Hicks v Quattro Capital Group Pty Ltd

[2022] VCC 1255

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

General List

Case No. CI-21-03337

JORDAN HICKS	Plaintiff
v
QUATTRO CAPITAL GROUP PTY LTD  (ACN 128 914 965)	Defendant

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	1 & 2 August 2022
DATE OF JUDGMENT:	11 August 2022
CASE MAY BE CITED AS:	Hicks v Quattro Capital Group Pty Ltd
MEDIUM NEUTRAL CITATION:	[2022] VCC 1255

REASONS FOR JUDGMENT
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Subject:Enforcement of Adjudication

Catchwords:               Determination by Australian Financial Complaints Authority – AFCA Rule B.2.1(e) – Whether decision maker entitled to entertain complaint against a Financial Firm as defined in Rules which had not supplied relevant service – Whether determination valid – Determination made in excess of jurisdiction – Decision maker misconceiving AFCA’s function – Determination unreasonable in Wednesbury sense – Proceeding to enforce determination – Proceeding to enforce determination dismissed

Legislation Cited:      Corporations Act 2001 (Cth); Industrial Relations Act 1996 (NSW)

Cases Cited:Vasco Trustees Ltd as trustee of the IPO Wealth Fund v IPO Wealth Holdings No 2 Pty Ltd & Ors [2020] VSC 733; Australian Securities and Investments Commission v M101 Nominees Pty Ltd (No 3) [2021] FCA 354; Australian Securities and Investments Commission v M101 Nominees Pty Ltd [2021] FCA 62; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Investors Exchange Limited v Australian Financial Complaints Authority Limited [2020] QSC 74; Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483; Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223; Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 313 ALR 469; Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; Mickovski v Financial Ombudsman Service Limited (2012) 36 VR 456; ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd [2022] QSC 120; QSuper Board v Australian Financial Complaints Authority Limited [2020] FCAFC 55; Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259; DH Flinders Pty Ltd v Australian Financial Complaints Authority Ltd [2020] NSWSC 1690; Notesco Pty Ltd v Australian Financial Complaints Authority Ltd (2022) 365 FLR 163; Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (2006) 66 NSWLR 151; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640

Judgment:                   1. Proceeding dismissed.

2. Costs reserved.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Bingham	Maurice Blackburn
For the Defendant	Mr A Aleksov with Mr P Donovan	Roberts Gray Lawyers

HIS HONOUR:

Nature of proceeding

1In this proceeding, Mr Hicks seeks orders to enforce a determination of Australian Financial Complaints Authority Ltd against the respondent, which at material times was a “Financial Firm” for the purposes of the rules of the Australian Financial Complaints Authority, hereafter referred to as AFCA.  AFCA made or purported to make a determination in its case No 719271 in favour of the plaintiff, Mr Hicks, and against the defendant, Quattro. (Court Book (“CB”) 487–502)  The determination, made 25 February 2021, required Quattro to pay Mr Hicks:

“$295,000, plus compound interest calculated at a rate equal to the change in the Australian Consumer Price Index from 3 April 2020 to the date of payment.” (CB 498)

2Unsurprisingly, Mr Hicks, through his counsel Mr Bingham, contends that the determination made by AFCA is valid and enforceable as a matter of contract in accordance with AFCA’s Rules, and the court should make orders accordingly to enforce the payments required.

3The defendant, Quattro, through its counsel, Mr Aleksov, disagrees.  According to Mr Aleksov:

“[T]here is a document called a determination and in it factual findings are made. ...  We admit those factual propositions.  Now, we dispute the analysis that flows from it, but the facts that are set out in the determination, we say, are correct.” (Transcript (“T”) 62, Lines (“L”) 29 – T63, L5)

4AFCA’s determination, therefore, is the principal source for the narrative to be found in these reasons.  No witnesses were called.  A large number of items of documentary evidence were tendered as part of a Court Book and supplementary Court Book.  Some of the documents in the Court Book were not tendered at all.  In a few instances, objections to the receipt of such documents by the defendant were upheld.

5According to Mr Bingham, counsel for Mr Hicks:

“[I]n order to get a financial services licence, a potential financial services licence holder must have a dispute resolution mechanism authorised under the Corporations Act; this is the dispute resolution mechanism authorised.” (T5, L27 – T6, L1)

6Mr Aleksov, counsel for Quattro, said:

“To put it completely clearly, my client withdrew from AFCA at a point in time later than the determination and is no longer a member of the scheme.  However, at the time of the determination my client was a member of the scheme.  ... And no issue is taken about the applicability of the regime generally.  We do say there are other defences.” (T9, L27 – T10, L4)

7I will proceed to reference specific AFCA Rules presently.  It is sufficient now to note that both parties were agreed that, by virtue of a tripartite contract form, in the events that occurred between Mr Hicks as complainant, Quattro as a “Financial Firm” within the meaning of the Rules, and AFCA, AFCA was appointed with power to determine the complaint made by Mr Hicks against Quattro.  As will appear, Quattro contends that, whilst in a general sense the tripartite contractual regime was invoked, the determination actually or purportedly made was not in accordance with the relevant contract and was therefore ineffective.

Background

8Mr Hicks entered into what is styled an “investment agreement” whereby he deposited the sum of $295,000.  The “payee” identified on the investment agreement was Eleuthera Group Pty Ltd.  The “investment agreement” was printed on stationery marked “IPO Capital”.  (CB 215-6)

9In accordance with terms in the agreement, the $295,000 investment “rolled over” on 25 July 2018 and 25 July 2019. (Determination, CB 494)  There was, however, an entitlement under Clause 12 of the investment agreement for Mr Hicks to withdraw his deposit upon 30 days’ notice.  On that basis, Eleuthera Group Pty Ltd should have repaid $295,000 to Mr Hicks on 3 April 2020. (Ibid)

10On 3 April 2020 a letter was written to Mr Hicks on letterhead styled “Mayfair 101”.  This letter was headed, “Update re liquidity prudency measures of the Mayfair 101 Group”.  It was signed “Sincerely, The Mayfair 101 Group Management Team”. (CB 895‑6)  The letter referred to the onset of COVID‑19 and said that the Mayfair 101 Group “has been required to take precautionary steps to manage its operations, investor capital and assets diligently.”  The letter continued:

“As a prudency measure, in early March 2020 the Mayfair 101 Group management team reached a consensus to activate its Liquidity Prudency Policy (LPP) which entitled the Group to suspend redemptions for its Mayfair Platinum and IPO Wealth investment products where it the Mayfair 101 Group considers the normal processing of redemptions would potentially be detrimental to the interests of the broader group of investors.”

11Under the heading “What this means for you”, the letter stated:

“The Liquidity Prudency Policy continues to remain in place given the current advancing circumstances purporting [sic] to COVID-19, meaning early and end of term redemptions are currently suspended.

Based on current estimates, the Group expects the Liquidity Prudency Plan to operate until 30 April 2020.  This may be subject to change based on market conditions.

Thereafter, redemptions are expected to be processed in line with standard notice periods.”

12The letter included the bromide:

“We appreciate your understanding and ensure [sic] you that we will continue to act in the best interest for our investors.”

13The $295,000 remains outstanding and unpaid, two years later.  It was presumably these circumstances that led Mr Hicks to take his complaint to AFCA.  According to Mr Bingham, and I did not understand this to be disputed:

“Mr Mawhinney started the Mayfair Group, and there are scores and scores of companies in the Mayfair Group, all of which were under Mr Mawhinney’s control and which operated as a group.” (T13, L11‑14)

14Amongst the companies in the group were Mayfair 101 Nominees Pty Ltd and Online Investments Pty Ltd. (Ibid, L26-27)  Mr Mawhinney was the sole director of all those companies in the Mayfair Group, as well as the identified two. (T14, L1‑2)  It will be recalled that the letter purporting to impose the Liquidity Prudency Policy and denying Mr Hicks repayment of his investment was signed on behalf of the “Mayfair 101 Group Management Team”.

15The defendant, Quattro, is controlled by a Mr Gibson. (T60, L4‑6)  Online Investments owns and controls the shareholding of Eleuthera Group Pty Ltd. (CB 489)

16By a letter dated 1 July 2019 addressed to Online Investments Pty Ltd t/a Mayfair 101, Mayfair Advisory Pty Ltd, M101 Holdings Pty Ltd and Mayfair Wealth Partners Pty Ltd, commencing “Dear James” (presumably Mawhinney), Quattro appointed those companies as its corporate authorised representative in accordance with the terms of the Corporations Act 2001. As such representatives, those companies were clothed with extensive authority, but “with respect to wholesale clients only”. This document was executed respectively by Mr Gibson on behalf of Quattro and Mr Mawhinney on behalf of the representative companies. (CB 227-235)

17A further authority in similar terms, dated 18 December 2019, was made in favour of Online Investments Pty Ltd, Mayfair Advisory Pty Ltd, M101 Holdings Pty Ltd, Mayfair Wealth Partners Pty Ltd, and M101 Nominees Pty Ltd.  Once again, the appointment was expressed to be with respect to wholesale clients only, and execution was once again on behalf of Quattro by Mr Gibson, and by the representative companies, Mr Mawhinney. (CB 240-252)

18A further appointment in similar terms was executed, dated 4 April 2020, in favour of the same companies as previously, together with IPO Wealth Pty Ltd. (CB 253-266)

19Mr Mawhinney was personally appointed by Quattro as an authorised representative from 7 June 2019. (CB 489)

20Mr Aleksov conceded:

“Mr Mawhinney and Mr Gibson were in business together.  Mr Mawhinney and Quattro were in business together.  Mr Mawhinney was the controlling mind of Eleuthera.” (T201, L3‑6)

21There has been a flurry of litigation relative to the Mayfair 101 Group.  Anderson J has determined a number of matters in the Federal Court of Australia, and Robson J in the Supreme Court of Victoria placed a number of companies in provisional liquidation (CB 21-214) and ultimately ordered that those companies be wound up. (Vasco Trustees Ltd as trustee of the IPO Wealth Fund v IPO Wealth Holdings No 2 Pty Ltd & Ors [2020] VSC 733; CB 415ff)  In summarising his reasons for this determination, Robson J said:

“[1]IPO Wealth is a managed investment scheme.  Under the scheme, investors acquired units in the IPO Wealth Fund (the Fund), a unit trust of which Vasco Trustees Ltd (the Trustee) is the trustee.  The investors were to receive payments in the nature of interest and be able to withdraw their investment upon the completion of the agreed term.  The Fund was marketed as an alternative to a bank deposit.  It was only open to investors who were characterised as wholesale investors.  The scheme was not required to be registered under the Corporations Act 2001 (Cth). In reality, many investors were unsophisticated and invested superannuation and retirement funds.

[2]    Some 180 unitholders invested some $80 million in units issued by the Trustee.  These trust moneys were then lent by the Trustee to IPO Wealth Holdings Pty Ltd (the Borrower), a company controlled by Mr James Mawhinney.  The Borrower then applied the bulk of the trust moneys to purchase investments held in sixteen companies owned by the Borrower, similarly named but differentiated as IPO Wealth Holdings No 2 through to No 17, and referred to as SPV 2, SPV 3 etc (the SPVs).  The Borrower and the SPVs invested the trust money in a range of investments chosen by the investment manager of the Fund, which was IPO Wealth Pty Ltd, a company controlled by Mr Mawhinney (the Investment Manager).

[3] The scheme was the brainchild of Mr Mawhinney and was one of several schemes he has in what he grandiosely calls the Mayfair 101 Group. The scheme has failed. The money has been lent and invested in poor investments. The Trustee has called up the trust moneys loaned to the Borrower. The Borrower has failed to repay the moneys due. The Borrower is insolvent. The unitholders stand to lose a great deal of money. On 17 September 2020, I ordered that the Borrower and the sixteen SPVs be wound up and I delivered preliminary reasons for my decision. I reserved the delivery of full reasons. I now do so.” ([2020] VSC 733)

22Anderson J in the Federal Court, namely Australian Securities and Investments Commission v M101 Nominees Pty Ltd (No 3) [2021] FCA 354, made certain orders against Mr Mawhinney relative to his involvement in raising funds in connection with financial products. His Honour’s orders in that respect are subject to appeal. (T87, L9‑11)

23Quattro does not deny, for the purposes of this proceeding, that:

“in 2017, Mr Mawhinney, by way of IPO Capital or Eleuthera, continued to raise funds ... without an Australian financial services licence, despite ASIC putting Mr Mawhinney on notice of this non-compliance in September 2016.” ([2021] FCA 354 [44])

24I do not understand it to be challenged that Eleuthera at no material time held an Australian financial services licence.

25In an earlier proceeding also brought by ASIC, Australian Securities and Investments Commission v M101 Nominees Pty Ltd [2021] FCA 62, Anderson J made an order winding up M101. The defendants to the proceeding, which included the company, Mr Mawhinney and Sunseeker Holdings Pty Ltd, consented to his Honour’s orders. Part of the material which led his Honour to make the order which he did was a report from the provisional liquidators, quoted at [18], which referred to an amount of $63.5 million which was said to have been “advanced to Eleuthera by [M101 Nominees] and $44.4 million advanced by M101 Nominees to Eleuthera”.

AFCA Rules

26As previously noted, the AFCA Rules operate by way of contract as between the relevant licence holder (referred to in the Rules as a “Financial Firm”); the Complainant; and AFCA, the scheme operator with statutory recognition.  Rule A.1.1 (CB 272) states:

“AFCA is an external complaint resolution scheme established to resolve complaints by Complainants about Financial Firms.  AFCA is operated by an independent not-for-profit company that has been authorised to do so by the responsible Minister under the Corporations Act.”

27Rule A.4 is headed “Complaints that AFCA considers”.  The first requirement, A.4.1, is that the Complainant must be an Eligible Person.  Section E defines Eligible Person as including, inter alia, “a) an individual ...”  Mr Hicks therefore is an Eligible Person.

28Rule A.4.2 requires the complaint to be “about a Financial Firm that is an AFCA Member at the time that the complaint is submitted ...”  It is common ground that Quattro is such a person.

29Rule A.4.3 provides, inter alia:

“There are some additional requirements that must be met in order for AFCA to be able to consider a complaint.  In summary:

a)    The complaint must arise from a customer relationship or other circumstance that brings the complaint within AFCA’s jurisdiction.

b)    There must be a sufficient connection with Australia.

***

***” (CB 274)

30Rule A.14 is headed “Decision making approach”.  Rule A.14.1 makes specific provision for the treatment of Superannuation Complaints.  Rule A.14.2 deals with the approach to other types of complaints, stating:

“When determining any other complaint, the AFCA Decision Maker must do what the AFCA Decision Maker considers is fair in all the circumstances having regard to:

a)    legal principles,

b)    applicable industry codes or guidance,

c)    good industry practice and

d)    previous relevant Determinations of AFCA or Predecessor Schemes.”

31Rule A.14.3 provides that the Decision Maker “is not bound by rules of evidence or previous AFCA or Predecessor Scheme decisions.”

32Rule A.15 is headed “Effect of Determinations”.  Rule A.15.3 provides:

“In the case of any other complaint, a Determination by an AFCA Decision Maker is final, and is binding upon the parties if accepted by the Complainant within 30 days of the Complainant’s receipt of the Determination.

If Rule A.15.3 applies, the Financial Firm may ask the Complainant to provide it with a binding release from liability in respect of the matters resolved by the Determination, provided the release:

a)    is limited to the matters dealt with in the Determination,

b)    is consistent with the Determination, and

c)    is provided to the Complainant within a timeframe specified by AFCA. If a Financial Firm asks a Complainant to provide it with a binding release in accordance with this rule, the Complainant must complete the release. The release shall be effective from the date on which the Financial Firm fulfils all of its obligations under the Determination.”

33Rule A.15.4 authorises a Complainant not to accept AFCA’s Determination, in which case he or she is at liberty to proceed in court without regard to any AFCA Determination.

34Rule B.2 is headed “Relationship giving rise to the complaint – other complaints”.  Rule B.1 deals with the relationship giving rise to superannuation complaints.  Rule B.2 is therefore the one applicable to Mr Hicks’ case.  Rule B.2.1 provides:

“A complaint (other than a Superannuation Complaint) must arise from or relate to:

a)    the provision of a Financial Service by the Financial Firm to the Complainant;

b)    the provision by the Complainant of a guarantee or security for, or repayment of, financial accommodation provided by the Financial Firm to an Eligible Person;

c)    an entitlement or benefit under a Life Insurance Policy that specifies or refers to the Complainant, whether by name or otherwise, as a person to whom the insurance cover extends or to whom money becomes payable under the Life Insurance Policy;

d)    an entitlement or benefit under a General Insurance Policy that specifies or refers to the Complainant, whether by name, or otherwise, as a person to whom the policy extends;

e)    a legal or beneficial interest of the Complainant arising out of:

(i)a financial investment (such as life insurance, a security or an interest in a managed investment scheme or a superannuation fund); or

(ii)a facility under which the Complainant seeks to manage financial risk or to avoid or limit the financial consequences of fluctuations in, or in the value of, an asset, receipts or costs (such as a derivatives contract);

f)     a claim by the Complainant under another person’s Motor Vehicle Insurance Product for:

(i)property damage to an Uninsured Motor Vehicle caused by a driver of the insured motor vehicle;

(ii)non-financial loss as a result of claims handling by the Financial Firm that insured the motor vehicle, but only where a valid claim has been submitted by the owner of the insured motor vehicle (unless the claim is being made pursuant to section 51 of the Insurance Contracts Act 1984);

g)    an investment made by the Complainant that was offered by a Financial Firm under a foreign recognition scheme to Australian resident investors, unless expressly excluded from access to AFCA or a Predecessor Scheme by the investment offer document; or

h)    a Traditional Trustee Company Service where:

(i)the Complainant is entitled to request an Annual Information Return from the trustee; and

(ii)at least one co-trustee was at that time a current AFCA Member and all co-trustees that are not AFCA Members have consented to AFCA considering the complaint.

i)     a breach of obligations arising from the operation of the:

(i)Privacy Act; or

(ii)the Consumer Data Framework.”

35In the present case, it is not contended that Quattro provided any Financial Service to Mr Hicks.  Eleuthera is not, and was not at material times, a member of the AFCA scheme, not being a licence holder.  Mr Hicks’ complaint was entertained by AFCA, it seems, on the basis of Rule B.2.1(e), on the basis that his complaint arose out of a financial investment made with Eleuthera, and, it would seem, on the basis that, in contrast to paragraph (a) of the rule, there is no requirement that the provision of a Financial Service be by an entity falling within the definition of a “Financial Firm”.

AFCA’s determination

36AFCA’s determination in Mr Hicks’ case, No 719271, was given in writing dated 25 February 2021. (CB 487-500)  The determination recited the circumstances of Mr Hicks’ advance of moneys to Eleuthera, his request to redeem, and Eleuthera’s failure or refusal to repay, reportedly in compliance with the Liquidity Prudency Policy.

37The determination next considered whether AFCA had power to deal with the complaint, going first to the relationship between key entities and individuals such as Quattro, Mr Mawhinney, and M101. It noted that Mr Mawhinney had been an authorised personal representative of Quattro since 7 June 2019, as had M101 and Online Investments respectively from 30 July 2019 and 11 March 2019. Based on Online Investments’ ownership of the shareholding in M101, the Decision Maker found that M101 was a subsidiary of Online Investments and that these were related bodies corporate within the meaning of s50 of the Corporations Act 2001.

38AFCA found that the investment by Mr Hicks was with Eleuthera, and that that company’s sole director was Mr Mawhinney.   Likewise, he was the sole director of Online Investments.

39The determination referred to s910A of the Corporations Act, noting that a number of companies, including Online Investments, had been appointed corporate authorised representatives of Quattro.  The determination then stated (CB 491):

“[Eleuthera] is owned by a corporate authorised representative of the financial firm and its sole director, [Mr Mawhinney], is an authorised representative of the financial firm in his personal capacity.

Under section 917A of the Act, a licensee is liable for its authorised representative’s conduct while he or she was its representative, to the extent the conduct relates to a financial service and the complainant relied on that conduct in good faith.

The complainant’s investment agreement is with [Eleuthera] and the decision which is purporting to prevent [Eleuthera] from returning the investment monies was made by [M101].

While I acknowledge [Eleuthera] was not specifically authorised by the financial firm as its corporate authorised representative, I am satisfied it is fair in all the circumstances described above for the financial firm to respond to this complaint as the licensee responsible for the conduct of its authorised representative [Mr Mawhinney], and its corporate authorised representatives, [Online Investments] and [M101].” (CB 491)

40The decision referred to Rule B.2.1(e). The Decision Maker referred to s763B of the Corporations Act and a product brochure associated with Mr Hicks’ investment, and found:

“On the available evidence, I am satisfied the monies received by [Eleuthera] (the contribution) were pooled to generate a return for investors (the interest) and each investor had no day-to-day control over the contribution.  Product I appears to have been an unregistered managed investment scheme.

I am therefore satisfied Product I meets the definition of a financial investment under section 763B of the Act.” (CB 492)

41The Decision Maker found that Mr Hicks was not a wholesale client, stating:

“The complainant was not a wholesale client

Product I is a fixed interest debenture product which was only available to wholesale clients.  Under the Act, a wholesale client is a client who is not a retail client.

Wholesale clients can be classed as such only if the test under section 761G of the Act is met, or if the client meets the Act’s definitions of a ‘sophisticated investor’ or ‘professional investor’.

I am satisfied the complainant did not meet any of the relevant tests and is a retail client.  As a result, he should not have been permitted to invest in 2017.

In early January 2020, Company IC [ contacted the complainant to advise they were no longer accepting investors ‘of his kind’ and he needed to withdraw.  The complainant acknowledged this and, on 13 January 2020, told Company IC he was looking for an alternate investment and would provide the withdrawal form once this was sorted out.” (CB 494)

42The Decision Maker referred to the letter to Mr Hicks from M101 dated 3 April 2020, commenting:

“The rationale presented by [M101] is the complainant is unable to redeem his investment in Product I due to a decision which had been taken by the [Mayfair 101 Group].  As noted above, [M101] is a corporate authorised representative of the financial firm [viz Quattro].” (CB 495)

43The Decision Maker observed that there was no explanation as to how Eleuthera fell:

“within the oversight of the [Mayfair 101 Group], given the only documented link between [M101] and [Eleuthera] is the shared ownership by [Online Investments] and the involvement of [Mr Mawhinney].” (CB 496)

44The Decision Maker found that Mr Hicks “was never transitioned to [IPO Wealth] and so again, should not be caught by the [M101] LPP decision.” (CB 496)

45The determination concluded, save for a reference to there being no opportunity for mitigation, with the statement:

“On the available evidence, I am satisfied ‘but for’ the decision of [M101] to apply the LPP to Product I on 11 March 2020, [Eleuthera] would have had to return the complainant’s monies in line with the contract.  As [M101] is a corporate authorised representative of the financial firm, there is a direct causal link between the conduct the financial firm is responsible for and the complainant’s loss.”

Statement of claim

46By his statement of claim, Mr Hicks alleged that he had made a complaint in accordance with the AFCA complaints regime, which determination he accepted in writing, with the amount payable to Mr Hicks remaining outstanding.  Accordingly, he sought $295,000 plus compound interest. (CB 6‑9)

47By its defence, Quattro said that the contract relative to the AFCA adjudication process contained:

“an implied term that any determination by AFCA is not enforceable, or is not within the AFCA Rules, unless it is made bona fide on probative evidence and is not one which no reasonable decision-maker acting bona fide could properly have made on the evidence.” (CB 14)

48This term is said to be implied “to give business efficacy to the contract, alternatively, the term is implied by law under the AFCA Rules.”

49Quattro said further that Mr Hicks had not alleged or proved any matters which would bring his complaint within the terms of Rule B.2.1(e) of the AFCA Rules, which, it was said, was the only relevant clause of the Rules.  It said that Mr Hicks had made a financial investment with Eleuthera, or alternatively IPO Capital Pty Ltd, and to fall within Rule B.2.1(e) of the Rules a financial investment “must be one arising out of a financial investment with the respondent to the complaint.”  The legal or beneficial interest of Mr Hicks, it was said, had “no connection with [Quattro] and it therefore [did] not meet a pre-requisite under the AFCA Rules for enforceability.”  If Rule B.2.1(e) extended to investments with a party for whom Quattro was responsible, it said, such responsibility had not been proven by Mr Hicks, and Eleuthera was not an authorised representative of Quattro.

50Next, it was said that Rule B.2.1(e) must be construed so as to avoid absurd outcomes of requiring that the respondent to a complaint be the person who provided the relevant service.

51In the circumstances, it was said, there was no enforceable determination in accordance with the AFCA Rules, or it was a determination that no reasonable person could make.  It was said the determination purports to impose on Quattro responsibility for the actions of Eleuthera “over which [Quattro] does not have any control”.

Plaintiff’s contentions

52In addition to the matters foreshadowed in his outline of contentions filed before the trial, at trial Mr Bingham relied on material constituting the revised explanatory memorandum for the legislation which provided for the present AFCA complaint determination regime, viz the Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017, and the final report of a committee chaired by Professor Ian Ramsay named “Review of the financial system external dispute resolution and complaints framework”.  The Ramsay Panel’s recommendation, according to the Report’s executive summary, was that:

“The existence of multiple EDR [viz external dispute resolution] schemes with overlapping jurisdictions means: it is difficult to achieve comparable outcomes for consumers with similar complaints; it is more difficult for consumers to progress disputes involving firms that are members of different schemes; and there is an increased risk of consumer confusion.  Multiple EDR schemes also result in duplicative costs for industry and for the regulator.”

53The result was that the AFCA regime was adopted to supersede the Financial Ombudsman Service, the Credit and Investments Ombudsman, and Superannuation Complaints Tribunal.  The summary also records:

“Finally, there are gaps and overlaps in membership of EDR schemes.  The absence of a requirement for debt management firms to be members of an EDR scheme represents a gap in the framework (for consumers of services these firms provide) and the requirement that both credit licensees and credit representatives hold EDR membership (rather than just credit licensees) results in unnecessary duplication and costs to the system without providing additional consumer protection.”

54The Panel said:

“With the move to a single EDR body for all financial disputes, the Panel considers it important to strengthen accountability and oversight.”

55The legislation responded to these recommendations with AFCA being constituted as a “one-stop shop”.  Accepting this as an accurate description of how the present regime came into existence, it is not evident to me how constituting AFCA as a “one-stop shop”, so as to overcome potential uncertainties as to jurisdiction or duplications of jurisdiction, should, aside from resolving these sorts of problems, affect the substantive outcome of adjudications under the new unified scheme.

56Mr Bingham denied the existence of the implied limitation upon the scope of complaints which AFCA may entertain alleged by the defendant in its defence.  He said the requirements for a term to be implied to give business efficacy to a contract were stated by the majority of their Lordships in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283, and, in the circumstances, that those requirements have not been met.

57Mr Bingham noted there was no allegation in the defence that the determination was made other than bona fide.

58He said that the findings of the AFCA Decision Maker established the requirements for Rule B.2.1(e) to enliven an entitlement for AFCA to entertain and to determine Mr Hicks’ complaint.  There was no basis, he said, for implying words which would limit the scope of this sub-rule.  Likewise, he said, there was no warrant for limiting the operation of the sub-rule to dealings with a party for which the respondent Financial Firm was responsible.  He noted that the defendant was calling no witnesses, which rendered it impossible for the defendant to make good the negative proposition that it was not responsible for Eleuthera.

59Mr Bingham stressed that, in accordance with Rule A.14.2, the AFCA Decision Maker was to be guided, inter alia, by what was considered fair in all the circumstances.  This meant, he said, that:

“The subject of the opinion is what is fair in all the circumstances.  The Determination involves the exercise of a ‘broadly expressed contractual power’ to reach that opinion.”

60He referred to the decision of Applegarth J in the Supreme Court of Queensland in Investors Exchange Limited v Australian Financial Complaints Authority Limited [2020] QSC 74 [33]. Mr Bingham incorrectly attributed this statement to paragraph [31]. He said that the Decision Maker therefore was to have regard to legal principles but was not required to apply those principles exhaustively, since other considerations were also relevant. The Decision Maker was not restricted to making decisions which could be made at law or in equity: Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483 [90].

61Mr Bingham said that a range of findings had been made by AFCA, including findings with respect to the complex corporate structure of the Mayfair 101 Group.  The AFCA determination was final and binding by its own force, and it was not incumbent on Mr Hicks to prove more.  Quattro was not to be permitted to require Mr Hicks, in effect, to run and prove again the case which he had already made before AFCA.

62Mr Bingham said that it was wrong to contend, as Quattro did, that the “relevant legal or beneficial interest of [Mr Hicks] has no connection to [Quattro]”.

63In so far as Wednesbury unreasonableness is alleged, Mr Bingham referred to Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 313 ALR 469; Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 per Hayne, Kiefel and Bell JJ [76]; Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541, 551 [11]; and Applegarth J in Investors Exchange Limited v Australian Financial Complaints Authority Limited [2020] QSC 74 [28]. He said the allegations in the defence “simply do not constitute Wednesbury unreasonableness”.  [In Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1KB 223, 230 Lord Greene MR (with whom Somervell LJ and Singleton J concurred) said, “if a decision [by an administrative decision maker] on a competent matter is so unreasonable that no reasonable authority could ever have come to it, then the courts can interfere”.]

64Next, Mr Bingham referred to Mickovski v Financial Ombudsman Service Limited (2012) 36 VR 456 [41], noting the constraint upon the ability to review or attack a determination which the parties have agreed will be final. In that case, according to Mr Bingham, the Court of Appeal considered that a predecessor of AFCA had “erroneously decided that a complaint made by Mr Mickovski was outside the jurisdiction of the predecessor of AFCA.” Nevertheless, it found that the error was not a jurisdictional error but one made within jurisdiction, because the chair of the panel was not guilty of fraud or lack of good faith, was not prejudiced, and did not misconceive the task which he was required to undertake. Accordingly, said Mr Bingham, even if, contrary to his earlier contention, AFCA had been in error in entertaining the application, such error was nevertheless not jurisdictional and not a ground to impeach the enforceability of the determination. He referred to ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd [2022] QSC 120 [104]–[113], [122], [126], [130], [144]–[146] and [158], where the Court at [169] said it was sufficient for the Decision Maker to have regard to legal principles, even if he made a mistake in applying them. Mr Bingham said:

“Here, the AFCA decision may be impugned only if the decision maker was guilty of fraud or lack of good faith; he was prejudiced; and he did misconceived the task which he was required to undertake.  That is not alleged.”

65It would be wrong, he said, to subject the determination to minute scrutiny.  Rather, it should be read fairly and broadly.  He referred to QSuper Board v Australian Financial Complaints Authority Limited [2020] FCAFC 55; Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259, 272; and Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 313 ALR 469 [146]. Had Quattro wished to challenge AFCA’s jurisdiction, it should have sought relief from the Supreme Court before the determination became binding.

66He said, in so far as the defendant relied upon the decision of Stevenson J in the Supreme Court of New South Wales in DH Flinders Pty Ltd v Australian Financial Complaints Authority Ltd [2020] NSWSC 1690 [90]–[94], such decision was inapplicable and distinguishable because the Court intervened on that occasion prior to any final determination having been made, and the provisions in the Rules rendering the decision, once made, final and binding, would lead to a different result here, and effectively insulate AFCA’s determination from the sort of attack which was successful in the DH Flinders case.

67Mr Bingham stressed the extensive inter-company dealings between Eleuthera and M101 Nominees.  He suggested that Eleuthera had advanced $63 million to M101 Nominees. (T107, L3‑4)  The fact, according to the provisional liquidators of M101 Nominees, was that $63.5 million was advanced to Eleuthera by M101. (CB 484) This passage from the report was quoted by Anderson J ([2021] FCA 62 [18]) in the judgment in which he ordered M101 Nominees to be wound up.

68In oral submissions, Mr Bingham contended that the effect of the decision of the Court of Appeal in Mickovski, in particular the final paragraph, was that:

“apart from the instances identified in Mickovski, for example procedural [un]fairness, Wednesbury unreasonableness, this being as it were a final determination, Wednesbury unreasonableness is the sole basis on which an attack can be made and errors as to jurisdiction – if you call it that because that’s a wrong use of the word ‘jurisdiction’ – is not a basis on which the determination can be set aside.” (T162, L22-29)

69I asked:

“Well, if we go back to Mickovski, the court says this was treated as being a jurisdictional error [by the appellant], but it wasn’t a jurisdictional error of the right type; that is, one that would enable the determination to be set aside.  So, what is the right type of jurisdictional error which would lead to an invalid determination?” (T162, L30 – T163, L5)

70Mr Bingham replied:

“Not this one.”

71I pressed him further, and he said:

“I don’t know”,

finally stating:

“I find it hard to speculate.  All that’s essential for my argument is to point to the lack of any significant distinction to be made between the decision made here and the decision made in Mickovski... And to therefore identify this as, if an error, within, as it were, jurisdiction.” (T162, L30 – T163, L17)

Defendant’s contentions

72Mr Aleksov, on behalf of Quattro, acknowledged the existence of what he said purported to be a determination by AFCA.  In the events that had occurred, however, he contended that it was not a valid determination, and so, not being made in accordance with the tripartite contract form pursuant to the AFCA Rules, was not binding upon Quattro.  He said (Opening submissions, paragraph 11):

“Determinations which are compliant with the Rules are binding on members of the scheme (i.e. the Financial Firms) and not binding on Complainants. If a Financial Firm fails or refuses to comply with a determination which is compliance [sic] with the Rules, then adverse consequences may result for that Financial Firm under the Corporations Act 2001.”

73He referred to s1051(4)(e), ss910C and 913BB(2)(e), and s920A(1)(j) of the Corporations Act.  According to Mr Aleksov, Rule A.15.3 of AFCA’s Rules rendered a determination final, and the binding nature and finality attached only to determinations made in accordance with the Rules. (Opening submissions, paragraphs 13‑15)

74Mr Aleksov noted the statement at the beginning of Section B of the Rules that:

“Section B sets out the requirements that must be met in order for AFCA to be able to consider a complaint that is submitted to it by a Complainant.” (Opening submissions, paragraph 20)

75A binding determination, he said, can proceed only from a complaint that fell within Section B of the Rules.

76Mr Aleksov stressed that whilst the AFCA regime is recognised by statute, and was established at the behest of the Commonwealth and its Minister administering the Corporations Act, it operated under the Rules of contract and should not be regarded as a public law tribunal. (Opening submissions, paragraphs 23‑26)

77He concluded:

“However, no matter how much the analysis of the Rules feels like a case in public law, it is not.  This is a contract case.”

78Mr Aleksov referred to a decision of Stevenson J, DH Flinders Pty Ltd v Australian Financial Complaints Authority Ltd [2020] NSWSC 1690, [90]–[94], where his Honour said the crucial question was whether “AFCA had authority to consider the Complaints”. He referred also to a decision of Rees J in Notesco Pty Ltd v Australian Financial Complaints Authority Ltd (2022) 365 FLR 163 [21] and [127], where her Honour said that the AFCA Rules defined the limits of AFCA’s authority. He said the decision in DH Flinders established that AFCA’s own opinion that it had authority could not create that authority.  Further, he said that an objection as to AFCA’s authority to make the determination could be raised at this stage, viz the point of enforcement.  He referred to the decision in Notesco [117]–[126].

79Next, Mr Aleksov referred to Divisions 5 and 6 of Part 7.6 of the Corporations Act dealing with authorised representatives. He noted s917B:

“If the representative is the representative of only one financial services licensee, the licensee is responsible, as between the licensee and the client, for the conduct of the representative, whether or not the representative’s conduct is within authority.”

80And s917F(1) stating:

“If a financial services licensee is responsible for the conduct of their representative under this Division, the client has the same remedies against the licensee that the client has against the representative.”

81He noted ss(3), however:

“However, nothing in this Division imposes:

(a)   any criminal responsibility; or

(b)   any civil liability under a provision of this Act apart from this Division;

on a financial services licensee that would not otherwise be imposed on the licensee.”

82Mr Aleksov said, however, that Eleuthera was not at any material time an authorised representative of Quattro, nor was another Mayfair company referred to in the determination, namely IPO Capital.

83Mr Aleksov stated:

“The defendant says that rule B.2.1(e)(i) of the AFCA Rules requires that the relevant legal or beneficial interest must be one which arises out of a financial investment with the respondent to the complaint.” (Emphasis in the original) (Opening submissions, paragraph 36)

84In oral argument Mr Aleksov scaled back this contention, contending that the various authorised subject matters for complaints under the Rules were to be regarded as restricted only by the requirement that the financial product the subject or the occasion for the complaint would be one issued by the relevant respondent Financial Firm.  Mr Aleksov continued in his written outline:

“The relationship between [M101] and the defendant need not be explored any further.  The AFCA Rules do not define a complaint by reference to any assessment of the relationships between parties.  Relevantly, the Rules operates [sic] by reference to the creation of legal or equitable interests.” (Opening submissions, paragraph 38)

85Mr Aleksov further contended that the reach of the AFCA Rules could not be extended as the subject determination sought to do by introducing a concept of “responsibility”. (Opening submissions, paragraphs 39–40)  Mr Aleksov said:

“It is important to mention that if the defendant were wrong in this case, the implication is that AFCA can find any Financial Firm liable for considerable sums of money regardless of whether the Financial Firm had anything to do with the matters about which the Complainant complains.” (Opening submissions, paragraph 41)

86At paragraph 42 he said:

“If, for example, a high-ranking officer of the Commonwealth Bank is, in their personal capacity involved in a financial collapse, could it be said that the Bank was ‘responsible’ for that collapse if AFCA believed it was ‘fair in all the circumstances’ to hold the Bank so responsible because it failed adequately to supervise its employee?  The short answer is of course not, and the reason why is that the Rules would not provide for it, no matter AFCA’s opinion of the fairness of doing so.” (Opening submissions, paragraph 42)

87Mr Aleksov said, in any event, there was an implied term of the tripartite contract formed by the Rules that any determination must be an honest opinion at which a reasonable person could honestly arrive in a bona fide and rational exercise of the function of deciding the dispute.  He said in the present case the determination did not meet this requirement.  He said:

“The determination by AFCA in this case was that the defendant pay a significant sum of money despite having no control over the party with whom the plaintiff dealt, and having no responsibility for that company in any legal (or even practical) sense.  The reasoning in support proffered by AFCA is that the defendant was responsible for [M101] in other contexts, and [M101] was to blame for the plaintiff’s predicament, so it was fair that the defendant should ‘carry the can’.” (Opening submissions, paragraph 45)

88He concluded by observing:

“Imposing liability on the defendant for sins of another is not within the rules of reason.” (Opening submissions, paragraph 46)

89Mr Aleksov said that, in so far as his client’s defence asserted unreasonableness in decision-making, this was the functional equivalent of the decision maker misconceiving the task which he was required to undertake (Opening submissions, paragraph 57).

Conclusions

90In Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 313 ALR 469, the Court of Appeal considered a challenge to a determination made by the Financial Ombudsman Service Ltd under a predecessor scheme to the one operated by AFCA. The contention on appeal was that the determination was unreasonable and, in the circumstances, there was an implied obligation on the Financial Ombudsman Service as Decision Maker to act reasonably. The Court, Warren CJ, Tate and Osborn JJA, held that the determination, which was subject to the same finality rule as the present one, was susceptible to attack only under the principles stated by the English Court of Appeal in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, 230, and the Service’s determination was not unreasonable according to that standard. Warren CJ and Osborn JA said:

“... it was of the essence of the agreement that the parties including Cromwell would accept the independent arbitration of the dispute by FOS in accordance with its judgment as to what was fair.  Such a case falls squarely within the line of authority identified in Carlton Football Club [Australian Football League v Carlton Football Club Ltd [1998] 2 VR 546] and is different in this essential characteristic from the cases upon which Cromwell relies.” ((2014) 313 ALR 469, 493 [88])

91Referring to a decision of the High Court of Australia in Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 [68]–[72], [76], their Honours said that:

“Wednesbury unreasonableness does not simply catch decisions that are bizarre or irrational, the court has to look at whether the decision was unreasonable in a legal sense. The central issue for a court should be whether the decision lacks an evident and intelligible justification.” ((2014) 313 ALR 469, 494 [97])

92In Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483 before Mitchell J of the Supreme Court of Western Australia, the appellant Patersons contended that the Ombudsman Service acted in breach of contract by wrongly allowing as damages or compensation sums of money which ought properly to have been characterised as consequential losses which were subject to a cap of $3,000. The challenge to the determination failed. His Honour approached the matter upon the basis that the sole ground on which the validity of the determination could be attacked was Wednesbury unreasonableness.  He said:

“I accept that, either as a matter of fact or law, it is implicit that the opinion referred to in para 8.2 [of the relevant rules] must be an honest opinion at which a reasonable person could honestly arrive in a bona fide and rational exercise of the function conferred by the contract for the purpose of deciding the dispute.  Reasonableness is to be assessed in the manner described by the Victorian Court of Appeal in Cromwell. In assessing the reasonableness of the opinion, it must be kept in mind that the subject of the opinion is not the existing legal rights, duties and liabilities of the parties. Rather, the subject of the opinion is what is fair in all the circumstances.” ((2015) 108 ACSR 483, 501 [95])

93Investors Exchange Limited v Australian Financial Complaints Authority Limited [2020] QSC 74 was a challenge by a financial firm to a determination of AFCA. The client’s complaint was that the financial firm had failed to observe the terms of a Compliance Plan which should govern the terms of the investments made. According to the financial firm challenging the determination, AFCA, in making its determination, misconstrued the Compliance Plan. Once again, the judge, Applegarth J, approached the matter on the basis that:

“the decision can only be set aside on the grounds of Wednesbury unreasonableness if it is ‘one to which no reasonable tribunal could properly come on the evidence’.” ([2020] QSC 74 [29])

94The judge dismissed the application challenging AFCA’s decision.  He observed:

“Other grounds may arise because the decision is inconsistent with the contract upon which it depends for its authority. This will be so, for example, if the decision is the result of bad faith, bias, fraud or dishonesty or is the product of a breach of the rules of natural justice. A determination is also amenable to court intervention if the decision-maker misconceived the task it was required to undertake or made an error which shows that the determination was not made in accordance with the contract. This last ground is not engaged simply because the decision-maker made an error in the process of reasoning or made a finding or conclusion which was unreasonable in some general sense of that word.” ([2020] QSC 74 [30])

95In Notesco Pty Ltd v Australian Financial Complaints Authority Ltd, Rees J of the Supreme Court of New South Wales upheld a challenge to the validity of a determination by AFCA against Notesco. She held, first, that it was competent for Notesco to mount its challenge after the determination designated as “final and binding” had been made, despite its not having raised the contention which it made before the Court that the matter dealt with by AFCA was beyond its jurisdiction as part of the AFCA process. ((2022) 365 FLR 163, 192 [123]) Her Honour said:

“The parties to the complaint are entitled, as a matter of contract, to require that AFCA proceed in accordance with the AFCA Rules ... The decision may be set aside if it is inconsistent with the contract upon which it depends for its authority, for example, if the decision is the result of bias or is the product of a breach of the rules of natural justice ... It follows that I consider that a declaration should be made that the Determination is invalid and that the matter be remitted to AFCA to be determined by an AFCA Decision Maker who was not involved in the preliminary assessment or the Determination.” ((2022) 365 FLR 163, 200 [158])

96Mickovski v Financial Ombudsman Service Limited (2012) 36 VR 456 is a decision of the Victorian Court of Appeal, and the one which Mr Bingham on behalf of the plaintiff, Mr Hicks, contends governs and controls the outcome of the present proceeding. Mickovski’s case once again concerned the Financial Ombudsman Service program, but there appears to be no material difference between that and the AFCA program for present purposes.  In Mickovski’s case, it was the client whose complaint was dismissed who challenged the determination.  Rule 14.1(p) of the relevant rules excluded complaints for consideration:

“where the complainant knew or should reasonably have known of all the relevant facts more than six years before first notifying the Service about the complaint.”

97Rule 15.3 of the rules included a similar provision as exists in the AFCA Rules rendering the determination final and binding.  The Court, Buchanan and Nettle JJA and Beach AJA, accepted that the decision maker had misconstrued Rule 14.1(p).  Their Honours said:

“In one sense, the Panel Chair’s error may be described a jurisdictional error in that it went to the question of whether FOS had jurisdiction under clause 14.1(p) to determine the dispute in the circumstances which obtained.  In the sense which matters for the purposes of clause 15.3, however, it was not a jurisdictional error but rather an error made in the exercise of jurisdiction or more accurately within the ambit of decision-making power conferred on the Panel Chair by clause 15.  That is to say, the Panel Chair was not guilty of fraud or lack of good faith; he was not prejudiced; and he did not misconceive the task which he was required to undertake.  He simply made an error in the process of reasoning which he adopted in the execution of his decision making responsibility.

In view of the terms of clause 15.3, such an error is not reviewable.” ((2012) 36 VR 456, 471 [51]–[52])

98DH Flinders Pty Ltd v Australian Financial Complaints Authority Ltd [2020] NSWSC 1690 was a decision of Stevenson J of the Supreme Court of New South Wales. It differed from the other cases just referred to in that the financial firm moved to block the AFCA process before it had moved to a determination. In granting injunctive relief precluding AFCA from making a determination, his Honour referred to Rule B.2.1(a), which required a complaint to arise from or relate to “the provision of a Financial Service by the Financial Firm to the Complainant.” Having noted that AFCA’s powers as a decision maker arise solely as a matter of contract ([2020] NSWSC 1690 [53]), his Honour said:

“The critical question is whether the Complaints relate to the provision of that Financial Service [viz the EFSOL Ameen Investment Program] ‘by’ DH Flinders ‘to’ Dr Khan and the other complainants.” [62]

99His Honour gave relief to DH Flinders on the basis that the financial service in question was granted by EFSOL rather than DH Flinders.  He remarked:

“There are no words in the definition of ‘Financial Firm’ itself which suggest that ‘representative’ includes a representative acting without or beyond authority.” [78]

100His Honour rejected a contention on behalf of the complainant that legal unreasonableness was the only basis upon which AFCA’s decision-making could be challenged.  His Honour was pressed with the authorities to which I have just referred, but regarded them as distinguishable. [92]

101Mr Bingham contended that DH Flinders would not be a safe guide in the present proceeding because, since no determination had been made by AFCA, the rule rendering such a determination final and binding was not engaged; therefore, there was a broader scope of challenge available before the making of a determination than existed now after the final and binding determination had been made.  I accept that observation in a general sense.

102In dealing with the privative clause in s179 of the New South Wales Industrial Relations Act 1996, as amended in 2005, which purported to exclude all challenges to the decisions of the Industrial Commission in court session, the New South Wales Court of Appeal had been willing to intervene “to prohibit a threatened excess of jurisdiction, prior to a decision being made”, but that a different result would obtain after a decision had in fact been made, at least as a matter of discretion: Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (2006) 66 NSWLR 151, 169 [82] per Basten JA.

103Nevertheless, I reject the contention that in the present circumstances no challenge is available to Quattro other than a contention that AFCA’s determination was unreasonable in the Wednesbury sense.  I do not read Mickovski’s case as having this effect.  In retrospect, the answer to my question to Mr Bingham as to what type of jurisdictional error might invalidate an AFCA determination was furnished by the Court in Mickovski, itself. Issues of fraud, lack of good faith, and so forth, may be put aside as irrelevant in the circumstances, but it remains open to a party in Quattro’s situation to contend that AFCA misconceived its task ((2012) 36 VR 456, 471 [51]), and Investors Exchange Limited v Australian Financial Complaints Authority Limited [2020] QSC 74 [30] quoted above per Applegarth J. I accept the contention of Mr Aleksov that a fundamental misapplication of the AFCA Rules might constitute a misconception of AFCA’s role. As Mickovski’s case shows, not every legal error would constitute such a misconception, even significant ones such as were raised in Mickovski.  In so far as the defendant’s defence alleges a fundamental misapplication of the Rules, even though it does not in terms allege that AFCA misconceived its function, to regard that consideration as not being open on the pleadings would be to exalt form over substance.

104I now turn to consider the application of Rule B.2.1(e).  It will be recalled that at paragraph 36 of his written outline of contentions, Mr Aleksov’s initial contention was that Rule B.2.1 as a whole, setting out the matters which could give rise to a complaint for the purposes of the AFCA scheme, applied only to circumstances where the relevant financial product was supplied or granted by the respondent Financial Firm to the Complainant.  As Mr Bingham correctly observed, this contention must be rejected.  The most obvious indication that no such restriction exists is to be found in paragraph (f), which would appear to cover a situation where a Financial Firm supplied a third party property insurance policy to Mr A relative to his motor vehicle, and as a result of Mr A’s negligent driving of that vehicle it damaged the uninsured vehicle of Mr Complainant.  The more modest contention ultimately advanced by Mr Aleksov was that each of the paragraphs of Rule B.2.1 required that the financial service the subject of such paragraph be one supplied by the respondent Financial Firm.  The heading or “chapeau” of this rule is “Relationship giving rise to the complaint – other complaints”.  Superannuation complaints are dealt with separately in Rule B.1.

105Section E.2 of the Rules states a short list of interpretative rules applying to the AFCA Rules generally.  Such provisions are typical boilerplate features of modern legal documents.  Section E.2 contains no boilerplate provision of the type frequently appearing that “headings are for convenience only and do not affect the construction or interpretation of this agreement” or “these rules”.  Hence, the several paragraphs of Rule B.2.1 should be seen as identifying relationships between, on the one hand, a Complainant, and, on the other hand, the respondent Financial Firm.

106In Patersons’ case, Mitchell J proceeded on the basis that, as a contractual document, the AFCA Rules should be construed in accordance with the principles stated by the High Court for the construction of commercial contracts in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 [35], where the Court said that a businesslike interpretation should be given to such document on the assumption that the parties intended to attain a commercial result. As to paragraph (e) of Rule B.2.1, AFCA did not proceed upon the footing that any Financial Firm a member of the scheme, could be rendered respondent to a complaint about a financial service provided by any other Financial Firm, presumably guided by considerations such as which of the two would be more likely to be willing and able to pay any compensation determined to be owing. Rather, it resorted to a concept of authority. The definition of Financial Firm in its 4^th paragraph states that the expression:

“includes any employee, representative, agent or contractor of the Financial Firm including any person who has actual, ostensible, apparent or usual authority to act on behalf of the Financial Firm or authority to act by necessity in relation to a financial service.”

107As Mr Aleksov has correctly observed, Eleuthera has no authority to act on behalf of Quattro. The argument which commended itself to AFCA was that Eleuthera acted at the behest of M101, which was an authorised representative of Quattro. Mr Bingham referred to the principle which is to be found in s917B, viz that a principal is responsible for the acts of its authorised representative “whether or not the representative’s conduct is within authority”. But that section applies only to dealings with “the client”, which I take to be a reference to the licensee’s client. It has never been suggested that Mr Hicks was a client of Quattro. I therefore put s917B and associated provisions of the Corporations Act to one side.  Assuming that the non-redemption of Mr Hicks’ investment was caused by one of Quattro’s representatives, it was not acting as such, and the provisions extending Quattro’s responsibility in the Corporations Act Part 7.6 Division 6 do not apply.

108Mr Bingham contended, as noted above, that any implied limitation upon the generality of the words in B.2.1 may only be made if the principles governing the implication of terms to give business efficacy are met, as stated by the majority of their Lordships in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, where they said:

“In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.” ((1977) 180 CLR 266, 283)

109Mr Bingham contended that in the circumstances the requirements laid down by their Lordships had not been met, and the proposed implied term ought not to be regarded as existing; viz, that each paragraph of Rule B.2.1. should be regarded as applicable only to financial services supplied by the respondent Financial Firm.  No doubt minds may differ, but the term seems to me to be so obvious as to go without saying.  It is capable of clear expression, and does not seem to contradict any express term of the contract.  It is reasonable and equitable that financial firms should be held accountable for their products but not for financial services supplied by others.

110The most contentious requirement would appear to be the second: the criterion of necessity.  It may be said that the approach adopted by AFCA or some other approach which rejected any implied restriction on the scope of Rule B.2.1 as under discussion would leave the contract effective.  No doubt, the Rules could be regarded as effective without the suggested implication, in the sense, for instance, that they would not be rendered void for uncertainty.  But in my view, the criterion of necessity is one which is allied to the concept of what is just and equitable and the objective of obtaining a businesslike outcome the High Court has said the process of construction should seek to achieve relative to commercial contracts.

111This is a matter so fundamental to the identification of the range of complaints which AFCA is empowered to resolve that to adopt a construction of Rule B.2.1(e) inconsistent with its proper construction it constitutes a misapprehension of the decision maker’s function.  It is therefore a jurisdictional error so as to invalidate the published determination.

112I am conscious that the Rules empower AFCA, in the words of Mitchell J in Patersons’ case, to:

“have regard to a variety of other matters [viz other than legal principles]. In deciding upon the fair and appropriate remedy, [AFCA] is not limited to making decisions which could be made at law or equity.” ((2015) 108 ACSR 483, 500 [90])

113However, the criterion of fairness is engaged only when a complaint is made which, in accordance with the Rules, AFCA is entitled to entertain.

114Were I wrong in this analysis, the effect of attaching liability to a licensee relative to a financial service which it did not supply, and on the basis of an unlicensed party, would meet the criterion of Wednesbury unreasonableness.

Disposition

115The proceeding should be dismissed.  I have heard no submissions on the question of costs, and so I will reserve them.