Investors Exchange Limited v Australian Financial Complaints Authority Limited

In the Federal Court of Australia, Investors Exchange Limited (IEL) brought an application for judicial review against the Australian Financial Complaints Authority (AFCA), seeking to overturn a determination made by AFCA in favour of the second respondent, Lornette Superannuation Fund (LSF). The dispute arose from a managed investment scheme in which LSF invested and subsequently suffered losses. LSF lodged a complaint with AFCA, which ruled in LSF’s favour, finding that IEL had failed to comply with its Compliance Plan. AFCA ordered IEL to compensate LSF for the losses suffered, and additionally awarded interest to maintain the real value of the compensation.

The primary legal issues before the court were whether AFCA misconstrued the Compliance Plan in making its determination, whether such an error permitted judicial intervention, and whether the findings by AFCA as to the consequences of the non-compliance were open to it. Another issue was whether the determination by AFCA was capable of being specifically enforced, considering that LSF had already received partial compensation from another financial firm.

The court found that the dispute concerned non-disclosure rather than investment performance per se, and that the failure to obtain an independent valuation as required by the Compliance Plan led to the non-disclosure in the Product Disclosure Statement (PDS), resulting in LSF's loss. Consequently, the court dismissed IEL’s application for judicial review. Regarding the specific performance of the determination, the court concluded that the Determination was capable of being specifically enforced, and there was no adequate remedy available at common law. The court also held that it would be unnecessary and costly for AFCA to pursue separate proceedings to claim damages.

The court ordered that IEL pay LSF $66,115 along with interest from 24 November 2015 to the date of payment, and that IEL also pay AFCA’s and LSF’s costs of and incidental to the proceeding.