ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd; ANLP Pty Ltd atf AP Superannuation Fund v ISG Financial Services Ltd - [2022] QSC 120

SUPREME COURT OF QUEENSLAND

CITATION:

ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd & Ors; ANLP Pty Ltd atf AP Superannuation Fund v ISG Financial Services Ltd [2022] QSC 120

PARTIES:

ISG FINANCIAL SERVICES LIMITED        BS 10170/20
ACN 114 733 569

(plaintiff)

v
AUSTRALIAN FINANCIAL COMPLAINTS AUTHORITY LIMITED ACN 620 494 340

(first defendant)
ANLP PTY LTD AS TRUSTEE FOR AP SUPERANNUATION FUND
(second defendant)
GLENN BRESSOW
(third defendant)
YOGESH APTE
(fourth defendant)
AMBICA JHA
(fifth defendant)
WARREN LAW
(sixth defendant)
JAMIE SILVA
(seventh defendant)
BRESSOW PTY LTD ATF BRESSOW SUPER FUND
(first defendant by counterclaim)
YV & KY APTE PTY LTD ATF APTE FAMILY SUPER FUND
(second defendant by counterclaim)
A & P JHA PTY LTD ATF JHA FAMILY SUPER FUND
(third defendant by counterclaim)
W & S LAW PTY LTD ATF LAW FAMILY SUPER FUND
(fourth defendant by counterclaim)
J S SILVA PTY LTD ATF SILVA FAMILY SUPER FUND
(fifth defendant by counterclaim)

ANLP PTY LTD ACN 102 307 737 as               BD 2152/20
trustee for the AP SUPERANNUATION FUND
(plaintiff)
v
ISG FINANCIAL SERVICES LIMITED ACN 114 733 569
(defendant)

FILE NOS:

BS 10170/20
BD 2152/20

DIVISION:

Trial

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

24 June 2022

DELIVERED AT:

Brisbane

HEARING DATES:

21, 22 and 23 March 2022

JUDGE:

Dalton J

ORDERS:

1.   Declare that a decision issued by the first defendant on 29 June 2020 on a complaint made by A & P Jha Pty Ltd, so far as it concerns the liability of the plaintiff to A & P Jha Pty Ltd, is not a determination within the meaning of the first defendant’s Complaint Resolution Scheme Rules, and is not binding on the plaintiff.

2.   Declare that awards of costs made by the first defendant to the fourth, sixth and seventh defendants on 29 June 2020 are not binding on the plaintiff.

3.   Otherwise give judgment for the defendants against the plaintiff on the claim in BS 10170/20.

4.   The plaintiff is to pay:

(a)   $53,420 to the first defendant;
(b)   $200,000 to the second defendant;
(c)   $50,000 to the second defendant by counterclaim;
(d)   $50,000 to the fourth defendant by counterclaim;
(e)   $45,000 to the fifth defendant by counterclaim,

together with interest to be dealt with in a subsequent order.

5.   Otherwise judgment for the plaintiff on the counterclaim of the first defendant in BS 10170/20.

6.   Dismiss the claim in BD 2152/20.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – whether AFCA made determinations in favour of the third to seventh defendants – where the proper complainants were the first to fifth defendants by counterclaim – whether AFCA’s determinations were validly made

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the AFCA Rules require AFCA to consider complaints in a way that provides procedural fairness to the parties – where the AFCA Rules require AFCA to provide the parties to a complaint with access to relevant information – where AFCA failed to provide documents to the plaintiff – whether AFCA’s failure to provide documents was material – whether AFCA’s determinations are invalidated due to a failure to provide procedural fairness

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS where the Australian Financial Complaints Authority (“AFCA”) Rules provide for a tripartite contract between AFCA, the plaintiff and the complainants – where there is an implied term that AFCA not act unreasonably in the Wednesbury sense – where AFCA is obliged to have regard to legal principles under the AFCA Rules – whether AFCA breached the tripartite contract

Corporations Act 2001 (Cth) s 912A, s 1041H, s 1050, s 1051, s 1051A

Australian Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Ltd [2021] NSWSC 1577, considered
CAQ17 v Minister for Immigration and Border Protection (2019) 274 FCR 477, cited
CNY17 v Minister for Immigration and Border Protection (2019) 268 CLR 76, cited
Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 288 FLR 374, considered
Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123, cited
Investors Exchange Ltd v Australian Financial Complaints Authority Ltd & Anor [2020] QSC 74, considered
Lord Buddha Pty Ltd (in liq) v Harpur (2013) 41 VR 159, cited
McCarthy v McIntyre [1999] FCA 784, cited
Mickovski v Financial Ombudsman Service Ltd (2012) 36 VR 456, considered
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357, considered
Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421, cited
Minister for Immigration and Citizenship v Li (2013) 249 CLR 332, considered
MZAPC v Minister for Immigration and Border Protection & Anor (2021) 390 ALR 590, considered
Orr v Ford (1989) 167 CLR 316, cited
Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483, considered

COUNSEL:

R Anderson QC for the plaintiff in BS 10170/20 and the defendant in BD 2152/20
MW Wise QC and AF Solomon-Bridge for the first defendant in BS 10170/20
MJ McDermott for the second defendant in BS 10170/20 and the plaintiff in BD 2152/20

SOLICITORS:

Cornwalls Lawyers for the plaintiff in BS 10170/20 and the defendant in BD 2152/20
Arslan Lawyers for the first defendant in BS 10170/20
Herd Lawyers for the second defendant in BS 10170/20 and the plaintiff in BD 2152/20

Parties and Proceedings

The second defendant and second, third, fourth and fifth defendants by counterclaim bought shares in a company called Omicron Investment Holdings Pty Ltd. They lost their money and complained to the first defendant (AFCA) about the financial services provider who prepared the information memorandum offering the shares. That financial service provider was the plaintiff (ISG). AFCA found the complaints against ISG substantiated and ordered ISG to pay money to the complainants. By BS 10170 of 2020 ISG seeks declarations that AFCA’s determinations are of no legal effect.
AFCA counterclaims for an order requiring ISG to specifically perform by paying in accordance with its determinations, and that ISG pays AFCA itself $66,650 as its costs for determining the complaints.
The plaintiff and the first and second defendants appeared at the trial of this matter. Formal service was proved on the fourth, fifth and sixth defendants. I am satisfied that informal service was proved on the seventh defendant – see tt 3-8-9. So far as it concerned the third defendant and the first defendant by counterclaim, the proceeding settled prior to trial. To give effect to that settlement I made orders at the end of the trial that:
(a)proceeding number 10170 of 2020, insofar as it consists of the claim of the plaintiff, ISG Financial Services Limited against Glenn Bressow is discontinued with no order as to costs as to that part of the proceeding, and
(b)the counterclaim of the first defendant against the third defendant and the second defendant by counterclaim is dismissed, with no order as to costs of that part of the proceeding.
The remaining defendants by counterclaim did not appear. Although formal service was not proved, I accept that there was good informal service because the defendants were their directors. The fourth, fifth, sixth and seventh defendants and the second, third, fourth and fifth defendants by counterclaim played no role in these proceedings, no doubt content for AFCA to advance their interests in the litigation.
Additional to the proceedings which were commenced in this Court, the second defendant began related proceedings against ISG in the District Court (2152/20). By order of this Court this proceeding was removed to the Supreme Court and the proceedings were consolidated (Court Document 59, Brown J, 8 September 2021). ANLP Pty Ltd accepted that if I were to make orders in its favour on the first defendant’s counterclaim in the Supreme Court proceeding, I need not make orders in the District Court proceeding.
I record for completeness that on the first day of trial I made an order by consent that the counterclaim of the second defendant against the first defendant was dismissed with no order as to costs in relation to that part of the proceeding.
In these reasons for judgment all legislative references are to the Corporations Act 2001 unless otherwise stated, and all references to rules are to the AFCA Complaint Resolution Scheme Rules.
Underlying Facts
The fourth, fifth, sixth and seventh defendants caused their superannuation funds, the second, third, fourth and fifth defendants by counterclaim, to buy shares in Omicron. The second defendant also bought shares in Omicron. The investments were made at the end of 2016.
Omicron entered into a Joint Venture Agreement dated 12 August 2016 with 1 McConnell Pty Ltd. The joint venture was to develop a block of residential apartments at 1 McConnell Street, Bulimba. Omicron’s contribution to the joint venture was to raise $5 million by the issue of shares. It engaged ISG to prepare an information memorandum regarding the offer of these shares for sale. A Mr Benjamin Godfrey was a director of both Omicron and ISG. 1 McConnell’s role in the joint venture was to raise the bulk of funding for the development and to carry out the development.
The information memorandum said that 1 McConnell would raise money from a bank to carry out the development. It did this, raising around $11 million from the National Australia Bank and giving that bank a first mortgage over the land at Bulimba. The information memorandum also stated that 1 McConnell might raise extra funds by way of mezzanine funding. It did not do this. However, before the Joint Venture Agreement was entered into, 1 McConnell did borrow an amount of $1.1 million from JSKS Enterprises Pty Ltd (JSKS). The loan was unsecured and expressed to be for a period of five weeks. If it were not repaid within the five weeks it was to attract interest at 15% per annum. One Gary Seaton controlled JSKS. He was the father‑in‑law of the director of 1 McConnell, a Mr Christian De Lloyd. Mr De Lloyd was associated with a financial services firm, De Lloyd Private Wealth Pty Ltd (DLPW). The JSKS loan was not repaid by 1 McConnell. It was not mentioned in the information memorandum.
The development at Bulimba was not successful. On 18 May 2018 1 McConnell granted a second mortgage over the land to JSKS to secure repayment of the JSKS loan. Less than a month later JSKS sold the land as second mortgagee. The proceeds of sale paid out the NAB loan and paid some, but not all, of the monies owing to JSKS. The shares the complainants had bought were valueless.
The cases before AFCA were that had the investors known of the JSKS loan they would not have invested. The investors said they had been misled because the information memorandum was silent as to the JSKS loan.
AFCA
Section 912A(1)(g) provides that if a financial services licensee provides services to retail clients, the licensee must have a dispute resolution system which complies with s 912A(2). Section 912A(2) provides that the licensee must have an internal dispute resolution procedure but also have “membership of the AFCA scheme”.
Sections 1050 and 1051 allow the relevant minister to authorise a private service provider to conduct the AFCA scheme. The “operational requirements” of that scheme at s 1051(4) are relevant to consider here. They include that:
● “The complaints mechanism under the scheme is appropriately accessible to persons dissatisfied with members of the scheme” – s 1051(4)(a).
● “Complaints against members of the scheme are resolved … in a way that is fair, efficient, timely and independent” – s 1051(4)(b).
● “Appropriate expertise is available to deal with complaints” – s 1051(4)(c).
Similar thinking is evident in s 1051A which provides that:
“The general considerations for an external dispute resolution scheme are the following:
(a)the accessibility of the scheme;
(b)the independence of the scheme;
(c)the fairness of the scheme;
(d)the accountability of the scheme;
(e)the efficiency of the scheme;
(f)the effectiveness of the scheme.”
Rule A.1.3 provides that the AFCA complaint resolution scheme is free of charge for complainants and that “complainants do not generally need legal or other paid representation to submit or pursue a complaint through AFCA”.
Section 1051(4)(e) provides that determinations made by AFCA are binding on members of the scheme, but not binding on complainants to AFCA. The AFCA rules provide at A.1.4 that a person is not obliged to use the AFCA complaint resolution process to pursue a complaint against a financial licensee but instead may institute court proceedings or any other available dispute resolution forum. Likewise, r A.15.3 provides that after AFCA has made a determination it is binding upon the parties to the dispute “if accepted by the complainant within 30 days of the complainant’s receipt of the determination”. Rule A.15.4 goes on to provide that if a complainant does not accept a determination, the complainant is not bound by the determination and may bring action in the courts or take any other action available to it.
It was common ground that the AFCA rules constituted a tripartite agreement between AFCA, ISG and the individual complainants – see r A.1.2.[1]
[1]Investors Exchange Ltd v Australian Financial Complaints Authority Ltd & Anor [2020] QSC 74, [13], citing Mickovski v Financial Ombudsman Service Ltd (2012) 36 VR 456.
ISG’s Complaints
ISG made nine separate complaints about the AFCA proceedings and decisions. I will deal with them in turn.
1 & 8: The Identity of the Complainants
ISG’s written submissions summarise its first point as, “In respect of the complaints made by the third to seventh defendants, AFCA did not have jurisdiction to consider the complaints or award compensation as the third to seventh defendants had not suffered any loss”.
All the investments in the Bulimba project which are the subject of this proceeding were made by the corporate trustees of self‑managed superannuation funds. The complaint to AFCA made by the second defendant was made in the name of that corporate trustee and the determination of AFCA was in favour of the trustee.
So far as the other four investments are concerned, there are problems. The AFCA rules provide at r A.3.1 – “A person may submit a complaint by using AFCA’s online form, writing to AFCA or by contacting AFCA by telephone. …”
It appears that the four other superannuation funds contacted a law firm, TGA Legal Pty Ltd, and that that law firm filled out the AFCA online complaint form in relation to each complaint.[2] Unfortunately, against the part of the form which enquired after “complainant details” it seems that TGA Legal inserted, not the name of the superannuation fund’s corporate trustee, but the name of the person from whom the firm presumably took instructions. These are the individuals named as the fourth to seventh defendants: Dr Apte, Dr Jha, Mr Law and Mr Silva. Each was a director of the relevant corporate trustee.
[2]Each of the complaint forms contains the information “I am lodging this complaint for someone else” and against the question on the form, “My relationship to the complainant”, each completed form contains the words “Solicitor – private”. Further, against the heading on the form “Representative details”, is recorded in each case, “Mr Tony Anamourlis TGA Legal Pty Ltd”.
Part of the complaint form makes provision for the complainant to submit electronic files “with complaint form”. In each case TGA Legal submitted a letter written by it which explains in much more detail than allowed for by the complaint form, what the complaint is. This letter, in all four cases, makes it clear that the complainant is the corporate trustee of the superannuation funds.
Thus, there was a mixture of information provided to AFCA in all four cases as to who the complainant was, and there was a contradiction between the complaint form and the attached letter. It is clear in every case that the individual named as the complainant on the online complaint form is closely related to the corporate trustee of the superannuation fund. For example, the online complaint form in relation to the fourth defendant gives complainant details as, “Dr Yogesh Apte” and the letter makes a complaint on behalf of “YV & KY Apte Pty Ltd (ACN 603 185 351) ATF Apte Family Super Fund”. It is plain enough that Dr Apte is likely to be the person giving instructions on behalf of the corporate trustee.
In my view having regard to the material on the online complaint form, and the material attached to it, it was sufficiently plain that the complainant in each case was the corporate trustee of the superannuation funds which have been joined as the second, third, fourth and fifth defendants by counterclaim. It seems to me, having regard to the definition of Complainant in the schedule to the AFCA rules (“a person who has submitted a complaint to AFCA”), that the corporate trustees were in each case the Complainants as defined by the rules.
This conforms with the reality of the investment complained about: ie., it was the corporate trustee in each case which invested in the Bulimba project.
Further, it seems to me that the superannuation companies were the obvious complainants in these matters. Rule B.2.1 of the AFCA rules provides that:
“B.2.1A 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;
…
(e)a legal or beneficial interest of the Complainant arising out of:
(i)a financial investment …
…”
In this case the financial service was provided by ISG to the corporate trustees of the superannuation funds. It is true that beneficiaries of the superannuation funds may have had an argument that they had a beneficial interest in the funds and that therefore they had rights as individuals to complain about ISG within the meaning of r B.2.1(e)(i).[3] However, they did not.
[3]In my view the claim of such a beneficiary would likely be for “direct financial loss”, as opposed to consequential loss, within the meaning of r D.3.1, but perhaps this would depend upon the terms of the trust deed. These matters were not explored in any detail before me. The interpretation of “direct financial loss” as being loss which is not consequential is made in Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483, [5], [6] and [48].
Relevantly, the tripartite contracts – r A.1.2 – were between AFCA, ISG and (separately) the second, third, fourth and fifth defendants by counterclaim.
In each of the complaints made against ISG, AFCA proceeded in a two stage approach authorised by r A.12. Rule A.12.1 provides that after collecting relevant information and obtaining submissions from the parties to a complaint, AFCA may choose to provide the parties with a preliminary assessment which is to set out reasons for any conclusions made about the merits of the complaint and provide a recommendation as to how the complaint should be resolved. The parties have the option to accept this or to require a determination by an AFCA Decision Maker. In all cases here the parties declined to accept the recommendation and there was a determination.
Unfortunately Mr Moura, the person engaged by AFCA to perform the preliminary assessment and make the recommendation, and separately Mr Crowhurst, the person engaged by AFCA as Decision Maker issued (respectively) the AFCA recommendation and the AFCA determination, under cover of a formal front page in the name of the individuals named on the complaint form, rather than in the name of the corporate trustees of the superannuation funds.

ISG submitted that this raised a considerable difficulty having regard to the AFCA rules. Rule D.3.1 provides that, “an AFCA Decision Maker may decide that the Financial Firm is to compensate the Complainant for direct financial loss. …”. Rule A.15.3 provides, “… 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”.
In each case the recommendations by Mr Moura were delivered under a title page which identified the case number, the complainant, in each case the individuals, not the corporate trustee of the superannuation fund, and the financial firms ISG and DLPW, who were the respondents to the AFCA process.
The language of the reasons for the recommendations is formulaic and quite often the complainant is referred to as “they”. As a matter of grammar this is not appropriate either to refer to the individual defendants to this proceeding or to the corporate defendants by counterclaim. However, now and then throughout the recommendation Mr Moura refers to the complainant as ‘he’ or ‘him’. I think it might be accepted that Mr Moura thought the complainants were the individual fourth, fifth, sixth and seventh defendants in this proceeding. The recommendation made by Mr Moura in each case was in terms similar to this one which is taken from Dr Apte’s case:
“FF1 and FF2 should pay the complainant his initial investment of $100,000. The compensation is divided equally between the two firms:
●FF1 and FF2 should pay the complainant $50,000 plus interest of 1.5% per annum from 10 October 2016 (being the date the complainant deposited fund), and an average of the RBA dates over the period.” [sic].
Under the AFCA rules the recommendation has no effect unless all the parties accept it – r A.12.2. Here, none of the recommendations made by Mr Moura were accepted by the parties. Thus, it seems to me that so far as the point in issue before me is concerned, I can disregard them, along with his errors as to the identity of the complainants.
After Mr Moura’s recommendations, the four complaints the subject of this argument proceeded to Mr Crowhurst. His job was to determine the complaints – r A.13.1. The determination is required to be in writing and reasons must be given for it – r A.14.4. The effect of the determination is final and binding between the parties if accepted by the complainant within 30 days of receipt – r A.15.3.
Mr Crowhurst’s determinations in each of the four cases reveal that he did not turn his mind to the proper identity of the complainants. Like Mr Moura’s recommendations, each determination is prefaced by a title page which contains the case number, the complainant and the name of the respondent financial firms. In each case the determination identifies the individuals Dr Apte, Dr Jha, Mr Law and Mr Silva as the complainants.
In all four cases the text of the reasons for decision is confused and contradictory as to this issue. To take examples from the determination involving Dr Apte, Mr Crowhurst says various things such as:
●“The complainant invested in the scheme by taking shares in Company O through his Self-Managed Superannuation Fund (SMSF) after being introduced to the offer by Mr D, an authorised representative of Financial Firm 2 and a director of Company M.” (p 3192, ex 1).
●“The complainant alleges that Financial Firm 1 failed to disclose material information in the information memorandum relating to a $1.2 million loan (the Loan) made by Company J to Company M. The complainant says that had he known about the loan, he would not have invested. He seeks compensation for his losses.” (p 3192, ex 1).
●“The investor, being the SMSF, was properly assessed as a wholesale client …” (p 3193, ex 1).
●“The complainant, via his SMSF, invested $100,000.00, in Company O on 15 September 2016.” (p 3194, ex 1).
●“The complainant submits that had he known of the Company J loan prior to investing, he would not have purchased the shares in Company O. The panel is satisfied in the circumstances that this is the case and that he has suffered the total loss of his SMSF’s capital investment.” (p 3209, ex 1).
Mr Crowhurst fails to understand the distinction between the four individuals and the corporate trustees of their superannuation funds.
I put to one side the confusion and errors in Mr Crowhurst’s statement of facts and reasons and focus upon his determinations. These are found at paragraph 1.3 of each of his documents. They are all in fairly similar terms. I will extract that in Dr Jha’s case:
“1.3 Determination
This determination is in favour of the complainant.
Within 28 days of the complainant accepting this determination:
●Financial Firm 1 must:
Reimburse to the complainant’s SMSF a settlement amount of $25,000.00 plus interest calculated at a compounding rate of 1.25% per annum from 15 September 2016 (the date of the payment into the Trust Account) to the date of payment and
Reimburse to the complainant $2,200.00 in contribution towards professional costs incurred.
In doing so, Financial Firm 1, on behalf of Company O, may elect to have the complainant’s SMSF assign its shares in Company O to Financial Firm 1.
●Financial Firm 2 must:
Reimburse to the complainant’s SMSF a settlement amount of $50,000.00 plus interest calculated at a compounding rate of 1.25% per annum from 15 September 2016 (the date of payment into the Trust Account) to the date of payment and
Reimburse to the complainant $2,200.00 in contribution towards professional costs incurred.” (pp 4066-4067, ex 1) (my underlining).
As explained, my view is that in each case the Complainant to AFCA was the corporate trustee of the superannuation fund. Pursuant to r D.3.1, the Decision Maker was able to decide that ISG was to compensate the Complainant for direct financial loss. In fact, that is what Mr Crowhurst’s determinations do in relation to the price of the failed investments. I find these determinations were validly made. I cannot see that the costs decisions were valid, Mr Crowhurst had no power to compel payments to the individual directors.
The last difficulty as to this point relates to the acceptance of the AFCA decisions by the complainants. By r A.15.3 a determination by an AFCA Decision Maker is final and binding upon the parties only if it is accepted by the Complainant within 30 days of the Complainant’s receipt of the determination. In each of the four cases it was the individuals who wrote back accepting the determinations made by AFCA. In my view, that was sufficient to accept the determinations on behalf of the corporate superannuation trustees; the individuals who wrote were in fact directors of the companies and were dealing with the complaints made to AFCA on behalf of those companies.
ISG’s eighth point was that, “… AFCA’s decision to determine the complaints by the second and fourth to seventh defendants was unreasonable on the basis that the complaints raised by each of the complainants was outside AFCA’s jurisdiction”. It closely resembled the first point but was on the basis that none of the individual defendants had been provided with a financial service by ISG (see r B.2.1); rather, it was said the individual defendants were simply complaining about the performance of a financial investment made by the corporate trustees in each case. For the same reasons as explained in relation to ISG’s first point, this ground fails in my opinion.
2, 3 & 4: Procedural Fairness
ISG’s grounds of complaint 2, 3 and 4 were that AFCA had not accorded it procedural fairness. In ISG’s written submissions these grounds are summarised as:
“30.2In respect of each of the determinations, AFCA failed to provide ISG with access to relevant information before each of the complaints was determined. …
30.3In respect of each of the determinations, information not provided by ISG was relied upon by AFCA when reaching a decision about the merits of the complaint in circumstances where no special circumstances applied. …
30.4In respect of each of the determinations, AFCA did not act fairly and in a manner that provides procedural fairness to the parties. …”
Despite the apparent complexity of these complaints, the only complaint made in written submissions or at the hearing was that ISG was not provided with all relevant documents prior to AFCA determining the complaints. ISG says that the AFCA rules formed part of the tripartite contract and that the failure to provide it with documents amounted to a breach of that contract.
There was no dispute that the documents ISG complained about existed; were in the possession of AFCA, and were not provided to ISG.
Rule A.2.1(c) provides that AFCA will:
“Consider complaints submitted to it in a way that is:
(i)independent, impartial, fair,
(ii)in a manner which provides procedural fairness to the parties,
(iii)efficient, effective, timely, and
(iv)co-operative, with the minimum of formality”.
Rules A.5.1 and A.5.2 provide that when AFCA receives a complaint it will notify the financial firm in writing and give it a time within which it must either resolve the complaint or provide a response to the complaint to AFCA.
Rule A.9 provides AFCA with power to require information from the parties to a dispute. Rule A.10 is headed “Information sharing and opportunity to make submissions”. It provides:
“A.10.1AFCA will generally share information provided by a party to a complaint with the other parties to the complaint, including after the complaint has been closed when appropriate.
A.10.2Before a complaint is determined by an AFCA Decision Maker, AFCA must provide the parties to the complaint:
(a)with access to relevant information; and
(b)an opportunity to make submissions.
A.10.3Despite rules A.10.1 and A.10.2, AFCA need not provide the parties with any memoranda, analysis or other documents prepared by AFCA’s employees or contractors unless required by law.
A.10.4Despite rules A.10.1 and A.10.2, AFCA need not provide a party with access to relevant information, if the party that provided the information does not consent to the information being shared with the other party and tells AFCA this when they provide the information. However, if the information is not shared AFCA cannot rely upon it when reaching a decision about the merits of the complaint, unless special circumstances apply.
…” (my underlining).
There was no evidence or argument that r A.10.4 applied. That is, there was no evidence that any party did not consent to information being shared and informed AFCA of this.
AFCA made certain submissions as to the application of these rules to particular documents and they are dealt with below. However, in respect of all the documents it made a submission that even if its failure to provide the document to ISG breached the tripartite contract, that breach could not have the effect that ISG contended for, namely that the AFCA decisions were of no legal effect. This submission was based on case law relating to the materiality of failures to disclose information. The cases are administrative law cases. It was common ground that they were applicable by analogy, and that they were the relevant cases.
AFCA relied upon the case of MZAPC v Minister for Immigration and Border Protection & Anor.[4]In that case the Migration Review Tribunal heard the appellant’s appeal from a denial of a protection visa. The Tribunal had the criminal history of the appellant, which fact was not revealed to the appellant in the appeal process. There was no dispute that this failure to disclose was a breach of procedural fairness by the Tribunal. The issue for the High Court was whether or not the information not disclosed to the appellant was so material that the Tribunal’s breach of procedural fairness resulted in jurisdictional error. The majority judgment said this about materiality:
[4](2021) 390 ALR 590.
“[1] … This appeal raises issues concerning the content and proof of the element of materiality identified in Hossain v Minister for Immigration and Border Protection as ordinarily required to exist for a breach of an express or implied condition of a conferral of statutory decision-making authority to result in jurisdictional error.
[2]Materiality was subsequently explained in Minister for Immigration and Border Protection v SZMTA to involve a realistic possibility that the decision in fact made could have been different had the breach of the condition not occurred. …
…
[27]To understand materiality, it is necessary first to understand jurisdictional error. …
…
[29]… To say that the decision is affected by jurisdictional error is to say no more and no less than that the decision-maker exceeded the limits of the decision-making authority conferred by the statute in making the decision. The decision for that reason lacks statutory force. Because the decision lacks statutory force, the decision is invalid without need for any court to have determined that the decision is invalid.
[30]… Non-compliance with an express or implied statutory condition of a conferral of statutory decision-making authority can, but need not, result in a decision that exceeds the limits of the decision-making authority conferred by statute. Whether, and if so in what circumstances, non-compliance results in a decision that exceeds the limits of the decision-making authority conferred by the statute is itself a question of statutory interpretation.
[31]… a statute conferring decision-making authority is not ordinarily to be interpreted as denying legal force to every decision made in breach of a condition which the statute expressly or impliedly requires to be observed in the course of a decision-making process. The statute is instead ‘ordinarily to be interpreted as incorporating a threshold of materiality in the event of non-compliance’.” (footnotes omitted).
As to questions of materiality, the majority judgment in MZAPC first dealt with the High Court decision in Hossain v Minister for Immigration and Border Protection[5] which was to the effect that a breach will not be material, “if complying with the condition could have made no difference to the decision that was made in the circumstances in which that decision was made”. The majority then looked to what was said by the majority in SZMTA:[6] “[a] breach is material to a decision only if compliance could realistically have resulted in a different decision”. The majority judgment then considered the case of CNY17[7] and concluded as follows:
“[38] The counterfactual question of whether the decision that was in fact made could have been different had there been compliance with the condition that was in fact breached cannot be answered without determining the basal factual question of how the decision that was in fact made was in fact made. Like other historical facts to be determined in other civil proceedings, the facts as to what occurred in the making of the decision must be determined in an application for judicial review on the balance of probabilities by inferences drawn from the totality of the evidence. And like other counterfactual questions in civil proceedings as to what could have occurred – as distinct from what would have occurred – had there been compliance with a legal obligation that was in fact breached, whether the decision that was in fact made could have been different had the condition been complied with falls to be determined as a matter of reasonable conjecture within parameters set by the historical facts that have been determined on the balance of probabilities.
[39]Bearing the overall onus of proving jurisdictional error, the plaintiff in an application for judicial review must bear the onus of proving on the balance of probabilities all the historical facts necessary to sustain the requisite reasonable conjecture. …”
[5](2018) 264 CLR 123, [30].
[6](2019) 264 CLR 421, [45].
[7](2019) 94 ALJR 140, [47].
AFCA also relied upon the words in r A.10 (above). It relied upon the fact that its obligation was to share “information” rather than every document which came into its possession. It relied upon CAQ17[8] for the proposition that a failure to provide a document which contained no new factual material was not a failure to provide information. Again, this was not contentious.
[8](2019) 274 FCR 477, 481; [2019] FCAFC 203, [7]-[9].
Supplementary submissions dated 10 March 2022 filed by AFCA (part of exhibit 3) provide a very helpful framework for analysis of this part of ISG’s case. At the hearing of the matter ISG disclaimed reliance on many of the documents it had (until then) relied upon. Its position was summarised by AFCA in a document which is exhibit 5. I now deal with the documents which remained the subject of complaint using the document numbers from AFCA’s supplementary submissions.
ANLP Pty Ltd
Document 2. This was an email from Ms Anita Patel on behalf of the second defendant (her superannuation fund) dated 21 November 2018. At this stage she knew that her investment was lost. The email is addressed to Chris De Lloyd and to a Sebastian Muscolino, who was a consultant to 1 McConnell.
Ms Patel first enquires of Mr De Lloyd whether or not ISG has an insurance policy that will respond to her loss. This part of the email is not said to be relevant. Ms Patel goes on to address Mr Muscolino. To him she says:
“… I am still extremely annoyed with you for getting me involved in this in the first place and for applying indirect pressure on me to invest due to you having assisted me in the past with my development at 460 Ipswich Road, when you were the surveyor for Westpac Bank, and me feeling obliged to invest in the Bulimba project and putting my trust in you as well.
When we met with Christian in my office with you, I did make it very clear that I did not consider investing in property development involving units/apartments a good investment due to the state of the market but you assured me that this was a sound development and there were no issues with contracts being signed for purchase of the units and that there were contracts already signed and everything was on track. You also told me the DA was already in place so there would be no delays with construction etc within the time line provided.
…
I have not forgotten about any of the representations made and will be taking this matter further in due course.
In the meantime Sebastian, kindly keep me posted with all developments.
My $200,000 investment through my superfund more than 2 years ago is a lot of money and all the relevant people who got me into this and made representations to me about this project, will be held accountable.”
ISG submits that this document is relevant to the question of whether, and to what extent, Ms Patel, on behalf of her superannuation fund, relied upon the information memorandum. ISG acknowledges that it had various other documents in which Ms Patel asserted that she entered into the investment, in whole or in part, because she trusted Mr Muscolino. However, it says that this is the only document in which she asserts something more than that, ie., that Mr Muscolino applied indirect pressure on her to invest.
ISG had a letter which Ms Patel wrote to it on 24 May 2018 stating that, “Since the writer respected and trusted [Sebastian Muscolino] and had previously worked with [Sebastian Muscolino] in other projects, the writer agreed to invest with your company based on your assurances that the project would be finalised within 18 months …” (p 478, ex 2). In that letter Ms Patel also asserted that it was “on the basis of the representations made by you” that she invested in the project. That letter also states that it was Sebastian Muscolino who introduced Ms Patel to Christian De Lloyd.

ISG had an email from Ms Patel to Mr Muscolino dated 3 November 2016 (p 3365, ex 2). This was sent at the time of the investment and said, “I am only doing this because of my friendship with you and trust in you”.
Mr De Lloyd referred to that email in his submissions to AFCA and referred to the fact that it was Sebastian Muscolino who introduced Ms Patel to him (pp 4038-4039, ex 2). Mr De Lloyd also said that it was “Mr Muscolino [who] went through the feasibility and marketing material along with the project details including the development team with Ms Patel at that meeting. Mr Muscolino was driving the process with Ms Patel …”. ISG had these submissions.
In its submission to AFCA, ISG said:
“Given the documentary evidence it may be reasonable to conclude that Patel may not have completed a conclusive due diligence in her assessment of the investment opportunity given her prior experience and profession as a lawyer and experienced investor status. In the initial complaint Patel failed to understand or know who ISG/Omicron was and relied heavily on the relationship between [Christian De Lloyd and Sebastian Muscolino].” – (p 916, ex 2).
ANLP Pty Ltd’s submissions to AFCA included the assertion that Ms Patel would not have caused her superannuation fund to invest in the project “irrespective of her business relationship with, and ‘trust’ in one Sebastian Muscolino …” had the JSKS loan been disclosed (p 1345, ex 2). ISG had these submissions.
Counsel for AFCA described the allegation of “indirect pressure” as nothing more than a rhetorical flourish. I am inclined to agree. The email of 21 November 2018 is angry and accusing. There is an assertion of indirect pressure, but no factual basis is given for it. Mr Muscolino had assisted Ms Patel in a past property development resulting in her feeling obliged to him. The material which ISG did have showed that Ms Patel and Mr Muscolino had a past business relationship and that she trusted him. Also that it was he who introduced her to Mr Christian De Lloyd. This was a basis for a submission that Ms Patel did not entirely rely upon the information memorandum, and that submission was made by ISG. I cannot think that further reference to the words of the email of 21 November 2018 would have so borne on the Decision Maker that there was a realistic possibility that that decision would have been different. Therefore I find that the non-disclosure of this document was not material in the relevant sense.
Document 6. This is a file note of a telephone call between Ms Patel and Mr Moura. The file note is dated 2 April 2019 (pp 22-23, ex 2). ISG relies upon the following passage in this file note:
“[Ms Patel] explained that she was approached by Christian De Lloyd and Sebastian Muscolino in November 2016, they came to her office. This is mentioned in her letter dated 24 May 2018. They had mentioned an investment opportunity in property that they wanted to present to her Anita knew Sebastian (and trusted him) from previous business meetings. That is how she became aware of the investment.”
Again, the relevance of this document is said to be whether, and to what extent, Ms Patel relied upon the information memorandum, rather than her prior relationship with Mr Muscolino.
In my view, there is no information in this document which is not in the documents ISG had (discussed in relation to document 2 above). I cannot see that the non‑disclosure of this document is material in the relevant sense.
Document 7. This is an email exchange between Mr Moura and Ms Patel dated 10 April 2019 (pp 1521-1522, ex 2). In the email Mr Moura explains that he was “trying to determine the extent of the involvement of Christian De Lloyd and his advice business … in this matter”. He asks Ms Patel some questions. One was, “Please clarify whether Mr De Lloyd was acting in any way as a financial advisor. Can you please also provide any evidence you may have about the capacity in which Mr De Lloyd was acting in his dealings with you and ANLP Pty Ltd.” To this Ms Patel responds:
“I did not know Mr De Lloyd at all and was introduced to him by one Sebastian Muscolino (SM) who I recently found out was known to all parties. SM introduced Mr De Lloyd to me specifically to take a look at the development in Bulimba. At no time whatsoever did Mr De Lloyd act as my financial advisor. SM was known to me and was someone I trusted as he was the quantity surveyor for Westpac Bank when I was constructing a block of 8 apartments in Annerley. SM knew Mr De Lloyd and introduced Mr De Lloyd to me and they provided the IM to me which is the document I relied upon when I acted for the self-managed super fund and made the decision to invest. …” (my underlining).
Insofar as ISG relies upon this document as containing the information that Christian De Lloyd was not Ms Patel’s financial planner, that information is made clear in the documents discussed in relation to document 2; in Ms Patel’s statement to AFCA (p 1254, ex 2), and an email from AFCA to ISG (p 1609, ex 2). ISG had all these documents.
This document contained no more material information than that which ISG already had. It is true that the information in the underlined part was not specifically in the knowledge of ISG unless they had this document. However, those words simply explain the reason why Ms Patel trusted Mr Muscolino. The material fact was that she did trust him, and ISG had more than one document which showed that – see the documents I consider in relation to document 2 above. I do not think that the non‑disclosure of this document was material in the relevant sense.
Documents 2, 6 and 7. ISG made a slightly different submission, along the lines that it was material for it to have every document in which it was asserted that Ms Patel trusted Mr Muscolino so that it could make reference in its submissions to her repeated assertions of trust. This question must be one of degree. In this case I think that the material ISG had made the non-disclosure of these three documents non‑material in the relevant sense.
YV & KY Apte Pty Ltd
Document 14. This is an email from Dr Apte to Mr Moura dated 17 August 2019. It contains both questions from Mr Moura and Dr Apte’s answers. Dr Apte says he did not receive any financial product advice from Mr De Lloyd; that he was not aware of any obligation on Mr De Lloyd to disclose material information to him other than the information presented in the information memorandum, and that he did not believe Mr De Lloyd’s conduct caused him any loss.
ISG says that this document goes to whether or not there should have been apportionment of liability between it and Mr De Lloyd (or DLPW). I find it very difficult to understand why ISG complains about the non‑provision of this document. It gave no information upon which ISG could rely to say that some of YV & KY Apte Pty Ltd’s loss was caused by reliance upon Mr De Lloyd. It is a document which had the potential to bear negatively on ISG’s case to AFCA that Mr De Lloyd and DLPW were relied upon by the complainant rather than, or as well as, ISG’s information memorandum. That is, it was one of the second category of cases discussed in MZAPC, see [65] of that case. In a document categorised this way, it is necessary that ISG show that the non‑disclosure was material because the decision‑maker took the potentially adverse information into account when making its decision. Here, ISG fails to discharge that burden. Notwithstanding what Dr Apte said in this document, the AFCA Decision Maker decided that Mr De Lloyd on behalf of DLPW did give financial advice and that the advice was relied upon by Dr Apte such that it caused half the complainant’s financial loss, see below.
Furthermore, ISG had a letter from solicitors acting for YV & KY Apte Pty Ltd to AFCA dated 1 May 2019 (p 3035, ex 2). That letter said that Mr De Lloyd presented the Omicron investment offer to Dr Apte. In the letter Dr Apte is quoted as saying:
“On 20 August 2016 I went through the whole document with Christian [De Lloyd] at my home. I read the contents in their entirety along with my wife Ketaki and there was no mention any loan with JSKS. We relied on the document provided to make our investment decision. If we were aware of the loan then we would not have proceeded with our investment.”
In the letter Dr Apte is also quoted as saying, “There was no financial advice provided as there was no statement of advice issued”. And further, Dr Apte’s lawyers say to AFCA, “In conclusion, ISG was responsible for the contents of the information memorandum. Based on the evidence we have received it can be concluded ISG failed to undertake the appropriate due diligence pertaining to the [JSKS] loan, which was not disclosed in the information memorandum which my clients relied upon.”
I cannot see that AFCA’s failure to disclose document 14 to ISG was material in the relevant sense.
A & P Jha Pty Ltd
Documents 16, 17 and 18. These three documents are related. Document 16 is the note which Mr Moura made of a telephone conversation he had with Dr Jha. In the note Mr Moura explains that Dr Jha said he moved to Brisbane in 2012 and met Christian De Lloyd who became his accountant. Christian De Lloyd helped Dr Jha and other doctors set up their self-managed superannuation funds. The note continues:
“[Dr Jha] developed a trusted relationship with [Christian De Lloyd]. At one point [Christian De Lloyd] noticed that Dr Jha had the maximum amount in his SMSF (⁓ $300,000) and said that he should invest that money. [Christian De Lloyd] said he had a special project for his special clients. He handed Dr Jha a brochure of documents, and they discussed the booming property market in Brisbane. [Christian De Lloyd] opened realestate.com.au and they looked at luxury apartments, explaining that the project would be to build luxury riverside apartments.
Dr Jha remembers asking if it would make them money, and [Christian De Lloyd] said that the property market was good.
Dr Jha had previously built two townhouses in Brisbane to sell, and [Christian De Lloyd] said that based on this he was an experienced investor that knows property developments. Dr Jha also knew that his house price had gone up, and believed that the property market in Brisbane was a good opportunity.
Dr Jha said that he trusted [Christian De Lloyd’s] recommendation, didn’t have time to read the paperwork, but trusted the investment and agreed to invest the same day it was presented.
[Christian De Lloyd] had access to the SMSF funds, and Dr Jha instructed him to make the transfer.
Dr Jha said that [Christian De Lloyd] explained his involvement in the project, but he didn’t know and wasn’t told about Gary Seaton’s involvement or the loan.
…” (my underlining) (p 4125, ex 2).
After this telephone conversation Mr Moura sent Dr Jha an email dated 12 September 2019, document 17. In the email he restated the contents of document 16 and asked Dr Jha to “confirm they are accurate, or let me know of any corrections (or anything else you would like to add)” (p 4408, ex 2).
Document 18 is Dr Jha’s reply dated 17 September 2019. In this, Dr Jha typed in amongst Mr Moura’s text so that one of Mr Moura’s paragraphs read as follows (with Dr Jha’s comment in italics):
“You said that you trusted [Christian De Lloyd’s] recommendation, and you didn’t have time to read the brochure and the paperwork for the investments, but agreed, based on your trust of the property market and of [Christian De Lloyd], to invest. I considered this as an introduction. It was up to me to do my own research and I was satisfied that this project was worth investing as per the brochure and the information available to me at that time.” (p 4407, ex 2).
AFCA argued that having regard to r A.10.3, above, document 16 was a document prepared by AFCA staff and therefore was not required to be provided to ISG. Rule 10.3 gives AFCA a discretion as to whether or not to exchange documents which its staff prepare – “need not”. In my view, a note such as this which is the complainant’s record of events should be disclosed. The file note itself records that Dr Jha was too busy to email Mr Moura, so Mr Moura rang to obtain his version of events and made a note. In substance, the note was a statement from Dr Jha and ought to have been disclosed.
In any event, the emails which are documents 17 and 18 were not within the terms of r A.10.3.
It was conceded by AFCA that the matters in the three documents bore upon whether Dr Jha relied upon the information memorandum, and very clearly they did. They also went to the question of whether reliance on the information memorandum caused or contributed to the decision to buy the shares, having regard to the fact that Dr Jha clearly relied upon his accountant, Christian De Lloyd, to a great extent. However, AFCA submitted that it was not material to disclose the documents because: (a) the plain statement by Dr Jha that he did not rely on the information memorandum was moderated by the change he made when responding to Mr Moura’s email, and (b) the Decision Maker “specifically recited the gist of this part of Dr Jha’s evidence in his decision and specifically allowed for Dr Jha’s admissions that he relied on the oral information provided rather than the documentation”.
As to the first of these points, the sentence added by Dr Jha in his email to Mr Moura creates ambiguity. There is no clear statement that he read the information memorandum or relied upon it.
As to the second point, I do not think the fact that the Decision Maker referred to parts of this contentious information in his reasons for decision cures the problem. In his reasons for decision the Decision Maker summarises what he takes to be the complainant’s position as to reliance, apparently from document 18, as follows:
“(I) trusted (Mr D’s) recommendation and (I) didn’t have time to read the brochure and the paperwork for the investments, but agreed, based on (my) trust of the property market and (Mr D) to invest. I considered this as an introduction. It was up to me to do my own research and I was satisfied that this project was worth investing as per the brochure and the information available to me at the time.” (p 4072, ex 1) (my italics, consistent with my reproduction of part of document 18 above).
This simply reproduces the ambiguity inherent in document 18. It does not resolve it, and does not resolve it in favour of ISG, which it would need to do for AFCA’s argument to succeed.
Then at a part of the reasons for decision concerned with the complainant contributing to his own losses, the Decision Maker said:
“The complainant accepted that his due diligence in the investment was poor and he relied on Mr [De Lloyd] and the verbal information provided, rather than the documentation. As a result, the panel is satisfied there was less reliance on the information memorandum than may otherwise have been the case.
The complainant’s lack of care and attention contributed to his losses. The panel is satisfied that the contribution should reduce the liability of [ISG] by half due to the complainant’s limited regard for the information memorandum.” (p 4087, ex 1) (my underlining).
The poor logic of this decision is the subject of another complaint by ISG, see below. However, focussing only on the failure by AFCA to give documents 16, 17 and 18 to ISG, I cannot see that there is anything in this decision which means that that failure by AFCA to disclose these documents to ISG was not material. Very plainly, the Decision Maker did not accept the version of Dr Jha’s evidence most favourable to ISG, and ISG was deprived of the opportunity to argue that should have occurred. It was also deprived of the opportunity to make submissions as to the need to clarify Dr Jha’s evidence, or submissions that there was no safe basis to find that Dr Jha relied upon the information memorandum at all.
I find that ISG was denied procedural fairness because AFCA did not disclose the documents. With the benefit of submissions as to what to make of documents 16, 17 and 18, the Decision Maker could have reached a different outcome, including because he may have been persuaded to seek clarification from Dr Jha before determining the matter. My concerns about lack of procedural fairness are amplified because the logic of the reasons for determination as to reliance, causation, and apportionment of liability for A & P Jha Pty Ltd’s loss is poor, see below. In my view this non‑disclosure is a sufficient infraction of AFCA’s contractual requirement to provide procedural fairness that the determination is invalidated.
W & S Law Pty Ltd
Document 24. This is a file note made by Mr Moura after a telephone conversation with Mr Law on 22 July 2019. Mr Law had rung because he had received an email from AFCA informing him that DLPW had been joined as a respondent to the complaint. Mr Moura records:
“Warren is concerned that he has other investments with [Christian De Lloyd], who still is his financial planner. He has an SMSF and direct shares. He said he is worried that if [Christian De Lloyd] is a bad apple, that his investments are at risk. He says that he has been a client of [Christian De Lloyd] for a long time, and that he has never had issues with him.” (p 5056, ex 2).
During the course of the hearing counsel for AFCA conceded that this information was relevant, but submitted that ISG plainly knew that Mr De Lloyd was Mr Law’s financial planner. This is borne out by the documents which were disclosed by AFCA to ISG – pp 4856, 4870, 4893, 4945, 6416 and 7894, ex 2. There are also statements in these documents that Mr De Lloyd introduced Mr Law to the investment, and that they “went through the paperwork together at Mr De Lloyd’s office”. In the last of the documents just referenced, Mr Law told Mr Moura:
“I cannot remember exactly when Christian first mentioned the Bulimba project. I meet Christian at his office and he went through the booklet with me. To me it sounded like a good investment. As we had done at our previous one at Carr Street. Christian said he would not be in control like Carr Street. We had made some money on Carr Street that is why I invested. … To me Christian just read out information to help me understand about the investment. I have known Christian for some time now and I don’t think he would do anything not right. …”
I do not think that the information in document 24 is so different from the information with which ISG was provided that its non-provision was a material breach of the AFCA rules.
Document 26. This is an email exchange between Mr Law and Mr Moura. It is at p 5321 of exhibit 2. That page contains those emails and it is only the first of the two emails on the top of the page (13 September 2019 and 16 September 2019) which ISG did not get. The 13 September 2019 email asks Mr Law some questions, and Mr Law’s reply to the questions is contained in the 16 September 2019 email.
Mr Law says that Mr De Lloyd showed him a brochure about the Bulimba investment some time before he read out the information to him. Mr Law probably did not read the information memorandum himself but “browsed through it with Christian [De Lloyd]”. When asked whether he made the decision to invest based on what Mr De Lloyd told him or what he read himself, Mr Law said, “A little bit of everything I guess. We made money out of Carr Street so I thought it would be the same or similar.”
I do think that the email exchange was a relevant document. However, I do not think its non-disclosure was material because it adds no new information to that which ISG had in the documents discussed above in relation to document 24.
J S Silva Pty Ltd
Document 29. This is an email from solicitors acting for Mr Silva to AFCA on 13 May 2019. The email attaches a number of documents and an explanation from Mr De Lloyd as to his views about why it was that JSKS registered a second mortgage. In very general terms, Mr De Lloyd blames Mr Godfrey (and thus ISG and Omicron) for what he sees as the necessity to grant JSKS a second mortgage, and generally for the demise of the joint venture.

Counsel for ISG argued that the document ought to have been provided to ISG so that ISG could respond to it in order to make its case that it had limited knowledge of the JSKS loan agreement before the information memorandum was prepared. I accept that it was relevant for ISG to put a case to AFCA as to what it knew of the JSKS loan, and its terms, before the information memorandum was prepared. However, it seems to me that this document did not bear on that subject. The closest it got was that, years after the information memorandum was prepared, a meeting between Mr Godfrey, Mr De Lloyd and Mr Seaton discussed “the ability to repay [the] JSKS loan” and “disclosure of the risks that had not been disclosed to investors” (p 7759, ex 2). In my view, the document was not relevant to the issues which AFCA had to decide as to ISG’s knowledge of the JSKS loan and its terms before the information memorandum was prepared.
Counsel for ISG also argued that the document went to the cause of the collapse of the joint venture, and that it ought to have had the opportunity to refute Mr De Lloyd’s blaming Mr Godfrey and Omicron for that. The complainant’s case made to AFCA was that the ISG information memorandum was misleading because it did not disclose the JSKS loan. The claim was that this caused the investment, and the investment failed. No part of the case was concerned with whether ISG, Omicron, or 1 McConnell was to blame for the failure of the project. I cannot see that the document ought to have been disclosed.
Document 33. This was Mr Moura’s file note of a telephone conversation with Mr De Lloyd on 4 September 2019 (p 8263, ex 2). In the telephone conversation Mr De Lloyd blamed Benjamin Godfrey for the demise of the Bulimba project. The note continues:
“The solicitor for 1 McConnell was aware of the [JSKS] loan. [Benjamin Godfrey] was aware of the loan, but never asked [Mr De Lloyd] for loan documents or details about it.
[Mr De Lloyd] mentioned the loan to investors, but never in detail (he didn’t specify if the loan was to him or to 1 McConnell), and that was because he thought the loan was not material. He says that he/[Benjamin Godfrey] expected to raise money straight away and pay back the loan to JSKS. [Mr De Lloyd] presumed that it would not be an issue to raise money.”
The case which ISG took to AFCA was that Mr Godfrey was aware of the loan before the information memorandum was issued, but had never been provided with a copy of the loan documentation. There was no evidence to contradict this, and the Decision Maker essentially accepted it but with one additional finding: that Mr Godfrey knew, prior to the issue of the information memorandum, that the loan “was subject to repayment obligations” as soon as practicable. This additional finding was on the basis of information contained in emails which ISG was given during the AFCA process (pp 8217-8218, ex 1).
This additional finding is less favourable to ISG than the record of what Mr De Lloyd told Mr Moura on 4 September 2019. Mr De Lloyd told Mr Moura that Mr Godfrey knew that the joint venture expected to pay back the loan to JSKS straight away, not that he knew it was obliged to do so. The difference is in my view irrelevant, given that: (a) the evidence which all parties did have included an email of 29 July 2016 which recorded a promise to Mr Seaton to draw down funding from the bank “as soon as practical to repay your capital and interest in the coming weeks” (p 8218, ex 2), and (b) the fact that the Decision Maker found that even if Mr Godfrey only knew about the JSKS loan in general terms, there was no satisfactory explanation as to: (i) why it was not mentioned at all in the information memorandum, and (ii) why he did not further investigate the terms of this funding so as to provide proper details in the information memorandum allowing investors to make an informed decision about whether or not to invest (pp 8218-8219, ex 1).
I find that the non-disclosure of this document was not material in the relevant sense.
Document 35. This is an email from Mr De Lloyd to Mr Moura dated 3 October 2019. The relevant part of it is, “[Neither Godfrey nor] Natasha requested for a copy of the loan agreement which they were fully aware of its existence” (p 8535, ex 2). In my opinion, this argument on behalf of ISG can be disposed of on the same grounds as the argument in relation to document 33.
5 & 6: Failure to Have Regard to Legal Principles and Unreasonableness
These are ISG’s complaints numbered five and six. Complaint five was that the Decision Maker in each of the AFCA complaints failed to have regard to legal principles in making the decisions, and that this was in breach of the AFCA rules. Complaint six was that the same failure was a breach of an implied term not to act unreasonably.
There are a series of decisions as to when a court will interfere with the decision of a body which has contracted to provide a final decision to resolve a civil dispute.[9] There are limited grounds of review, but if the determination has not been carried out in accordance with the agreement, a Court will interfere – Mickovski [35] and [38]‑[41]. It is this line of authority which ISG relies upon in saying that the Decision Maker, Mr Crowhurst, failed to comply with the AFCA rules. Rule A.14.2(a) provides that in determining a complaint the Decision Maker, “must do what the AFCA Decision Maker considers is fair in all the circumstances having regard to: (a) legal principles …”.
[9]Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483; [2015] WASC 321; Mickovski v Financial Ombudsman Service Ltd (2012) 36 VR 456; Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 288 FLR 374 and Investors Exchange Ltd v Australian Financial Complaints Authority Ltd & Anor [2020] QSC 74.
AFCA is obliged to have regard to legal principles, but in a setting where it is not a court, and it is to provide a quick, cheap and efficient method of dealing with disputes. In Patersons Securities Mitchell J had noted the obligation on the Decision Maker in that case to make a decision which was fair and said:
“In forming an opinion about what is fair, [the Decision Maker] is to have regard to legal principles. However, it is not required to apply those principles. Paragraph 8.2 also provides for [the Decision Maker] to have regard to a variety of other matters. In deciding upon the fair and appropriate remedy, [the Decision Maker] is not limited to making decisions which could be made at law or equity.
It follows that the opinion which [the Decision Maker] is to form under par 8.2 is not a legal opinion about the pre-existing legal rights, duties and liabilities of the parties to the Dispute. While [the Decision Maker] is to have regard to the existing contractual rights, its task is not confined to determining the legal liabilities of the parties under the relevant contract. Rather, [the Decision Maker] is to act on the basis of its opinion of what is fair in all the circumstances. That is a very broadly expressed contractual power.
…
That [the Decision Maker] is to do what in its opinion is fair means that its decisions will rarely be opened to successful curial challenge on their merits. The standard applied in determining what is fair is not exclusively legal. As the decision in Mickovski illustrated by reference to the former terms of reference, even errors of construction of the terms of the contract going to the ‘jurisdiction’ of [the Decision Maker] need not be reviewable.” – [90]-[94].
In Investors Exchange Limited, Applegarth J started with the proposition that the essence of the tripartite contract was that, “the parties would accept the determination of the dispute according to AFCA’s ‘opinion of what is fair in all the circumstances’, having regard to legal principles, applicable industry codes or guidance as to practice, good industry practice, and previous relevant decisions ...” – [14].
He also noted that AFCA was required to specify the remedy that it considers “fair and appropriate”. He concluded as follows:
“[20] Both the nature of the required determination, being based on AFCA’s opinion as to what is fair in all the circumstances, and the parties’ agreement that the determination is ‘final’, severely constrain the scope for judicial intervention. Various formulations appear in the cases but they have a consistent theme.
[21]An error in a process of reasoning which results in a wrong conclusion, if made ‘within the ambit of decision-making power conferred’ on AFCA is not reviewable.”
Further, Cromwell Property Securities, [66], cited in Patersons and in Investors Exchange Ltd, is authority for the proposition that there is an implied contractual term requiring, in this case AFCA, to exercise its powers to resolve the dispute before it in a way which is unreasonable in the Wednesbury sense. That is, in a way that no reasonable Decision Maker could do. In Minister for Immigration and Citizenship v Li[10] the High Court said of this Wednesbury type of unreasonableness, “Unreasonableness is a conclusion which may be applied to a decision which lacks an evident and intelligible justification”. That is a high standard but, “it is a standard that reflects the need for judicial restraint to avoid subverting the rationale behind the provision of such services”.[11]
[10](2013) 249 CLR 332, [76].
[11]Cromwell, [256], cited in Patersons, [81].
All the complaints made to AFCA against ISG allege that ISG engaged in misleading or deceptive conduct in failing to disclose the existence of the JSKS loan, and that had the loan been disclosed they would not have invested and thus not lost the value of their investment.
It seems that in or about July 2019 AFCA decided that DLPW may also have contributed to the loss suffered by the complainants and that in consequence AFCA itself began new complaints against DLPW which it joined to, and determined with, the original complaints against ISG.[12] AFCA took this action in relation to all the complaints except that made by the second defendant. The difference appears to be that Mr Christian De Lloyd was the accountant and/or financial planner for the fourth, fifth, sixth and seventh defendants, but not the second defendant. This action seems to have been referable to r A.6.2 which provides that, “… AFCA may at any time decide that it is appropriate to join another Financial Firm as a party to the complaint. A joined Financial Firm has all the rights and duties under these rules as if they were the original Financial Firm under the complaint.”
[12]Pp 3340, 4365, 4878 and 8428, ex 2.
Each of the AFCA determinations found that ISG had engaged in misleading and deceptive conduct contrary to s 1041H of the Corporations Act 2001 and that ISG (and, where joined, DLPW) each ought to pay a proportion of the monies invested to the complainants.
ISG contends that in three respects all the AFCA decisions fail to have regard to legal principles because they impose liability on ISG in circumstances where: (a) the information memorandum was not misleading; (b) the complainants did not rely on the information memorandum, and (c) reliance on the information memorandum did not cause their loss. I will examine the challenged parts of the decisions in turn, it is convenient to deal with reliance and causation together.
(a) Misleading Conduct
Section 1041H(1) of the Corporations Act provides that:
“A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service that is misleading or deceptive or is likely to mislead or deceive.”
It was accepted by ISG that an omission to disclose, or silence, could be conduct which was misleading or deceptive within that section. It accepted that the relevant test as to whether or not silence or omission to disclose was misleading or deceptive came from Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd[13] and was whether “the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed …”. It accepted that the test of reasonable expectation was to be applied having regard to an objective standard.
[13](2010) 241 CLR 357, 369, [18].
It was submitted on the part of ISG that there could not have been a reasonable expectation that the JSKS loan would have been disclosed in the information memorandum because: (a) at the time the information memorandum was prepared the JSKS loan agreement did not give JSKS any security for its lending; (b) a deed of cross charge between Omicron and 1 McConnell meant that, at that time, the complainants had a sort of security, whereas JSKS had none, and (c) the information memorandum did disclose that a debt facility would be obtained up to a limit of $10,916,000, which facility was to be secured. In those circumstances the JSKS loan facility was “relatively insignificant” at around 10% of the total debt of the project.
A further written submission was made that “the JSKS loan was accounted in the costs of the purchase of the land. As such, the assessment of the feasibility of the Development was not impacted.” Counsel for ISG was not able to explain what that submission meant in terms of the facts of the matter or the contents of the information memorandum.
ANLP Pty Ltd
In the complaint made by ANLP Pty Ltd, the Decision Maker agreed with and adopted the recommendation made by Mr Moura. Mr Moura referred to the terms of s 1041H of the Corporations Act and directed himself that it was necessary for the complainant to show that: ISG had made a representation that was untrue; the complainant had acted in reliance on that and, in doing so, suffered a loss. He directed himself that misleading conduct could occur by silence, “in circumstances where such silence was likely to be misleading or deceptive”.
Mr Moura noted that the JSKS loan was in an amount of $1.2 million and that the lender was the father‑in‑law of the director of 1 McConnell. Mr Moura noted that the loan was incurred before the information memorandum was issued. He noted that it was a short‑term, high‑interest loan which was unsecured and that it was intended to be paid back in a few weeks from equity raised from investors in Omicron. Mr Moura noted that the information memorandum said that the joint venture was going to seek finance from a bank and possibly a mezzanine funder. Mr Moura concluded that:
“By being silent on the matter of the existence of the loan, and [on] its nature, I find it reasonable to conclude that a potential investor might be misled to conclude reading the IM that:
●no mezzanine funding or any other loan (other than a bank mortgage) was in place
●that if other funding was required, it would be by way of secured long-term loan.”
In all these circumstances, Mr Moura determined that the existence of the loan was material information and that by omitting it from the information memorandum ISG failed to “provide critical information that an investor reasonably should need to know before deciding to invest”.
Having adopted that, the Decision Maker recorded the admission by ISG that it knew of the existence of the loan and found that ISG “should have disclosed what it knew or found out more information to enable more complete disclosure”. She then concluded:
“[ISG’s] submissions dispute the finding in the recommendation that the Loan was a significant risk to the investment. The Loan was a related party loan for $1.2 million. Even if I accept that it was not a significant risk, it was nevertheless a risk that ought to have been disclosed.
[ISG] also says the funds made available by the Loan were not considered to be a loan for the purpose of the IM. I do not accept that submission. It was a loan for $1.2 million, it was relevant and should have been disclosed.”
I cannot see that there was any breach of the rule obliging the Decision Maker to have regard to legal principles. Nor can I see that there was anything approaching Wednesbury unreasonableness in the process by which she arrived at her conclusion, or the conclusion itself.
Apte, Jha, Law and Silva Superannuation Funds
Mr Crowhurst was the Decision Maker in relation to each of these complaints and the reasons he gave in each of the determinations is similar. He made reference to what was disclosed in the information memorandum regarding borrowing: ie., that 1 McConnell intended to seek finance from a bank which was to be secured and that it “may seek finance from a mezzanine funder (and provide second ranking security, including a mortgage to that financier)”. The information memorandum disclosed that the finance from the bank was likely to be in an amount of $11 million. The Decision Maker found that ISG knew that these statements were incorrect in the sense that the JSKS loan had already been provided and that that loan was from a company controlled by Mr De Lloyd’s father-in-law. He says:
“Given the relationship between the parties to the loan and the amount involved, [Mr Godfrey] should have understood there was a conflict of interest for [Mr De Lloyd] in the event the project ran into financial difficulty, as it would be a natural inclination to try to protect his father-in-law’s money. …”
The Decision Maker found that Mr Godfrey knew the JSKS loan was “subject to repayment obligations ‘as soon as practical’ along with interest payment prior to the information memorandum being issued”.
The Decision Maker concluded that:
“Mr [Godfrey] had adequate knowledge of the situation to consider whether further investigations about this funding were required and should have concluded that more information was needed for the investors to be able to make an informed decision about whether or not to invest.
… The failure to make those further enquiries or to disclose what was known to Mr [Godfrey], particularly given the responsibilities of [ISG] to verify compliance with Australian financial services obligations, was a significant failure of governance and [ISG’s] obligations to investors.
As a result of the above, the panel is satisfied that it is fair in all the circumstances to find that [ISG] made, by omission, misleading statements in the information memorandum regarding the initial project financing and, in particular, the interests of [JSKS].”[14]
[14]I have taken these extracts from the decision in relation to Dr Apte’s superannuation fund. However, the same findings appear in very similar or identical terms in the reasons for determination of the other complaints.
Again, I cannot see any breach of the rule obliging the Decision Maker to have regard to legal principle, nor anything approaching Wednesbury unreasonableness.
(b) and (c) Reliance and Causation
ANLP Pty Ltd
As noted above, the Decision Maker adopted Mr Moura’s reasoning. Mr Moura found that Ms Patel, on behalf of her superannuation fund, was “experienced in investing … and performed due diligence by questioning the profitability of the project and account the financial information provided in the IM” [sic]. The evidence provided by Ms Patel to AFCA supported that factual finding. Mr Moura continued:
“By omitting material that would have impacted the projections and the facts of the investment that the complainant relied on, I find that they did in fact rely on misleading representations made in the IM. In doing so the complainant acted to their detriment by deciding to invest and ultimately losing all their investment.”
Mr Moura also found that ANLP Pty Ltd would “not have invested if [Ms Patel] knew that there were loans to a related party”.
The Decision Maker said:
“The director of the complainant states that in her assessment of the Offer the existence of a related party loan of $1.2 million was information material to her decision to invest. I also consider that it would have been material information which ought to have been disclosed and was relevant information that any investor would require in deciding whether to invest in the Offer.
…
… In this complaint I accept that the director of the complainant was an experienced investor and would not have invested the SMSF’s funds in the Offer if the Loan was disclosed in the IM. The complainant should therefore be returned to the position it would have been in, if the misleading conduct had not occurred.”

I cannot see that the Decision Maker failed to have regard to legal principle in reaching this finding. Nor can I see that her process of reasoning or her conclusion was unreasonable in the relevant sense. The Decision Maker had material showing that Ms Patel also relied on Mr Muscolino and, ISG argues, Mr De Lloyd. That is no bar to a finding that it was ISG’s conduct which was a real, substantial cause of the loss allowing recovery of the full amount of the loss against ISG – McCarthy v McIntyre.[15]
[15][1999] FCA 784, [49].
Apte, Jha, Law and Silva Superannuation Funds
Mr Crowhurst, the Decision Maker in these matters, understood that the complainants had to show they relied on the information memorandum and that this caused them loss. In each case he says at an early part of the determination, “The complainant says that had he known about the loan, he would not have invested. He seeks compensation for his losses.” I read this as the Decision Maker defining the issues, not as making a finding.
ISG’s complaint is more as to whether or not there were facts which could support his finding of reliance in each case.
In each case the letter sent by TGA Lawyers as part of the complaint contained the statement:
“We have been instructed that my client relied on the information detailed in the IM to make an investment decision. If the loan from JSKS had been disclosed to my client, my client would not have invested in Omicron Investment Holdings Pty Ltd … via the IM … ”.
Common to all these matters is a clause in the form of application for shares in Omicron which stated that:
“By submitting this application form:
…
(b)(reliance) I/we acknowledge that I/we have only relied on the Information Memorandum in making this investment decision together with my/our own independent enquiries and professional advice.”
It is a boilerplate acknowledgement clause, although oddly drafted with, to my mind, an obscure purpose.
In each of these decisions there is a heading, “The complainant relied upon the representations in the information memorandum”. Under this heading the Decision Maker extracted the boilerplate clause from the application form and followed it with a finding, “On this basis, the panel is satisfied that the complainant relied, in part, on the representations made in the information memorandum”. This was, in each case, the only evidence referred to at that part of the reasons for decision.
ISG criticises the Decision Maker’s reasoning so far as it is encapsulated in that part of the determination. First, the fact that the complainant signed an application for shares which contained this standard form clause is hardly compelling evidence of what is recited in the clause. Secondly, in a case which deals with an omission from the information memorandum, signing an application containing this standard form clause is no evidence that, had the information memorandum contained particulars of the JSKS loan and its terms, the complainants would have acted differently. Thirdly, the standard form clause acknowledges reliance both on the information memorandum and “independent enquiries and professional advice”. These later enquiries and advice are nowhere defined and there is no indication as to what weighting any of these things had in the applicant’s decision to invest.
In each complaint there was in fact more material before the Decision Maker, and considered by him, than he referenced in that part of his reasons which expressly deal with the question of reliance. I will deal with each of the complaints to AFCA in turn.
YV & KY Apte Pty Ltd
In the case of the complaint by Dr Apte’s superannuation fund, the reasons for decision include the following paragraph from Dr Apte’s statement about DLPW introducing and facilitating the investment:
“On 20 August 2016 I went through the whole document [information memorandum] with [Mr De Lloyd] at my home. I read the contents in their entirety along with my wife … and there was no mention of the [JSKS loan].”
On the basis of this statement from Dr Apte, the Decision Maker concludes that DLPW provided a financial service to the complainant.
The Decision Maker then discusses why the JSKS loans were material to be disclosed and concludes that as a matter of objective fact they were material to a decision to invest because of their size, because they were short-term loans and because of the personal relationship between Mr De Lloyd and his father-in-law, which gave rise to a risk of the JSKS “debt position being treated more favourably than that of other investors”. The Decision Maker then records, “The complainant submits that had he known of the [JSKS loan] prior to investing, he would not have purchased the shares in [Omicron]. The panel is satisfied in the circumstances that this is the case and that he has suffered the total loss of his SMSF’s capital investment.” I read the phrase “in the circumstances” as a reference back to the finding that, objectively, the JSKS loans were material to a decision to invest. That seems a suitable enough basis for decision having regard to the law to the effect that a question as to whether a person relied upon a misrepresentation, and acted on the basis of it, is to be “objectively determined by examining the alleged conduct in light of the relevant surrounding facts and circumstances” whenever that is possible.[16]
[16]Lord Buddha Pty Ltd (in liq) v Harpur (2013) 41 VR 159, [191].
The Decision Maker discusses the basis for liability on the part of DLPW and then says:
“Compensation for loss does not automatically follow a finding that the advice firm has breached its obligations. The onus is on complainants to prove they suffered a loss and that a breach by the financial firm caused the loss. This will generally be established by asking whether they would have acted differently and avoided or reduced their loss but for the breach.
… The panel is satisfied, on balance, had:
●[ISG] ensured the accuracy of the information memorandum, provided sufficient information for the true risks of the investment to be understood, and/or
●[DLPW] advised the complainant of the material information in their possession about financial and risk factors inherent in the investment,
the complainant would not have invested via his SMSF on 21 September 2016.
The panel is satisfied, as a starting point, it is fair in all the circumstances for each Financial Firm to be equally liable to the complainant.”
The decision was that ISG refund half of the investment amount with interest and that DLPW refund the other half with interest.
It seems to me that in the case of YV & KY Apte Pty Ltd, there was sufficient factual material before the Decision Maker to support his finding that Dr Apte relied upon the information memorandum, and that the Decision Maker was aware of that and took it into account, although he did not refer specifically to it at that part of the reasons which referred to reliance upon the information memorandum.
Further, it seems to me that the Decision Maker had sufficient regard to legal principles in coming to the conclusion that reliance upon the information memorandum caused (in part) the loss suffered. In this regard, the Decision Maker had the submission in the complainant’s solicitor’s letter; evidence that Dr Apte read through the whole of the information memorandum, and his finding that objectively the omission of the JSKS loan from the information memorandum was something which would affect a reasonable investor in coming to a decision as to whether or not to buy shares in Omicron.
Given that AFCA was not obliged to act in accordance with the rules of evidence, and was obliged to do what it thought fair, I am not persuaded that the Decision Maker came to a conclusion which was unreasonable in the relevant sense.
W & S Law Pty Ltd
At a part of the reasons for decision which discusses the liability of DLPW, the Decision Maker records information obtained from Mr Law:
“I met [Mr De Lloyd] at his office and he went through the booklet with me. To me it sounded like a good investment. As we had done at our previous one at (C Street unregistered property development scheme) [sic]. [Mr De Lloyd] said he would not be in control like (C Street unregistered property development scheme). We had made some money on (C Street unregistered property development scheme) and that is why I invested. … To me [Mr De Lloyd] just read out information to help me understand about the investment. I have known [Mr De Lloyd] for some time now and I don’t think he would do anything not right. …”.
The Decision Maker found that Mr De Lloyd provided unofficial advice to the complainant, and that having been paid for the introduction, DLPW had provided a financial service to the complainant in relation to the investment.
At a later part of the decision the Decision Maker considers factual matters which he concludes meant that the existence and terms of the JSKS loan were material to the investment and records:
“The complainant submits that had he known of the [JSKS loan] prior to investing, he would not have purchased the shares in [Omicron]. The panel is satisfied in the circumstances that this is the case and that he has suffered the total loss of his SMSF’s investment.”
Towards the end of the decision the Decision Maker records:
“The panel is satisfied, on balance, had:
●[ISG] ensured the accuracy of the information memorandum, provided sufficient information for the true risks of the investment to be understood and verified the appropriateness of checks on the wholesale client status of the investor, and/or
●[DLPW] advised the complainant of the material information in their possession about financial and risk factors inherent in the investment and performed appropriate checks on the wholesale client status of the investor,
the complainant would not have invested via his SMSF on 17 October 2016.
The panel is satisfied that it is fair in all the circumstances for each Financial Firm to be equally liable to the complainant for the total capital loss of $100,000.”
For the same reasons as are expressed at [144], [145] and [146] above, I reject both the applicant’s submissions in relation to this complaint.
J S Silva Pty Ltd
These reasons include some evidence from the complainant early in the decision about reliance on DLPW:
“The complainant was made aware of the investment opportunity by Mr [De Lloyd], an authorised representative of [DLPW]. The complainant knew Mr [Dr Lloyd] as he was an existing client of [DLPW] … The panel is satisfied [DLPW], through Mr [De Lloyd] and its advisors, both introduced and actively sought the SMSF’s investment in the scheme. … The panel is also satisfied it is reasonable in these circumstances, Mr [De Lloyd] could reasonably be regarded as nevertheless intending to influence the complainant in making a decision to invest in the offer by introducing and promoting the offer in which he was a principal actor.”
Unlike the reasons in YV & KY Apte Pty Ltd and W & S Law Pty Ltd, in these reasons, the Decision Maker does not include any factual material which shows reliance by Mr Silva on the information memorandum.
Once again the Decision Maker records that DLPW took a fee for the introduction and concludes that DLPW provided a financial service to the complainant.
The reasons continue, as all of them do, to give the factual basis for the Decision Maker’s conclusion that disclosure of the JSKS loan was objectively material to the investment in Omicron and again in that context says, “The complainant submits that had he known of the [JSKS loan] prior to investing, he would not have purchased the shares in [Omicron]. The panel is satisfied in the circumstances that this is the case and that he has suffered the total loss of his SMSF’s capital investment.”
Then later in the reasons the Decision Maker says:
“The panel is satisfied, on balance, had:
●[ISG] ensured the accuracy of the information memorandum, provided sufficient information for the true risks of the investment to be understood and verified the appropriateness of checks on the wholesale client status of the investor, and/or
●[Mr De Lloyd’s financial services firm] advised the complainant of the material information in their possession about financial and risk factors inherent in the investment and performed appropriate checks on the wholesale client status of the investor,
the complainant would not have invested via his SMSF on 10 October 2016.
The panel is satisfied that it is fair in all the circumstances for each Financial Firm to be equally liable to the complainant for the total capital loss …”
So far as the reasons for decision in the complaint of W & S Law Pty Ltd reveal the Decision Maker’s thinking, there is more substance to the points made by ISG: nowhere in the decision is there any reference to Mr Law having read the information memorandum. Nonetheless, there was information provided to the Decision Maker to that effect. It was contained in a letter written by the solicitors for W & S Law Pty Ltd.[17] The letter contains what appears to be a copy and paste of Mr Law’s instructions to his solicitor, Tony Anamourlis:
“Tony have answers to afca questions.
-     Christian de Lloyd
-     I received the document on 14^th October 2016. went through paperwork together.. there was no mention of any loan with jsks. I relied on the paper work of the document, if the loan had been disclosed in the information memorandum I would not have invested.
-     no statement of advice given. no advice
…”
[17]Exhibit 8, p 4870 ff.
There is authority to the effect that the reasons for decision of a body such as AFCA are not expected to resemble judicial reasons.[18] Making allowance for that and for the principles outlined at [106] ff above, both ISG’s points in relation to this complaint must fail for the same reasons as are expressed at [144], [145] and [146] above.
[18]Cromwell, above, [146].
A & P Jha Pty Ltd
It can be said at the outset that the reasons for decision in Jha are the weakest of all the reasons I must examine. In a part of the reasons which deals with Mr De Lloyd’s involvement, the Decision Maker quotes the ambiguous part of the email from Dr Jha to Mr Moura discussed above:
“[I] trusted [Mr De Lloyd’s] recommendation and [I] didn’t have time to read the brochure and the paperwork for the investments, but agreed, based on [my] trust of the property market and [Mr De Lloyd] to invest. I considered this as an introduction. It was up to me to do my own research and I was satisfied that this project was worth investing as per the brochure and the information available to me at the time.
…
[Mr De Lloyd] explained his involvement in the project, but [I] didn’t know and [I wasn’t] told about [Mr De Lloyd’s father-in-law’s] involvement or the [JSKS] loan.” (I have preserved the italics from [80] above, although they do not appear in the reasons for determination).
Immediately before extracting this part of what is essentially Dr Jha’s statement, the Decision Maker extracted Mr De Lloyd’s statement to AFCA that he only gave an introduction to the Complainant and explained that he was not giving advice and that the Complainant should seek independent advice. The Decision Maker goes on to note that DLPW was paid to introduce investors and then concludes, “For the above reasons, the panel is satisfied [that DLPW] more likely than not provided a financial service to the complainant as his financial advisory firm. It is fair in these circumstances that [DLPW] be held accountable for the conduct of its staff, including Mr [De Lloyd].” The reasons go on to find that Mr De Lloyd “withheld material information”, namely the JSKS loan, and that that amounted to misleading conduct.
Mr De Lloyd’s statement about his role was very similar to Dr Jha’s version of events. The Decision Maker says nothing about this, and does not explain how he comes to reject DLPW’s position when Dr Jha’s statement supports it. In itself that may not be of concern to ISG. However, it does add to the impression of poor reasoning at this part of this decision.
The Decision Maker refers to the boilerplate clause and says:
“The application form noted the complainant entered the investment in reliance on both the information memorandum and on professional advice received. Both firms contributed to the complainant’s loss in equal amounts.”
The Decision Maker discusses the factual matters which in his view mean that the JSKS loan was material to the assessment of risk associated with the purchase of Omicrom shares. He says, “the complainant submits that had he known of the [JSKS] loan prior to investing, he would not have purchased the shares in [Omicron]. The panel is satisfied in the circumstances that this is the case and that he has suffered the total loss of his SMSF’s investment.”
The Decision Maker goes on to discuss causation of loss and comes to the following conclusion:
“The panel is satisfied, on balance, had:
●[ISG] ensured the accuracy of the information memorandum, and/or
●[Mr De Lloyd’s financial firm] advised the complainant of the material information in their possession about financial and risk factors inherent in the investment,
the complainant would not have invested via his SMSF on 11 September 2016.
The panel is satisfied, as a starting point, it is fair in all the circumstances for each Financial Firm to be equally liable to the complainant for the total capital loss of $100,000.”
Soon after this the reasons contain the following passage:
“The complainant contributed to his losses
The complainant accepted that his due diligence in the investment was poor and he relied on [Mr De Lloyd] and the verbal information provided, rather than the documentation. As a result, the panel is satisfied there was less reliance on the information memorandum than may otherwise have been the case.
The complainant’s lack of care and attention contributed to his losses. The panel is satisfied the contribution should reduce the liability of [ISG] by half due to the complainant’s limited regard for the information memorandum.”
The compensation payable to Dr Jha was to be $25,000 from ISG and $50,000 from DLPW.
The Decision Maker had a letter from the solicitor acting for A & P Jha Pty Ltd which he did not refer to in his reasons for decision.[19] That letter contains information in response to an AFCA query about “what date they received and read the information memorandum”. The answer is, “I received the document in August 2018. I went through this document with Christian [De Lloyd], we read the document thoroughly and there was no mention of any loan other than the NAB loan. This was on the 11^th of September 2016 at Christian’s office.”
[19]Exhibit 8, p 7714.
This letter is dated 1 May 2019, some months before the emails which comprise documents 16, 17 and 18 (above). I cannot see that this resolves or in any way lessens the ambiguity present in document 18 which is quoted by the Decision Maker in his reasons.
If this were an appeal from the Decision Maker’s findings on this complaint I would allow the appeal, for it seems to me there was no safe basis on the evidence to conclude that Dr Jha ever read the information memorandum. However, this is not an appeal. It cannot be said that the Decision Maker did not have regard to legal principles. He did, but, in my view, made a mistake in applying them. While it seems that the Decision Maker has made a mistake in relying on the boilerplate clause and, apparently interpreting the ambiguous part of document 18 in favour of A & P Jha Pty Ltd, the parties had agreed that it was the Decision Maker who was to make a final determination of their dispute and in that sense, the mistake was the Decision Maker’s mistake to make – cf Mickovski, above, [48]-[51].
The question becomes whether or not the decision was one “to which no reasonable tribunal could properly come on the evidence”.[20] This is a very demanding test and I am not prepared to say that the decision was so unreasonable as that. There were statements in the two solicitor’s letters; the boilerplate clause, and the italicised part of Dr Jha’s email all giving some indication that Dr Jha did read the information memorandum. Further, the submission on behalf of A & P Jha Pty Ltd was that it would not have bought the shares had the JSKS loan been disclosed. In relation to that, the panel considered the factual matters relating to the JSKS loan and came to a finding that they were material to disclose and that the complainant would not have purchased the shares in Omicron had he known of the JSKS loan.
[20]Investors Exchange, [29].
7: Failure to Exclude the Complaints

This was ISG’s seventh point. It was summarised in ISG’s written submissions as follows: “In respect of each of the determinations, AFCA breached the Implied Term by failing to exercise its discretion to exclude [the] complaint[s].”
ISG contended that there was an implied term that AFCA would not exercise its discretion as to whether or not to exclude a complaint in such a way which resulted in a decision which no reasonable tribunal could properly come to. As a matter of law I think this may be accepted.
The AFCA rules include the following:
“C.2.1AFCA may in its discretion exclude a complaint, if AFCA considers this course of action is appropriate.
AFCA will not exercise its discretion to exclude a complaint lightly. The discretion will only be used in cases where there are compelling reasons for deciding that AFCA should not consider the complaint.
C.2.2Examples where AFCA may consider excluding a complaint include:
(a)If there is a more appropriate place to deal with the complaint, such as a court, tribunal, another dispute resolution scheme, or the Office of the Australian Information Commissioner;
…”
ISG contends that AFCA ought to have refused to hear these complaints because they involved questions of contested evidence which were better resolved in a court on cross-examination. There was no expansion on this in ISG’s written or oral submissions either to particularise the factual matters relied upon, or to say when AFCA should have excluded the matters. So far as ISG was concerned, it seems that the questions which needed to be resolved on contested facts were as to (1) how much ISG knew about the JSKS loan; (2) whether and to what extent there was reliance upon the information memorandum by the complainants, and (3) what the complainants would have done had they known of the JSKS loan before investing. I cannot see that there was any unreasonable decision made having regard to this set of contested facts.
A part of the challenge in Cromwell (above) rested on the same argument advanced by ISG here. The claim in Cromwell was similar – the complainant alleged information provided before an investment was misleading and that there had been reliance on that information in circumstances where, had the true facts been known, no investment would have been made.[21] For this reason (along with others), it was contended by Cromwell that the claim ought to be heard in the courts. The majority in Cromwell rejected this. In relation to the claim that there were evidentiary limitations in the complaint resolution process, the Victorian Court of Appeal found that there was no reason in that case to think that, “… the investigation of an expert tribunal into these issues will not result in a fair and reasonable assessment.” – [122]. Bearing on that decision was the Court’s characterisation of the complaints resolution process as one which “reflects an intention to provide a low cost dispute resolution scheme to consumers as an alternative to litigation” – [17]. And that, “Cromwell consented to the jurisdiction with full knowledge of the constraints of the dispute resolution process in relation to witnesses and production of documents. These constraints in this process must be balanced against the aim of the whole dispute resolution process, namely, that FOS should seek to resolve small claims cheaply, efficiently and using informal procedures” – [123].
[21]Cromwell (above), [120].
A similar point was dealt with in Australian Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Ltd.[22]There, AFCA resolved evidential conflicts without a hearing based upon the information it had gathered. Again, reference was had to the burdens that a formal hearing in a court would have involved, and the fact that the “system of dispute resolution established by the AFCA Rules was designed to avoid” such burdens. The Court found that the decision by AFCA to resolve the complaint itself rather than decline to do so was not so unreasonable that no reasonable Decision Maker would have made it.
[22][2021] NSWSC 1577, [48]-[54].
In the absence of any specific argument advanced on behalf of ISG, I cannot see anything about these cases which would take them outside the normal run of cases dealt with by AFCA, or outside the authority of these two decisions.
9: Failure to Join DLPW as a Respondent in the ANLP Pty Ltd Complaint
This was ISG’s last (ninth) complaint about the AFCA decisions.
As noted above, it is possible for AFCA to join another financial services provider as a respondent to a complaint if it sees fit. AFCA did this in relation to all matters except the complaint begun by ANLP Pty Ltd. ISG contends that the decision not to join was unreasonable in the Wednesbury sense.
ANLP Pty Ltd was the only Complainant which was not a client of DLPW. As discussed above, the material shows that Mr De Lloyd accompanied Mr Muscolino to Ms Patel’s office. From the documents it seems that it was Mr Muscolino, rather than Mr De Lloyd who was introducing the investment. That was consistent with Mr De Lloyd’s version of events to AFCA. The matter of Mr De Lloyd’s involvement in introducing the investment to Ms Patel’s superannuation fund was expressly raised with Ms Patel by Mr Moura during his investigations. Her response was clear: she made the decision based on her relationship with Mr Muscolino and what was provided in the information memorandum – see [69] above. At another point in their correspondence Ms Patel informed AFCA that her “SMSF did not seek financial advice nor was it asked to do so at any stage by [ISG] or by anyone else” (p 1254, ex 2).
AFCA advised ISG during its dealings with all the complaints that it intended to join DLPW as a party to all complaints except that made by ANLP Pty Ltd (p 1609, ex 2). ISG never objected; it acquiesced in that course.[23]
[23]Orr v Ford (1989) 167 CLR 316, 337.
I cannot see that ISG has shown any error on the part of AFCA in refusing to join DLPW to the complaint made by ANLP Pty Ltd, much less that its decision not to do so was unreasonable in the sense necessary to provide ISG with a remedy of the kind it seeks.
Disposition
It seems to me that ISG has failed to make out its case in respect of all of the complaints except for the complaint made by A & P Jha Pty Ltd. In relation to that complaint only, I am convinced that AFCA breached the tripartite contract by failing to provide procedural fairness to ISG and that as a result the determination is one which is not binding on ISG. ISG seeks a declaration that in those circumstances the document dated 29 June 2020 purporting to be a determination on the complaint made by A & P Jha Pty Ltd against ISG is not a determination within the meaning of that term as used in the AFCA rules. I will make that declaration.
The submission on behalf of AFCA was that should I reach a conclusion such as this, I should make orders which would compel AFCA to come to another determination, by a different Decision Maker. Submissions as to that position were brief at the hearing. I will invite both parties to make further submissions as to whether such an order needs to be made, and if it is to be made, the form of that order. I will also hear the parties as to costs of this proceeding.
AFCA’s Counterclaim
AFCA counterclaimed against ISG for orders compelling it to pay the amounts awarded by AFCA to each of the complainants. It seems that AFCA should have judgment on that part of its counterclaim, except in relation to the complaint brought by A & P Jha Pty Ltd, and except where the AFCA decisions did not award sums to the defendants by counterclaim, ie., the decisions as to costs, see [42] above.
AFCA’s Fees
AFCA’s constitution allows it to charge a fee to hear and determine complaints. ISG paid the AFCA fee in relation to the ANLP Pty Ltd complaint but did not pay the remaining fees. They were claimed by AFCA on its counterclaim. In the circumstances it seems that AFCA should recover those fees except the fee in relation to A & P Jha Pty Ltd. I therefore give judgment in an amount of $53,420 on the counterclaim brought by AFCA.
I will hear the parties further as to interest on the amounts of AFCA’s counterclaim and the costs of the counterclaim.
I will hear ANLP Pty Ltd and ISG on the costs of the District Court proceeding.

CITATION:	ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd & Ors; ANLP Pty Ltd atf AP Superannuation Fund v ISG Financial Services Ltd [2022] QSC 120
PARTIES:	ISG FINANCIAL SERVICES LIMITED BS 10170/20 ACN 114 733 569 (plaintiff) v AUSTRALIAN FINANCIAL COMPLAINTS AUTHORITY LIMITED ACN 620 494 340 (first defendant) ANLP PTY LTD AS TRUSTEE FOR AP SUPERANNUATION FUND (second defendant) GLENN BRESSOW (third defendant) YOGESH APTE (fourth defendant) AMBICA JHA (fifth defendant) WARREN LAW (sixth defendant) JAMIE SILVA (seventh defendant) BRESSOW PTY LTD ATF BRESSOW SUPER FUND (first defendant by counterclaim) YV & KY APTE PTY LTD ATF APTE FAMILY SUPER FUND (second defendant by counterclaim) A & P JHA PTY LTD ATF JHA FAMILY SUPER FUND (third defendant by counterclaim) W & S LAW PTY LTD ATF LAW FAMILY SUPER FUND (fourth defendant by counterclaim) J S SILVA PTY LTD ATF SILVA FAMILY SUPER FUND (fifth defendant by counterclaim) ANLP PTY LTD ACN 102 307 737 as BD 2152/20 trustee for the AP SUPERANNUATION FUND (plaintiff) v ISG FINANCIAL SERVICES LIMITED ACN 114 733 569 (defendant)
FILE NOS:	BS 10170/20 BD 2152/20
DIVISION:	Trial
PROCEEDING:	Trial
ORIGINATING COURT:	Supreme Court of Queensland
DELIVERED ON:	24 June 2022
DELIVERED AT:	Brisbane
HEARING DATES:	21, 22 and 23 March 2022
JUDGE:	Dalton J
ORDERS:	1. Declare that a decision issued by the first defendant on 29 June 2020 on a complaint made by A & P Jha Pty Ltd, so far as it concerns the liability of the plaintiff to A & P Jha Pty Ltd, is not a determination within the meaning of the first defendant’s Complaint Resolution Scheme Rules, and is not binding on the plaintiff. 2. Declare that awards of costs made by the first defendant to the fourth, sixth and seventh defendants on 29 June 2020 are not binding on the plaintiff. 3. Otherwise give judgment for the defendants against the plaintiff on the claim in BS 10170/20. 4. The plaintiff is to pay: (a) $53,420 to the first defendant; (b) $200,000 to the second defendant; (c) $50,000 to the second defendant by counterclaim; (d) $50,000 to the fourth defendant by counterclaim; (e) $45,000 to the fifth defendant by counterclaim, together with interest to be dealt with in a subsequent order. 5. Otherwise judgment for the plaintiff on the counterclaim of the first defendant in BS 10170/20. 6. Dismiss the claim in BD 2152/20.
CATCHWORDS:	CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – whether AFCA made determinations in favour of the third to seventh defendants – where the proper complainants were the first to fifth defendants by counterclaim – whether AFCA’s determinations were validly made CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the AFCA Rules require AFCA to consider complaints in a way that provides procedural fairness to the parties – where the AFCA Rules require AFCA to provide the parties to a complaint with access to relevant information – where AFCA failed to provide documents to the plaintiff – whether AFCA’s failure to provide documents was material – whether AFCA’s determinations are invalidated due to a failure to provide procedural fairness CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS where the Australian Financial Complaints Authority (“AFCA”) Rules provide for a tripartite contract between AFCA, the plaintiff and the complainants – where there is an implied term that AFCA not act unreasonably in the Wednesbury sense – where AFCA is obliged to have regard to legal principles under the AFCA Rules – whether AFCA breached the tripartite contract Corporations Act 2001 (Cth) s 912A, s 1041H, s 1050, s 1051, s 1051A Australian Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Ltd [2021] NSWSC 1577, considered CAQ17 v Minister for Immigration and Border Protection (2019) 274 FCR 477, cited CNY17 v Minister for Immigration and Border Protection (2019) 268 CLR 76, cited Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 288 FLR 374, considered Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123, cited Investors Exchange Ltd v Australian Financial Complaints Authority Ltd & Anor [2020] QSC 74, considered Lord Buddha Pty Ltd (in liq) v Harpur (2013) 41 VR 159, cited McCarthy v McIntyre [1999] FCA 784, cited Mickovski v Financial Ombudsman Service Ltd (2012) 36 VR 456, considered Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357, considered Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421, cited Minister for Immigration and Citizenship v Li (2013) 249 CLR 332, considered MZAPC v Minister for Immigration and Border Protection & Anor (2021) 390 ALR 590, considered Orr v Ford (1989) 167 CLR 316, cited Patersons Securities Ltd v Financial Ombudsman Service Ltd (2015) 108 ACSR 483, considered
COUNSEL:	R Anderson QC for the plaintiff in BS 10170/20 and the defendant in BD 2152/20 MW Wise QC and AF Solomon-Bridge for the first defendant in BS 10170/20 MJ McDermott for the second defendant in BS 10170/20 and the plaintiff in BD 2152/20
SOLICITORS:	Cornwalls Lawyers for the plaintiff in BS 10170/20 and the defendant in BD 2152/20 Arslan Lawyers for the first defendant in BS 10170/20 Herd Lawyers for the second defendant in BS 10170/20 and the plaintiff in BD 2152/20