The Federal and Supreme Courts have dismissed the appeals of QSuper and a boutique fund manager against the financial complaints authority, after both companies accused AFCA of unfair processes.
QSuper member Tommy Lam placed a complaint with the Australian Financial Complaints Authority (AFCA) in January last year, alleging that he was entitled to a refund after he had overpaid premiums for death and total permanent impairment cover from July 2016 to December 2018.
Dr Lam discovered he was eligible to pay a lower premium, because he fell within a new professional occupational rating introduced in 2016.
But QSuper had refused to refund any money to Dr Lam, saying that he had been given sufficient information to allow him to apply for changes to his insurance cover and qualify for a reduced premium.
In August, AFCA decided the complaint in favour of Dr Lam.
In its appeal against the determination, QSuper argued that AFCA had exercised judicial power in breach of the constitution, after the government body had found the industry fund breached section 1017B of the Corporations Act.
The section, the fund said, requires the government body to give notice of the nature and effect of a significant event.
But the court found that AFCA did not exercise judicial power, noting that on the way to making a determination about fairness and reasonableness, the government body can make decisions about legal rights, such as compliance with the law or compliance with the trust deed.
None of the provisions of the Corporations Act, which establish the AFCA scheme and grant AFCA power to make determinations were found to offend the constitution.
On 9 April, the court handed down its decision on the QSuper appeal, with the bench unanimously dismissing it and awarding costs to AFCA.
Investors Exchange appeal shut down
On the same day as the Federal Court decision, the Supreme Court of Queensland dismissed with costs the case brought by Investors Exchange, which had sought judicial review of an AFCA determination.
Investors Exchange was the responsible entity of an unlisted managed investment scheme, which offered the opportunity to invest in projects to acquire and develop properties.
Lornette Superannuation Fund (LSF), a trustee, was persuaded to invest a total of $140,000 into two of Investor Exchange’s property development projects, one being in Maleny in the Sunshine Coast region.
Each project however was said to be a “financial disaster,” with LSF losing $132,230 of its initial $140,000 investment. The trustee complained to AFCA’s predecessor, Financial Ombudsman Service (FOS).
AFCA in 2019 determined that Investors Exchange had failed to follow its compliance plan in failing to obtain independent valuations, ultimately leading to LSF suffering its loss.
The complaints body ordered that Investors Exchange pay LSF $66,115 plus interest – but the fund manager didn’t cough up, launching an appeal and seeking a declaration that the determination was invalid along with an order for it to be dropped.
Investors Exchange had argued that AFCA’s determination was not open to the facts and had misconstrued the evidence provided.
But the court found AFCA’s determination was reasonable, had been open to the facts and had correctly interpreted the documentation.
The judgement held that the principles set out in case law involving predecessor external dispute resolution (EDR) scheme, the Financial Ombudsman Service, are equally applicable to AFCA.
The complaints body managed to obtain an order for specific performance to ensure the determination is complied with.
Justice Peter Applegarth noted: “It is possible that, having had regard to legal principles, the decision-maker decides to not apply them because the strict application of those legal principles would lead to an outcome which is unfair in all the circumstances.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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