In Goldie Marketing Pty Ltd v Financial Ombudsman Service1 the Supreme Court of Victoria has confirmed that the Financial Ombudsman Service (FOS) has a broad discretion to exclude disputes under its Terms of Reference and that challenges to the FOS’ decisions will only be successful in limited circumstances.

Previously, the Court had cast some doubt on this by granting an injunction restraining the Financial Service Provider (FSP) from exercising its securities after the FOS had excluded a dispute. Of concern for FSPs, the Court considered that there was a reasonable case to be argued that the FOS’ decision could be challenged and gave only limited consideration to the prejudice suffered by the FSP by the delay in enforcing its securities.

Key points

  • The FOS has a broad discretion to exclude disputes under the Terms of Reference, and may take into account matters such as staffing or resourcing issues.
  • The FOS’ Operational Guidelines are to assist in understanding the Terms of Reference only and are not part of the Terms of Reference.
  • Whilst the FSP was ultimately successful in both the Court and the FOS, Goldie’s challenges in effect delayed the FSP from enforcing its rights since default notices were served in December 2013. That delay is likely to have caused the FSP’s position to deteriorate through holding and legal costs.
  • Hopefully some of the recent changes made to the Terms of Reference that we commented on in our alert Changes to the Financial Ombudsman Service – good or bad for financial service providers? will minimise the delay and potential prejudice to FSP’s in similar circumstances.

The decision

The background was:

  • From July 2006 to October 2013, the FSP provided facilities to Goldie which were secured by various properties and guarantees from Goldie’s directors. The debt owing to the FSP ultimately amounted to approximately $8.8 million.
  • By November 2013, defaults had occurred and in December 2013 default notices were served and the facilities were cancelled.
  • In December 2013 Goldie lodged a FOS dispute claiming the FSP:
  • negligently lent $2.5 million to Goldie when the company was ‘over-leveraged’
  • delayed in assessing and approving seasonal funding for its business activities
  • failed to give enough assistance to the borrowers to help them overcome financial difficulties.
  • The FSP argued that the dispute should be excluded as it was outside the FOS’ Terms of Reference. In late December 2013, the FOS issued a preliminary assessment finding that the dispute fell outside the scope of the Terms of Reference as Goldie was not a ‘small business’. Goldie sought a review of that decision.
  • In April 2014 the FOS issued a decision confirming the dispute fell outside of the Terms of Reference as Goldie was not a small business.
  • Subsequently, in April 2014, Goldie challenged the FOS’ decision and sought urgent interlocutory relief to restrain the FSP from enforcing its securities against them. The matter was resolved by consent and the dispute was remitted back to the FOS for determination.
  • In September 2014 the FOS issued a ‘jurisdictional assessment’ stating the dispute was more appropriately dealt with by a court. Goldie sought a review of that decision.
  • In November 2014 the FOS issued a written decision confirming it was excluding the dispute on the basis the court was a more appropriate place to deal with the dispute.
  • Goldie alleged the FOS’ decision was invalid as the true reason for its decision to exclude the dispute was revealed in a telephone conversation with the Ombudsman in which she said the FOS did not have the in-house knowledge to deal with the dispute after losing key staff.
  • In November 2014 Goldie obtained an injunction restraining the FSP from exercising its rights pending the trial of Goldie’s challenge to the FOS’ November decision.

In granting Goldie the injunction restraining the FSP from enforcing its securities the Court reluctantly concluded Goldie’s challenge to the FOS’ decision has sufficient likelihood of success to justify a trial. In a welcome decision for both the FOS and FSP’s, the Court has now reiterated that the FOS’ decisions can only be challenged where the decision is one to which no reasonable tribunal could properly reach.

Beyond this, the Court also confirmed that the FOS’ discretion to exclude a dispute should extend to all matters of relevance to the FOS in managing and administering the dispute. The Ombudsman had indicated the FOS would have accepted the dispute had it been properly resourced, but subsequently clarified the dispute was excluded on a number of grounds. The Court considered the FOS was entitled to take into account issues of staff resourcing, capability and availability in excluding a dispute.

Importantly, the Court did not follow an earlier decision2 that found that the Operation Guidelines formed part of the Terms of Reference. The effect of this was that the court rejected the borrowers’ argument that the FOS had failed to satisfy itself of a necessary prerequisite to exclude the dispute. The Operational Guidelines are guidelines only, nothing more.


Whilst ultimately successful, the FSP has been delayed in enforcing its securities since December 2013. The FSP has also been put to the cost of a drawn out legal battle. Despite the freeze on Goldie’s assets preserving the status quo, the FSP’s security position is likely to have deteriorated due to holding and legal costs.

In our alert Changes to the Financial Ombudsman Service – good or bad for financial service providers?‘ we commented on some recent changes to the FOS’ Terms of Reference including to:

  • allow the FOS to exclude disputes involving recovery of a debt from a small business involving a credit facility exceeding $2 million
  • reduce the timeframe for applicants to object to a determination by the FOS that a complaint is outside of the Terms of Reference
  • give the FOS a discretion to allow FSPs to sell an asset the subject of a dispute.

These changes would have assisted the FSP involved in the Goldie matter by clarifying that Goldie was not a ‘small business’ and streamlining the objection process. The ability to sell an asset that is the subject of a dispute is likely to be used sparingly, and seems unlikely to have helped the FSP here. Nonetheless, FSPs should consider pressing the FOS to allow the sale of assets in disputes where there are deteriorating assets or those with significant holding costs.