Goldie Marketing Pty Ltd’s (GM) business involved the manufacture and distribution of products associated with well recognised popular culture characters.

The creditor advanced GM around $8.8m and took security over its assets. After falling into default, GM lodged a dispute with the Financial Ombudsman Service (FOS) alleging that the creditor:

  • negligently lent $2.5m to GM when it was “over-leveraged”;
  • delayed in assessing and approving seasonal funding for its business activities; and
  • failed to give enough assistance to GM to help it overcome its financial difficulties.

The creditor argued that the dispute should be excluded under the FOS Terms of Reference on grounds that:

  • GM was not a small business;
  • the dispute exceeded FOS’s jurisdictional limit; and
  • the dispute would be more appropriately dealt with in a court.

FOS determined that it would exclude the dispute on the sole basis that it was more appropriately dealt with in court. Soon after, the creditor informed GM that it would be appointing receivers to the business.

GM applied to the court seeking an injunction against the creditor restraining it from taking any enforcement action until an appeal of the FOS determination had been heard. The basis of the appeal was that the FOS decision was invalid as it was motivated by internal resourcing limitations. GM relied upon an ‘off the record’ telephone discussion between representatives of GM and FOS, during which it was alleged that FOS acknowledged that the availability of key staff was the primary reason why the dispute had been excluded.


In granting the injunction, the court found that:

  • There was a reasonable argument that the FOS decision was motivated by internal resourcing limitations and, therefore, the decision was not made in accordance with its Terms of Reference.
  • The balance of convenience was “firmly” in favour of the creditor being restrained from taking any enforcement action, even though the appeal of the FOS determination was likely to take up to 18 months to run its course.
  • Damages would not be an adequate remedy for GM, as the appointment of receivers would cause “irremediable” damage to GM’s business due to the likely loss of key contracts.


Although the case is unusual in that it involved allegations of an ‘off the record’ conversation between FOS and GM representatives, the judgment is of concern to secured creditors for numerous reasons, including:

  • Little consideration was given to the prejudice to the creditor in being unable to enforce its securities for up to 18 months, including the cost of capital in holding a distressed debt for an extended period.
  • No direct consideration was given to events that may occur in the restraint period, such as what may happen if the value of the secured assets depreciated, or an additional default occurred.

As a result of the outcome of this case, a new trend may emerge where debtors seek to delay enforcement action by appealing against determinations made by FOS.