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Financial Ombudsman Service decision supported by Court

17 March 2016, 15:00 PM

The Financial Ombudsman Service (FOS) Australia today clarified its involvement in a dispute referred to on ABC 7.30 last night.

The report relates to a case brought before the Victorian Supreme Court (Goldie Marketing Pty Ltd v FOS and ANZ), concerning financial facilities in excess of $8 million. The applicant challenged FOS’s jurisdictional decision not to consider the dispute. The FOS decision set out the reasons why it considered the matter was more appropriately dealt with by a Court. The Victorian Supreme Court upheld the approach to, and decision of FOS, in this matter.

The Ombudsman’s reasons to exclude the dispute set out in the decision which was the subject of the Court case were as follows:

“In exercising my discretion I have been mindful of the costs and benefits associated with using FOS as opposed to a court as the venue for the resolution of the dispute, and have not made my decision lightly. I am cognisant that this decision will significantly increase the Applicants’ legal costs, however I remain of the view that my exercise of discretion is appropriate given:

  1. The complexity of the dispute and facilities at issue (some of which are cross collateralised).
  2. The inability of FOS to cross examine all relevant witnesses and compel the production of information from third parties, compared to the ability of a court to compel production and appearance and cross examine.
  3. The need to engage experts, and the persisting issue after the engagement of those experts that FOS is less likely to obtain a complete and accurate picture of the dispute than can a court.
  4. The Applicants may have other claims which have not yet been particularised (and may result in their dispute being then deemed to be outside FOS’ TOR)
  5. The conduct of the parties during the dispute (as discussed above) and the preparedness of the Applicants to go to court.”

In the relevant judgment of the Victorian Supreme Court, Her Honour Justice Cameron found the factors relied upon in the November Jurisdictional Decision to be “cogent”, “rational’ and “compelling”. Justice Cameron also noted in her decision that some factors (the complexity of the dispute and the possibility for cross-examination) were reasons relied upon in the earlier assessment by the relevant case manager, “so they were not new in terms of FOS’s consideration of this matter.”

In regard to differences between a recording of a conversation with an Ombudsman and file notes later produced in court, in the court proceedings both parties acknowledged the file notes reflected the practice of this Ombudsman, were a mixture of comment, observation and notation, and were something other than a verbatim record of the phone conversation.

Importantly, Justice Cameron found there was no evidence of bias by the Ombudsman in the deliberations or that the Ombudsman acted in bad faith. In finding FOS's decision to exclude the dispute to be valid, Justice Cameron found: “there is no evidence before me that FOS acted in bad faith, was biased, or that the decision was so unreasonable that no other decision maker could have come to that decision.”

There is no basis for any assertion that the Ombudsman used or created the file notes to mask the reasons for the decision.

FOS occupies a very particular position as a party to the type of proceedings brought by Goldie before the Supreme Court. As the decision maker in the dispute, FOS is bound by law to limit its role in the proceedings to assisting the Court and making submissions going to its powers and procedures. FOS limited its role in these proceedings in that fashion.

FOS has been the subject of detailed review in the context of the Financial Services Inquiry (FSI) and the Senate Committee Inquiry into the Performance of ASIC. While various proposals for enhancements have been put forward, these reviews have been generally very supportive of the current structure and regulation of external dispute resolution (EDR) that underpins FOS’s operations.

Consumer organisations, while indicating that there are always opportunities for improvement (a view we share), have been strongly supportive of FOS and the important role current EDR arrangements perform in providing consumers with access to redress.

FOS has made significant changes to streamline and improve its dispute process over the last few years. We are also committed to working with all our stakeholders to continue to improve the dispute resolution service we provide to the Australian community. FOS is happy to provide further information to relevant parliamentary or government inquiries about the role, operations and performance of FOS.

Media enquiries
Veronica McGowan, 03 9613 7307

Related links
Further submission to The Scrutiny of Financial Advice Inquiry (20 August 2015)

Scrutiny of Financial Advice Submission 134 - Response to adverse comment in supplementary submission 134.1

Tags: disputes