The recent Victorian Supreme Court decision of Goldie Marketing Pty Limited v. FOS and ANZ shows how the Finance Ombudsman Service process, combined with Court challenges by borrowers, can delay a lender from enforcing its rights for several years.
On 19 June, 2015, the Supreme Court of Victoria eventually upheld a FOS decision that a court, rather than FOS, was best placed to consider a dispute between a Melbourne toy maker and ANZ.
However, the FOS compliant by the borrower, and the challenging of the FOS decision through the courts, has effectively prevented ANZ from enforcing its rights since December 2013.
Goldie Marketing, a maker of Mattel Hot Wheels, Transformers and 20th Century Fox characters, fell into default with ANZ in November, 2013.
In December, 2013 ANZ cancelled Goldie's facilities which were in excess of $8 million, and served default notices.
Goldie then lodged a FOS dispute.
In November 2014, FOS resolved to exclude the dispute from its jurisdiction on the basis that the court was a more appropriate place to deal with the dispute.
In doing so FOS identified the following matters:
- FOS did not at that time have requisite in-house skill and would need business lending and accounting experts;
- The facilities were complicated involving business activities overseas;
- FOS cannot take evidence on oath or require third parties to produce information. It would therefore be difficult to reach a view on the merits;
- Goldie had competent legal representation and resolving the dispute in Court was a viable option;
- There was uncertainty about the quantum of Goldie's claim. The Court may be a more appropriate option given the FOS limit of $500,000.
Goldie, however, made an application to the Supreme Court seeking to prevent the Court from dealing with the matter and to have the matter dealt with by FOS.
This was on the basis of a telephone conversation between the FOS case officer and a representative of Goldie, where the FOS case officer, in part, referred to problems with temporary staffing and a loss of banking advisors in the last six months. It was submitted by Goldie that this was a basis to challenge the FOS decision as being improper.
In November, 2014 the Supreme Court agreed with Goldie and granted an injunction to restrain ANZ from appointing receivers, as it had threatened to do.
This was pending the final hearing.
Final decision of Supreme Court of 19 June, 2015
The Court has now finally determined the matter.
The Court has ruled in favour of FOS, and confirmed that the Court should deal with the matter instead of FOS.
In doing so, the Court confirmed that there was no error in the FOS decision as it was a decision that “a reasonable tribunal could properly reach on the evidence”.
There was no evidence that the decision was so unreasonable that the decision should be set aside.
Conclusion of the Court
The Court concluded as follows:
- The FOS Terms of Reference constitute the entire contract between the parties and the operational guidelines do not form part of that contract.
- FOS had a broad discretion to exclude disputes under the Terms of Reference which does not prevent FOS from taking into account staffing or resourcing issues.
- There was no basis for the court to review the FOS November jurisdictional decision to exclude the Court from dealing with the matter.
Consequences for Lenders
The lengthy FOS complaint process and Court process has effectively prevented the lender from enforcing its rights since December 2013.
The Court is, however, mindful to properly consider challenges to the jurisdiction of FOS.
The decision highlights the difficulty in overturning a FOS decision
For a FOS decision to be overturned it would need to be shown that no tribunal could properly come to the conclusion that FOS came to.
This is a high onus of proof that was not satisfied, despite the injunction initially granted in November 2014.