his statement, Mr D’Aquino explained the CRC and its operation:

   “9.      The current CRC panel consists of three members:  an independent chair, a consumer advocate and an industry representative.

   10.When a complaint is received it is not only circulated to all members of the Panel but also a copy is sent to the ATHOC Member against whom the complaint is made.  The Member is given a right of reply which in turn is circulated to the entire panel as well as the Complainant.

   11.Once all the facts, charges and evidence is ‘on the table’ I request that my fellow panelists submit preliminary views on the matter including whether we have sufficient material upon which to make a determination.  If not, I then contact the parties and request further particulars.

   12.Once the CRC is satisfied that all relevant material has been presented I write a first draft determination based upon the consensus/majority view that seems to be emerging from the comments of the other panelists and my own judgment.

   13.The draft determination is then submitted to the other panelists for further debate and fine tuning until a final version has either total consensus or majority view.

   14.This Determination is then circulated to the parties.

   15.When the CRC was operating at full capacity … it would hear about 20 cases per annum.

   16.The CRC is completely independent of ATHOC, and the decisions are based on the merits of the case.”[98]

   [98] Exhibit C at 21

1. Clause 4 of the Rules attempts to define the complaints that may be dealt with by ATICS by reference to the contract for purchase of a time-sharing interest, the administration of the contract, the management of a time-sharing resort and the consumer’s right to deal with the interest.  While that type of formulation may cover many of the disputes that may arise between a consumer of a time-sharing product and a financial services licensee, it potentially opens the way for an initial dispute as to whether a claim comes within the scope of cl 4 or not.  It may be more apt to draft the jurisdiction clause more broadly in terms of a complaint about an act or omission by or of a member or for which a member may be responsible in relation to a financial product or financial service related to the time-sharing industry. 

1. At one level, the monetary limit of $50,000 seems adequate.  The evidence leads me to conclude that the majority of time-sharing interests are sold for an amount under that ceiling.  In view of that, the upper limit should accommodate any complaint involving a potential rescission of a contract to purchase a time-sharing interest and loss of associated benefits.  In that sense, ATICS should be accessible to the majority of consumers dealing with financial services licensees in the time-sharing industry.

1. My difficulties with the monetary level lie in the manner in which the monetary value is to be determined.  In relation to the potential rescission of a contract, for example, is it to be determined by reference to the amount paid for the time-sharing interest or possibly agreed to be paid for it or does it take into account additional costs and charges including interest?  The Rules might well need to drafted with such difficulties in mind.

1. Clause 5 of the Rules excludes four types of complaint.  It presupposes that a complaint will always relate to a particular scheme and a particular member.  Complaints could, of course, relate to the time-sharing industry as a whole and, although it may not come within cl 4, it may be that it should be expressly excluded by cl 5.  Clause 5(b) expressly excludes a complaint about a matter that is already the subject of a proceeding brought by the consumer in a court or tribunal unless the consumer gives a written undertaking not to take further steps in the action while ATICS is dealing with the complaint.  That clause does not have sufficient regard to the reality that a consumer cannot necessarily control what happens in a court or tribunal once he or she has initiated the proceeding.  To take no further step during the course of the ATICS proceeding may be to prejudice a consumer’s legal rights.  It may be that the court or tribunal will adjourn the proceedings while the ATICS proceedings take their course but it cannot be assumed.  Any form of undertaking required of a consumer under cl 5(b) should not be cast in terms that do not enable him or her to protect his or her rights in existing court or tribunal proceedings.

1. The Rules do not provide any time within which a complaint must be made to ATICS.  As they are currently drafted, a complaint could be made about a matter arising many years before and about which the member no longer holds records or, because of the movement of staff, of which the member no longer has a corporate memory.  To place a member in that position is not fair.  Just how fairness is to be achieved would require some thought.  The passage of time does not necessarily disadvantage a member and there may be any number of reasons why a consumer does not complain to an external body at an earlier time.  One such reason may be that the consumer has been engaged in lengthy discussions with the member over a long period of time.  Fairness may be achieved by providing that a complaint must be made within a certain time but allowing for an extension of that time in appropriate circumstances.  As the Rules stand, no thought appears to have been given to the issue.

1. No provision is made for the determination of whether a complaint comes within the ambit of ATICS or not.  PS 139.46 requires that determination to be in writing and with reasons.  It would seem to be a task for the Chair of the Panel although, in a larger scheme, it might be a decision made by somebody else.  That is a matter to be considered against the whole of the scheme.

1. Clauses 8 and 9 of the Rules deal with the administrative officer’s role in dealing with complaints before they are referred to the Chair of the Panel.  In part, they are concerned with the classification of complaints to ensure that they come within ATICS’ jurisdiction.  That classification assists ATICS but does not come within the description of assisting complainants to draft and lodge their complaints as required by PS 139.33.  Certainly, cl 9 tells a consumer what to put in a complaint but it seems to me that PS 139.33 contemplates that the staff of an EDR scheme will also assist to an extent that is short of acting as the person’s advocate.  Assistance of that sort may be necessary if, for example, a person understands what is required by cl 9 but has difficulty in expressing the complaint in writing or in assembling the information in a way that reveals the nature and extent of the complaint.  Clause 8(e) of the Rules contemplates that assistance of that sort will be given by one or other of the legal aid or legal welfare bodies that it sets out.  That is inconsistent with PS 139.33 and inconsistent with a scheme that should, according to PS 139.43, be provided free of charge to any complainant.

1. The procedures set out in the Rules are very focused on the process to be followed and the time within which each procedural step must be achieved.  The time limits are prescriptive and no allowance is made for them to be modified to take account of the needs of any case that should require a longer time for an industry member to assemble the relevant information relating to the complaint.  Standardisation of process is important as it is a way in which consistency of treatment of complaints can generally be achieved.  Where those time limits are realistic, it is possible to expect that there will be a consistency of the outcome that results from their application.  In the case of procedures for the provision of information, there will always be cases in which the relevant information cannot be gathered in the time allowed or in which circumstances require it to be gathered more quickly.  Some ability to modify the time limits will permit the needs of such cases to be met so that there is ultimately consistency of the outcome i.e. the provision of the relevant information to ATICS.

1. The Rules relating to the gathering of the information from the consumer and from the financial services licensee have the effect that the member sees all of the material submitted by the consumer.  They do not permit the consumer to see all that the member submits.  That follows from the fact that the administrative officer is directed to send all material to the members of the Panel 30 days after posting the complaint and the consumer’s documents to the member.  The practical outcome of the procedures is that the consumer is unable to address any arguments that are put by the member and that raise new issues or present new information not previously addressed by the consumer.  That is to say, the Rules do not pay any regard to the fact that a dispute may be multi-dimensional.  It may be that the consumer sees one or two of its dimensions.  The member may see quite another dimension as well as, or perhaps instead of, those seen by the consumer.  The information must be gathered about a dispute in all of its dimensions and all must be made known to both parties for their comment before an EDR scheme can be said to be fair.

1. The ATICS Rules seem to be drafted on the basis that the Panel will never want to use its own initiative to make its own enquiries regarding a matter.  Those enquiries may be of the parties themselves or of third parties.  They may relate to the specific actions or omissions of the parties themselves or they could, for example, be directed to the usual practice of others engaged as operatives or as consumers in the time-sharing industry.  It might be thought appropriate for the Panel to have the ability to seek any information that it considers relevant provided it makes all of the information it obtains available to both parties for their comment.

1. The Rules make no allowance for work to be done at an informal level between the consumer and the member before a complaint is referred to the Chair of the Panel for conciliation or to the Panel for adjudication.  Mr O’Shea spoke of complaints settling through what he described as “shuffle mediation”.  On his description, settlement seemed to occur through the very fact of the exchange of information.  It may appear that way but experience in courts and tribunals shows that settlement occurs after the exchange of information only if the parties make contact with each other outside the formal procedures or if a third party facilitates their doing so.  That facilitation does not need to have the formality of a conciliation or even be conducted by a person with skills as a conciliator.  It does need to be done by a person with the skills to assist people to find their own solution to a problem whether it be by showing them possible solutions or otherwise. 

1. Omission of more informal means of facilitating the resolution of a dispute has a negative impact on the effectiveness of ATICS as an EDR scheme in that it closes the door on an opportunity to resolve a matter with as little cost to both the parties and the scheme.  Cost should be measured not only in monetary terms in the form of fees paid to ATICS and in the salary costs paid to members’ staff involved in the resolution process but also in terms of effort expended by the consumer, the member and the personnel of ATICS.  Even when measured purely monetary terms, it is apparent from the evidence of Mr Reghenzani that even with FICS, which he regards as an expensive EDR scheme model, three of the seven complaints referred to it were settled before they were referred for conciliation or adjudication at a cost to APVC of only $297 for each of them.  That figure does not reflect any part of the amount paid by APVC as its membership or subscription but that is a cost it must meet regardless of the time at which a complaint is settled.

1. The ATICS Rules do provide for conciliation.  The proposal suggests that the process will be very structured and clinical.  It will result in any settlement proposal made by one party or other being put to the other party through the Chair of the Panel.  The proposal will either be accepted or not accepted.  While there is room for the parties to make counter proposals, there is no provision made for ATICS to bring the parties together whether personally, by telephone conference or, perhaps, a video link.  There is no provision made for their discussions to be facilitated by a third person or for that third person to suggest other proposals that the parties may wish to consider.  There is no provision for that third person to assist the parties to mould their own proposals for settlement or to explore other issues that are relevant but had not previously been explored.  These are but some of the ways in which a conciliation may assist in the resolution of a dispute.

1. As I have said, NADRAC emphasises in its Report[352] that the explanations that it gives of terms such as “conciliation” are not to be regarded as definitions.  Bearing that in mind, it is useful to have regard to NADRAC’s explanation of the term for it gives a flavour of what is required in a conciliation and what I am trying to explain is missing from the proposal in the ATICS’ Rules.  NADRAC describes:

   “Conciliation … [as] a process in which the parties to a dispute, with the assistance of a dispute resolution practitioner (the conciliator), identify the issues in dispute, develop options, consider alternatives and endeavour to reach an agreement. The conciliator may have an advisory role on the content of the dispute or the outcome of its resolution, but not a determinative role. The conciliator may advise on or determine the process of conciliation whereby resolution is attempted, and may make suggestions for terms of settlement, give expert advice on likely settlement terms, and may actively encourage the participants to reach an agreement.
   Note:  there are wide variations in meanings for ‘conciliation’, which may be used to refer to a range of processes used to resolve complaints and disputes including:

   Informal discussions held between the parties and an external agency in an endeavour to avoid, resolve or manage a dispute

   Combined processes in which, for example, an impartial party facilitates discussion between the parties, provides advice on the substance of the dispute, makes proposals for settlement or actively contributes to the terms of any agreement.”[353]

   [352] See FN 302 above

   [353] Legislating for alternative dispute resolution; A guide for government policy-makers and legal drafters, November 2006 at 101

1. If the matter is not resolved at the conciliation, the ATICS Rules contemplate a determination that is either in favour of the consumer or in favour of the member.  It may be simply a matter of drafting but I note that it is possible to envisage some determinations that could be said to favour neither one or to do so only partially.

1. I note that cl 14(c) of the Rules imposes a $40,000 limit on any payment that the Panel may require the member to pay the consumer to remedy any loss or damage, including consequential loss or damage, suffered by the consumer.  The choice of $40,000 is a mystery to me in view of the fact that cl 5(a) permits a complaint to be made if it “involves a dispute over an amount more than $50,000.”  I note that cll 14(d) and (e) permit the Panel to award two further sums up to $5,000 to be paid by the member to a consumer.  The first is for damages and the second for costs.  If all were ordered, the total would be $50,000.  That is the amount referred to in cl 5(a) but it is the amount of the dispute to which reference is made and not a reference to the amount of the dispute together with damages and costs.  It seems to me that the practical effect of the $40,000 limit set by cl 14(c) is to discount a member’s liability by $10,000, and so by 20%, when that member is faced with a claim for the maximum amount of $50,000 that ATICS may consider.  A discount is also given to those members defending complaints involving matters between $40,000 and $50,000.  The discount is not as great but will be an amount proportionate to the difference between $40,000 and the amount of the claim.  That is not fair to those consumers should they be successful.

1. The enforcement of the Panel’s determinations is a matter dealt with, in my view, inadequately.  Quite properly, cll 16(c) and (d) provide that a member is bound by the Panel’s determination unless the consumer does not accept that determination.  The problem with cl 16(c) is that it imposes possible sanctions against the member in the form of “fines” or loss of membership but does not include any steps that ATICS itself may take to enforce its own determination.  Enforcement could be by way of seeking specific performance of a term of the contract that it should have with the member when the member joins ATICS.  That term should be found in the Constitution of ATICS and should be to the effect that the member agrees to implement the terms of any Panel determination made in relation to a complaint against it.  The term should also bind the member to implement any agreement that it reaches with a consumer in settlement of that consumer’s complaint against it.

1. I will come now to the subject of the budget, which straddles the provision made for them in the Rules and the arrangements made for the implementation of the Rules.  There are two aspects: the fee for each complaint and the annual subscription to be paid by each member. 

1. On the basis of the evidence, I am unable to make a finding as to the amount that each member of ATHOC will have to pay to be a member of ATICS or that a non-member of ATHOC will have to pay.  I accept the evidence of Mr Filo, based on the resolution of the ATHOC Board that, if a member of ATHOC joins ATICS, its total annual subscription for the two bodies will not exceed that it currently pays for membership of ATHOC.  On the basis of the evidence of Mr Filo, I find that membership fees paid to ATHOC in 2005/06 totalled $373,598.29.[354]  There is no evidence of the amount required to operate ATHOC and so no evidence of the amount of the annual membership fee that could be “sacrificed” and charged instead as the membership fee of ATICS.

   [354] Exhibit G at [1] referring to RF2 (spreadsheet)

1. The likely membership base of ATICS is also unclear and a matter on which I find myself unable to make a finding.  Mr Filo said that 50 of the 60 ATHOC members who were then required to be members of an approved EDR scheme had expressed their intention to join ATICS if it were approved.[355]  Since Mr Filo gave that evidence, ASIC has made its amendments to PS 160 and its effect on the 50 is unknown to me.  Furthermore, it is not clear how many members of the time-sharing industry will remain as members of ATHOC.  The doubt arises in my mind from two changes effected by PS 160.  The first is that it removed what would seem to be a significant benefit previously enjoyed by ATHOC members.  That benefit was in the form of a cooling off period that was significantly shorter if a consumer entered an arrangement with an ATHOC member than if it entered an arrangement with a member of the time-sharing industry who was not a member of ATHOC.  The cooling off period is now the same for all.  It is possible that this has had, or will have, an impact upon ATHOC’s membership.  The second is the change to the requirement for certain time-sharing schemes to be a member of an approved EDR scheme.  Just how many time-sharing schemes will be affected by this is unclear to me.  Whether any of the 50 identified by Mr Filo are among them is also unclear.  What is clear to me on the basis of ASIC’s letter received on 29 June 2007 is that, provided they are not involved in resale of time share interests, 32 time-sharing schemes will not be required to be a member of an approved EDR scheme and at least some of them were members of ATHOC as at August 2006.

   [355] Exhibit G at [5]

1. I accept the evidence of Mr Shields that the fee structure of an EDR scheme can be pitched in a way that makes an industry member feel that it has to concede complaints it considers unmeritorious and capable of being defended.[356]  The cost of continuing to defend the complaint will outweigh the cost that flows from conceding it.  There is a balance to be achieved in the setting of fees and I have not given thought to where they should be set.  Bodies such as FICS have a scale set according to the stage at which a complaint is resolved.  That approach has not found favour with ATHOC’s members but I note that the fees form part of the revenue needed to run an EDR scheme. 

   [356] Transcript at 173-174, see also at 164

1. ATICS provides for a fee of $100 to be paid by a member against whom a complaint is made.  At that level, it is difficult to see how the necessary funds will be raised to make up the operating costs shown in the proposed Budget to be $100,000.  Accepting for the moment the assumption made in Note 2 to the ATICS’ proposed Budget, 150 complaints would be made in each 12 month period and 25 of those would be determined in a manner adverse to the member.  They would bring an income of $40,000 only.  If ATICS’ estimates are correct, it is difficult to see that sufficient funds could be gathered to run ATICS after its first year.  A sum of $60,000 would have to be found from the membership subscriptions or from further amounts levied on members.  It would possibly remain dependent on ATHOCS if ATHOCS were able to raise sufficient funds from its membership subscriptions.  That is subject of some doubt given Mr Filo’s evidence that those ATHOC members who joined ATICS would not pay any greater subscription or membership fee than they currently paid to ATHOC.  It is to be expected, though, that the price of membership will increase.  What I understand Mr Filo and, indeed, Ms Clegg to be saying is that the total membership fees of a member belonging to ATHOC and ATICS will not exceed that paid by a member of ATHOC alone.  Ms Clegg foreshadowed a possible rise in membership fees when she said that she did not think that members, who did not currently pay larger fees, would find a fee of $2,000 too much if it meant avoiding complaint fees of up to $7,000.  Whatever level of membership fees is set, the problem remains that the link between the two would have some effect on the perception of its independence from members in the time-sharing industry.  These matters all remain a matter for speculation in view of the uncertainty surrounding the number of members likely to be attracted to join ATICS.

1. If the number of complaints received by the CRC and by FICS were a more accurate guide of the likely number of complaints to be received by ATICS, the funding arrangements for ATICS become even more tentative.  Mr D’Aquino’s evidence was that there were about 20 in 2002 and Mr Rice’s experience was that there had been up to 25 or 30 complaints each year until 2003 when a lot of member has moved to FICS.  Mr O’Shea had dealt with only 18 in 2003.  The complaints made to FICS average about 18 each year.  Together the complaints made to FICS and to the CRC are in the order of 40 each year; may be more or may be fewer.  If the complaints made to ASIC were added, they would amount to about 80.  If that were a more accurate assessment of the likely number of complaints to be made to ATICS, it is even more difficult to see how it could fund itself.

1. The premises from which it is proposed to operate ATICS is the next matter that I must consider.  The offices offered by Mr D’Aquino in Rubbertech could be described as basic at best.  That is not to say that quality work cannot be produced from such offices; it can be.  What it is to say is that the offices, located as they are, in close vicinity to a manufacturing operation do not convey an impression that the focus is upon dispute resolution.  Dispute resolution appears to be an adjunct to the main work, which is manufacturing.  The offices do not appear suitable for conducting meetings with the parties or their representatives. 

1. The arrangements made for servicing ATICS have not been properly thought through. No thought has been given to meeting the requirements of the Privacy Act to protect the confidentiality of personal information and to separate it from Rubbertech’s business records. That is so whether the information is in hard copy or held electronically. At times, there seemed to be an assumption that Mr D’Aquino would be the Chair of the Panel. If that proves to be so, arrangements to protect the information would still need to be made.

1. The cost of the use of Rubbertech’s premises, described as a “serviced office” in the Budget, is $10,000.  Mr D’Aquino said that this included use of consumables, telephones, postage and computers as well as the office space.  Although he did not expressly state that the sum included it, it would seem that it included administrative assistance provided by Mrs D’Aquino.  Mr D’Aquino said that she would have enough time from her current work to absorb the additional work and the Budget does not show a separate item for a salary.  That would continue to be the case even if he were not the Chair of the Panel.  It is difficult to reconcile Mr D’Aquino’s evidence with the separate items found in the budget for telephone, facsimile and postage and the like.  Further thought needs to be given to the expenditure items in the budget and I do not consider that I am in a position to do so on the evidence that I have.

1. The staffing of ATICS is a separate issue that needs to be considered.  Staff are a vital ingredient in the implementation of an EDR scheme.  They can make the difference between a scheme that should work in theory and that should provide appropriate outcomes and a scheme that does.  As I have said, I am not satisfied with the theory of ATICS but, despite that, I have looked at the proposal for implementation from the point of view of its staffing and considered whether the arrangements made for it are appropriate to an EDR scheme. 

1. It is proposed that Mrs D’Aquino be the administrative officer.  I have no reason to think that she is anything but very competent in her work for Rubbertech but I have no evidence of her experience or attributes that would make her an appropriate person to be at the “front door” of an EDR scheme.  I have no evidence of her understanding the time-sharing industry or of her skills in gleaning information from people who may, at times, be upset.  I have no evidence of her skills in sorting out information that may be given to her in anything but an orderly manner so that she may help a consumer to articulate the complaint against the member.  I have no evidence of her ability to help a consumer to identify that information required to support a complaint.  If she were required to play a role in facilitating a settlement between a consumer and a member, I have no evidence that she has the qualities or the qualifications to do so.  Mrs D’Aquino may have all of these skills but I am unable to make a finding to that effect on the evidence that I have. 

1. Accessibility to ATICS would, I find, be a problem during a four week period at Christmas and Easter when Rubbertech is closed.  No arrangements have been proposed for complaints or enquiries to be forwarded to anybody in that period.

1. The Budget provides for a Panel Fee of $20,000 that is to be divided between the Chair and the consumer representative only as the industry representative traditionally does not seek payment.  That is based on Mr Rice’s practice.  I note that Mr Rice was Industry Representative on the CRC at a time that he was a director of ATHOC.  Clause 28.2 of ATICS’ Constitution permits that to be the case in relation to the Industry Representative on the ATICS’ Panel.  That raises a question regarding the perceived independence of any Industry Representative.  An Industry Representative (or a Consumer Representative) on a disputes resolution body should bring knowledge of the interest but should bring, and be perceived as bringing, an open mind to the resolution of a dispute and decide it on its merits.  He or she should not bring and should not be perceived as bringing a bias in favour of the industry (or consumer interests) he or she represents or to be acting as an advocate for the interests of that industry (or consumer interests).  Occupancy of a position as director of the body representing and promoting the interests of those engaged in the industry would seem to be contrary to the perception of independence even if the respective representatives do in fact bring a neutral mind to their task on the Panel.

1. That brings me to the manner in which it is proposed that the Panel will undertake its task.  I have referred already to the information to which it will have regard and the omission of any mention of its making its own enquiries.  The Rules give the Panel a period of 60 days within which to reach its determination.  That period is calculated from the date the Panel receives the last of the information from the member or, if the Panel has asked for additional information, from the consumer or the member.  Clause 13 sets out the matters to which the Panel must have regard and they accord with proper principles of decision-making. 

1. The concern that I have arises in part from the evidence of Mr Rice.  In relation to his role as the industry representative on the CRC, he said that he was there “in an advice role” and “left the decision-making process pretty much up to those people.”[357]  This approach is inconsistent with the role of a member of a Panel who, according to ATICS’ Constitution and Rules should behave as an equal member of the Panel.  Any member’s experience can be drawn upon to question the parties, to test the information with them and to seek further information that must be put to them if it is given to the Panel.  A member’s experience cannot be relied on as a separate source of information that is given to the Panel and not made known to the parties.  That would be unfair to both parties.  To some extent, Mr Rice acknowledged that this is the correct approach when he was re-examined but it is open to doubt whether he would bring an independent mind to bear on any dispute.  My doubt arises from Mr Rice’s statement that “…would be in agreement with whatever the chair has written…”.[358]

   [357] Transcript at 107

   [358] Transcript at 115

1. Mr Rice is not the only person who has been suggested as a possible member of the Panel.  Mr D’Aquino is another but his experience is limited to his work on the CRC as its independent Chair.  His work there is related to a relatively small number of 20 or so complaints each year.  I have no doubt that Mr D’Aquino and Mr Rice as well as Mr Filo are all enthusiastic for their work but enthusiasm must be matched with skill and expertise in the work of dispute resolution.  On the basis of the evidence they gave at the hearing, I am not satisfied that they demonstrated that skill and expertise.  That is not to say that they do not have it; just that they have not demonstrated it.

1. I have not touched on every matter that could be regarded as relevant in considering whether to approve ATICS as an EDR scheme.  Those that I have touched upon lead me to the conclusion that ATICS would not, on the current proposal and evidence, be viable.  I am not satisfied that it would an EDR scheme that would meet the needs of either consumers or those concerned in the time-sharing industry.  As currently proposed, it may be cheap and it will certainly lead to a determination of a dispute.  The way in which it will determine the dispute, though, do not, for the reasons that I have given, satisfy me that it will be a fair process undertaken by a Panel that is perceived to be independent or that it will be an effective or efficient process.

1. I have considered whether the correct decision would be to approve ATICS as an EDR scheme subject to changes being made to address the areas in which I have found it to be wanting. As I have said, I have not touched on every matter that is of concern. I have touched on enough to support my conclusion that ATICS is not an EDR scheme that should be approved having regard to the criteria in r 7.6.02(3). Any conditions that I could impose would be directed to matters that are fundamental to the operation of ATICS as an EDR scheme suited to the resolution of disputes in the time-sharing industry. Until those matters are addressed, I do not consider that ATICS should be approved at all.

1. For the reasons I have given, I affirm ASIC’s decision.

I certify that the three hundred and twenty-six preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President S A Forgie,

Signed:           ...............................................................

Jayne Haydon  Associate

Dates of Hearing  1, 4, 8 and 9 August 2006

Final Submissions Received         29 June 2007
Date of Decision  23 January 2008
Counsel for the Applicant             Mr D Collins SC

Solicitor for the Applicant            Mr J Bengasino and Mr E Linivker
  Wilder Moses Bengasino

Counsel for the Respondent         Ms D Mortimer SC

Solicitor for the Respondent         Ms J Birch
  Australian Securities and Investment Commission

Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634 at 640 per
Brennan J