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BFCSA: FOS "bound in contract" to obey the rules - So complain to Parliament

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Question is Andy:  If FOS err and get it wrong, who is there to complain to?  What can be done about this other than tell Parliament?   Courts cannot overturn a decision by the EDRs.      db

Australian Securities and Investment Commission (ASIC) defines a complaint as being any ‘expression of dissatisfaction’.

If  FOS/COSL act in "bad-faith" against the consumer, BFCSA members (others) should ‘express their dissatisfaction’  by informing Parliament; ASIC Inquiry Submission or their local member, so we can rid ourselves of a ‘dysfunctional’ contrived "EDR scheme of arrangement" biased towards Bank$ters.   

These complaints could lead to the FOS/COSL scheme's “letter of approval” revoked by ASIC @ Parliament's direction.

EDR’s are supposed to have a Panel of Review – but that has disappeared from FOS….why?

Did ASIC say they could drop the review process?  If yes, AND when?  ASIC are the licensee of the EDRs

How did that assist consumers?

Not a "fair and equitable" system when recommendation is being now bypassed and a TAKE IT OR LEAVE IT stance has been taken by the Ombudsman.

Banks must be whooping for joy!!!

So everyone needs to write to parliament about this latest twist in FOS behaviour that ASIC HAS failed to address and because they have meetings regularly we are assuming ASIC has sanctioned this non remedy of appeal……

Even the courts have higher authorities to appeal to in case the Judge has erred on a point of law.  The Ombudsmen are saying their decisions are final and given the serious nature of the allegations FRAUD, and given the LOSS OF HOME is a consequence of  the EDR’s giving a wrong or even biased decision, it is imperative of a "fair and equitable" system that an independent Tribunal be set up to take these cases to a higher authority.

The only lawyers looking over these decisions are BANK LAWYERS and FOS employed seconded BANK LAWYERS

It’s a disgrace!!!!

FPA recommends improved regulatory measures for ASIC in Senate inquiry submission

Thursday, 7 November 2013

In a submission to the Senate Economics Committee inquiry into the performance of ASIC, the FPA has recommended several measures to improve the efficacy of the regulatory body[ Read more ]

What is professionalism and professionalisation?

The Australian Council of Professions defined a profession as:

“..a disciplined group of individuals who adhere to ethical standards and uphold themselves to, and are accepted by the public as possessing special knowledge and skills in a widely recognised body of learning derived from research, education and training at a high level, and who are prepared to exercise this knowledge and these skills in the interest of others”. (Australian Council of Professions, AGM, 1997)

FOS: "Our PanelsGeneral Insurance |  Investments, Life Insurance and Superannuation  | 

Information --- on our home page 3 Jan, 2014 --- about our decision making panels.

General Insurance  Panel Chair   Ron Beazley

Investments, Life Insurance and Superannuation Panel Chairs   Katy Adams  |   Michael Arnold  |   Murray Gerkens  

Banking & Finance ?????????? "silent" ????????? ---but why???????? ---Mr Lead Ombudsman???????? ---Please explain ??????

Philip Field, Lead Ombudsman – Banking & Finance
Prior to the establishment of the Financial Ombudsman Service, Philip was General Manager – Corporate and Legal Counsel at the Banking & Financial Services Ombudsman (BFSO). He joined the BFSO as Legal Counsel in February 2002 and was appointed General Manager – Corporate in March 2006. Prior to joining the BFSO, he worked in private practice and as an in-house solicitor in the financial services sector. Philip was also a volunteer solicitor at the Springvale Legal Service.Philip holds a Bachelor of Economics, a Bachelor of Laws (with Honours) and a Master of Laws (Commercial Law) all from Monash University and was admitted to legal practice in March 1986

FOS seek representatives for new panel 

The Financial Ombudsman Service (FOS) is seeking expression of interest from persons who wish to be considered to be appointed as an industry representative on decision making panels.

Any interested FPA practitioner members should send their nomination to This email address is being protected from spambots. You need JavaScript enabled to view it. by Tuesday 29 October 2013.

Applicants should include a detailed CV and should demonstrate:

  • Capacity to act independently;
  • Knowledge of the issues and laws pertaining to the financial services industry & to external dispute resolution schemes;
  • Experience as a decision maker;
  • Ability to effectively communicate and write clearly and accessibly;
  • Ability to be well-informed and make objective decisions; and
  • Ability to command the respect of relevant FOS stakeholders 

EDR Schemes, such as FOS, are supposed to have a “Panel of Review” – which no longer appears on the FOS home page's radar screen? So why is FOS  being so tricky? Is it suppressing knowledge and has "unannounced" decided unilaterally to deny consumers the right of appeal by referring their matter to 'the panel' when desirable , and if so….the FOS Chief Ombudsman must provide a full explanation to Parliament, to the applicants--- as to why this denial of natural justice contrary to its mandate under ASIC Regulation Guidelines 139, says--- 

RG 139.110  “Fairness” 

 Says--“We believe a scheme’s complaints/disputes handling and other procedures must accord with the principles of natural justice.”

According to Alison Maynard speaking on behalf of the the Financial Ombudsman Service in May, 2012, says---

‘If a consumer, for example, had a complaint against their financial adviser, ..that dispute might go all the way through to a panel; subject to the Corporations Act 2001 (Corporations Act); approved & regulated by ASIC to determine financial services disputes; ..(and) Regulatory Guide 139 Approval and oversight of external dispute resolution schemes (RG 139), sets out a number of requirements that an EDR must meet.

‘RG 139 sets out criteria by which

schemes must be approved that includes 

being fair, 

being independent,

being accessible and

being efficient and effective,’ 

Alison Maynard said. 

Banking Code of Practice

The Code of Banking Practice is a voluntary Code of Conduct that sets standards of good banking practice for banks to follow when dealing with individual and small business customers. ----You can view and download the Code of Banking Practice from the Australian Bankers Association website.

A Code Compliance Monitoring Committee was established to ensure that banks that have adopted the Code of Banking Practice meet the standards of good practice set out in the Code. The Committee investigates complaints that the Code has been breached and monitors  bank compliance with the Code. You can find out more at the Code Compliance Monitoring Committee website

Is the Code law?

"The Code is not legislation; however, banks that adopt the Code are considered to be

contractually bound by their obligations under the Code."

How can I enforce my rights under the Code?

You must first wait until your bank announces that it has adopted the 2013 Code. The ABA will publish on its website a list of banks that subscribe to the Code. Then, if you think your bank has breached the Code, there are a number of steps you can take.

A good first step is to raise the issue with your bank. Your bank has an internal complaint handling service to assist you. If your complaint is not immediately resolved and the internal complaint handling service cannot resolve it, the Financial Ombudsman Service (FOS) may be able to help. In this case, the FOS can be contacted on:

Telephone: 1300 78 08 08 (toll free) or (03) 9613 7366 Website:

The Code Compliance Monitoring Committee (CCMC) can also investigate possible breaches of the Code (see below: How can I make a complaint to the CCMC?). Anyone can refer a possible breach of the Code to this committee which is an independent compliance monitoring body established under Clause 36 of the 2013 Code. However, the CCMC cannot determine claims for financial loss. Such claims should be referred to FOS.


An independent compliance monitoring body, Code Compliance Monitoring Committee (CCMC) has been set up to investigate possible breaches of the Code. Anyone can refer a possible breach of the Code to this committee. For more information visit the CCMC website.


A customer can also refer an allegation of the breach of the Code to the bank’s external dispute resolution scheme, the Financial Ombudsman Service if the customer has suffered a loss and is not satisfied with the bank’s internal dispute resolution.---

Frequently Asked Questions – FAQs

FOS - Terms of Reference

Will the dispute always go to a Recommendation if it cannot be resolved by agreement?

Normally, a dispute will be dealt with by Recommendation. However, in some circumstances, a dispute will be referred straight to Determination, without going to Recommendation first. This is called an “Expedited Determination”. When considering whether to expedite a dispute directly to Determination, we take into account the circumstances of the dispute, including:

  • any urgency (for example, if the Applicant is experiencing ill health)
  • the type of product or service
  • " the size of the loss involved "
  • the age of the matter, and
  • technical complexity.

If there is any urgency, or if the FSP has gone into administration or liquidation, has ceased to trade, or has not responded to the dispute, then we will probably proceed to an expedited determination.

What is a Determination?

A Determination is a final decision on the merits of a dispute, made by:

  • an Ombudsman; or
  • a Panel of three decision-makers chaired by an Ombudsman.

Before a Determination is made, we will:

  • advise the parties; and
  • where the Determination is following a Recommendation, give the parties an opportunity to provide further information in response to the Recommendation.

The Ombudsman or Panel will take into account all information provided by the parties during our investigation of the dispute, the law, any applicable industry codes of practice, as well as good industry practice. If a Determination is made by a Panel in relation to a medical indemnity dispute, the other members of the panel will be a medical representative and a medical indemnity insurer representative. In other disputes the members of the Panel will be a consumer representative and an industry representative, both with relevant experience. 

All Ombudsmen and all Panel members are appointed by the Financial Ombudsman Service Board on the basis of their objectivity, qualifications, experience and relevant personal qualities, and their ability to make decisions on the merits of financial services disputes.

When will a Determination be made by a single Ombudsman and when will it be made by a Panel?

We will decide whether a dispute should be determined by a single Ombudsman or by a full Panel, based on a range of factors including the nature complexity and significance of the dispute, any expertise required and where this can best be found, and other considerations.

Terms of Reference 1 January 2010

 2.4   "FOS Panels"

  1. A FOS Panel will be comprised of:
  1. where the Dispute pertains to medical indemnity insurance – an Ombudsman, a medical representative and a medical indemnity insurer representative;
  1. for other kinds of Disputes - an Ombudsman and two Panel Members, one of whom is a consumer representative and one of whom is an industry representative.
  1. A FOS Panel has the power to resolve Disputes by making Determinations.
  1. A Panel Member’s duties are to participate from time to time, where requested by FOS, in a FOS Panel responsible for resolving a Dispute by making a Determination.

Terms of Reference 1 January 2010  (as amended 1 January 2012)

“FOS Panel” means a panel that has been formed by FOS in accordance with paragraph 2.4 for the purposes of making a Determination in relation to a Dispute. 

Section A:Preliminary Matters


2.FOS Structure 

2.1Appointment of Ombudsmen 

2.2Powers and duties of the Ombudsmen 

2.3Appointment of Panel Members 

2.4  "FOS Panels"  

"Reviewing its decisions"

The Financial Ombudsman Service Limited ACN 131 124 448 (FOS) conducts an External Dispute Resolution Scheme specifically approved by ASIC under an instrument made pursuant to the Corporations Act 2001; [refer- Corporations Regulations & National Credit Regulation].

As such, FOS

  • must perform its statutory functions in a "timely manner without undue delay" under ASIC's framework "Regulation Guidelines 139"; 
  • “Fairness” under RG 139.110 says-- “We believe a scheme’s complaints/disputes handling and other procedures must accord with the principles of natural justice."
  • FOS's Operational Guidelines declares; “We seek to serve the community by resolving disputes between consumers and financial services providers (FSPs) in a way people can trust." 

”It maybe useful-- if a complaint has not been reviewed by the FOS "Panel Chair", which otherwise provides that its decision will be "final" pursuant to Rule-15.3-- the Courts may examine FOS decisions in the context of claims for breach of contract; and Contractual remedies may therefore be available to any allegedly 'wronged' complainant.

A recent Court decision found a tripartite "contract" indeed exists between FOS and its members, and between “FOS and a complainant”. 

The significance of the finding that a tripartite contract is established upon a complaint being made to FOS is that parties would be entitled to consider, as possible breaches of contract, ---any failures by FOS to comply with the Terms of Reference [TOR].

Authority:-  Mickovski v Financial Ombudsman Service Limited and Metlife Insurance Limited [2012] VSCA 185 , 17 August 2012; whereby Justice Pagone went on to consider whether a contract exists between FOS and its members, and between FOS and a complainant.  

Tripartite Contract
His Honour held that the existence of a contract between FOS and its members does not itself result in the establishment of a contract with a non-member, such as Mr Mickovski.   

    • However, when the complainant elects to bring their complaint to FOS, the position is changed and Justice Pagone considered a tripartite contract to be formed between Mr Mickovski, MetLife and FOS as the decision maker.   
    • In electing to bring his complaint before FOS, Mr Mickovski became bound to comply with the TOR to the extent to which they applied to him and, correspondingly, he became entitled to expect those terms to be applied correctly.” 

© Australian Securities and Investments Commission June 20, 2013 - 


"Approval and oversight of external dispute resolution schemes"

Approval and oversight of external dispute resolution schemes informs--- there are only two exceptions to otherwise proscribing ‘recovery activity’ relating to any aspect of the subject matter of the dispute while the EDR scheme is dealing with the dispute.

RG 139.67 “ The Terms of Reference of an EDR scheme must require that legal proceedings by scheme members should not be commenced where a complaint or dispute has been lodged with the scheme unless:

  1. the legal limitations period is about to expire; or
  2. there is a test case situation. “

RG 139.69 “Commencing legal proceedings in relation to a complaint or dispute lodged at EDR-- creates the potential for scheme members to undermine the EDR process; and there is also the possibility that the same complaint or dispute will be dealt with in two competing forums, wasting time and resources.

Insurance eBulletin ~ 28 June 2011:-


Holders of an Australian Financial Services Licence (AFSL) must be members of an external dispute resolution scheme approved by the Australian Securities and Investments Commission. The Financial Ombudsman Service (FOS) is one such scheme. It handles complaints against a wide range of providers of financial products and services including general and life insurers, insurance and mortgage brokers, stockbrokers, financial advisors and planners, banks, credit unions, foreign exchange dealers, deposit takers, credit providers and some superannuation providers.

Terms of Reference (TOR), which operate as a contract between FOS and its members, define both the types of disputes that can be considered by FOS and those disputes that FOS may determine to be excluded from its jurisdiction. Suffice to say that the types of disputes that can be considered by FOS are extremely broad and its discretion to exclude (or to not exclude) a dispute is similarly wide. 

While there is provision for members to flag an intention to treat a particular dispute as being a test case, or one more appropriately dealt with by a court or tribunal1, FOS has a wide discretion whether or not to accede to such a request and there are no appeal provisions available for members in the TOR, either on the merits or on a point of law. Conversely, applicants are provided with the right to request that FOS review decisions to exclude disputes under the TOR under clause 5.3.

There have been a number of decisions over the past 10 years concerning the question whether decisions of FOS, or its predecessor the Financial Industry Complaints Service Limited (FICS), are reviewable by courts, and on what basis. The most recent of these was handed down by the Victorian Supreme Court last week, when Justice Pagone ruled that while FOS decisions are not subject to judicial review, they may be challenged in contract.

Mickovski v FOS and MetLife

Mr Mickovski issued proceedings in the Supreme Court of Victoria seeking to challenge a FOS ruling that it lacked jurisdiction to deal with his complaint against MetLife Insurance Limited (MetLife) in relation to entitlements under a salary continuance policy.

FOS's ruling was based on a clause in its then terms of reference, which excluded complaints where the complainant knew or should reasonably have known of all the relevant facts more than six years before notifying FOS of the complaint. 

Mr Mickovski sought judicial review of FOS's ruling, or alternatively a declaration that FOS had breached a contractual obligation in ruling as it did. 

Judicial review

The Victorian Supreme Court was faced with an earlier decision of the NSW Supreme Court in Masu2 in which Justice Shaw had held that FICS, although a private body, was empowered to make decisions of a public character and, as such, its decisions were susceptible to judicial review.3  In this decision Justice Shaw accepted that the weight of Australian authority indicated that the English case of Datafin4  is applicable in this country. This has been the subject of some judicial controversy with the High Court not having ruled on the issue.

The Datafin principle, as it has been called, provides that the source of the power being exercised by a body is not the sole test of whether or not its decisions are judicially reviewable. The principle operates in the "middle ground", i.e. between cases where the bodies exercising powers are clearly subject to judicial review, because their powers derive from statute, and cases where bodies are not subject to judicial review because their powers derive entirely from private contract.

The Victorian Supreme Court has confirmed, in Mickovski, that in this "middle ground" it is pertinent to look at both the source and the nature of the power being exercised. The Court considered that where a body is exercising public law functions, or if the exercise of its functions has public law consequences, this may suffice to bring the body within the ambit of judicial review.

Application of the Datafin principle in Mickovski

In applying the Datafin principle, Justice Pagone arrived at entirely the opposite conclusion to Justice Shaw in Masu.

His Honour did not consider that FOS exercises a public duty or function when its jurisdiction is consensually invoked by the parties to a complaint. This is despite there being a public interest in the existence of an external dispute resolution mechanism like FOS to resolve complaints in the financial services industry. The absence of a public "duty" or a public "element" in FOS resolving private controversies, in a non binding manner, appears to have been the determinative factor.

It is interesting to examine the facts that Justice Pagone appears to have considered as relevant to the application of the Datafin principle:

  • MetLife operates under a licence which is conditional upon it being a member of an alternative dispute resolution scheme approved by ASIC;
  • FOS conducts a dispute resolution scheme specifically approved by ASIC under an instrument made pursuant to the Corporations Act 2001;
  • FOS's scheme is governed by a constitution and terms of reference;
  • FOS is a company limited by guarantee whose objects are directed to the purpose of providing an external dispute resolution scheme which complies with the Corporations Act 2001; 
  • FOS's jurisdiction is consensually invoked by the parties to a complaint; and
  • complainants are under no obligation to use FOS and they are not bound by its decisions, but may pursue whatever rights they may have against the member in any other forum.


It is interesting to contrast the indicia that Justice Shaw considered relevant in Masu, when applying Datafin in the context of FICS. In that case the focus was very much on the federal government's involvement in the establishment of FICS and the significant consequences for licence holders not complying with FICS decisions.

Consensual invocation of FOS's jurisdiction?

Justice Pagone in Mickovski adverted to the non-binding nature of FOS decisions, vis-à-vis complainants.   The reality for financial services providers, of course, is that they are required by the Corporations Act to hold an AFSL. The AFSL is their raison d'être, so to speak.   Without it, they cannot provide financial product advice, deal in financial products or operate registered schemes, among other things.   Justice Pagone noted that it was a condition of MetLife's licence that it become a member of an ADR scheme approved by ASIC.   The same, of course, applies to other financial service providers who are effectively compelled to become members of FOS, and thereby are bound by its TOR.

However, under the TOR as amended on 1 July 2010, FOS's jurisdiction is not invoked consensually by a member.  Rather, once an applicant lodges a complaint in FOS, and assuming FOS determines it has jurisdiction to deal with that complaint, the relevant member becomes bound by FOS's determination and enjoys no appeal rights under the TOR, assuming the applicant accepts FOS's determination within 30 days.  Further, the relevant member is precluded from issuing legal proceedings against the applicant relating to any aspect of the subject matter of the dispute.

Therefore, while it is true that applicants consent to FOS's jurisdiction being invoked, and applicants are not bound by FOS's recommendations or determinations, once made, the position is entirely different for FOS members under the current regime.   So far as they are concerned, the reality of the statutory framework binds them to an ADR process which, in turn, binds them to accept quasi-judicial determinations by a body approved by ASIC, whose terms of reference have doubtless been approved by ASIC in endorsing FOS as an approved ADR scheme.   Lord Donaldson in Datafin arguably cautioned against this very thing when stating that the court ought not to allow its "vision to be clouded by the subtlety and sometimes complexity of the way in which [executive power] can be exerted." 

From a financial service provider's standpoint, therefore, they might be forgiven for thinking that the "duty" to comply with the ADR process and the outcome of that process very much derive from a "public" or statutory source, albeit indirectly.   That is, while the source of the powers exercised by FOS in applying the TOR is not statutory, the framework within which disputes are resolved and the machinery that compels financial service providers to subject themselves to and comply with that process, is arguably the direct expression of executive power.   This is not a voluntary 'opt-in' ADR framework such as where both parties contract to resolve their disputes by private arbitration.  In our view, therefore, FOS falls much closer to the public end of the spectrum.

Public aspects of FOS's jurisdiction

The final sentence in the often cited passage of Lord Justice Lloyd's judgment in Datafin is as follows: "the essential distinction, which runs through all the cases to which we referred, is between a domestic or private tribunal on the one hand and a body of persons who are under some public duty on the other."   There are a number of aspects of the TOR that indicate FOS is subject to public duty.  For example, the TOR oblige FOS to:

  • provide reports to ASIC of all serious misconduct; and
  • produce reports, at least every 12 months, for publication to ASIC, financial service providers and the public.

It seems likely that FOS is obliged by ASIC, or the federal government, to comply with these obligations as a precondition to it receiving approval as a dispute resolution scheme.   An examination of the process by which FOS obtained ASIC approval as an ADR scheme might expose more of these public duties to which it appears subject.

An interesting related question is whether or not the courts, in applying Datafin, are required to examine the full range of functions exercised by the body in question and, where the exercise of any one or more of those functions involves a public duty or public element, whether that is sufficient to render all decisions of the body judicially reviewable.


Having determined that FOS decisions are not amenable to judicial review, Justice Pagone went on to consider whether a contract exists between FOS and its members, and between FOS and a complainant.

His Honour held that the existence of a contract between FOS and its members does not itself result in the establishment of a contract with a non-member, such as Mr Mickovski.   However, when the complainant elects to bring their complaint to FOS, the position is changed and Justice Pagone considered a tripartite contract to be formed between Mr Mickovski, MetLife and FOS as the decision maker.   In electing to bring his complaint before FOS, Mr Mickovski became bound to comply with the TOR to the extent to which they applied to him and, correspondingly, he became entitled to expect those terms to be applied correctly.

His Honour rejected an argument by MetLife that no contract between Mr Mickovski and FOS had come into existence, which was predicated on a clause of the TOR that provided a complainant would not be bound by FOS decisions.   Despite the fact that Mr Mickovski could elect not to accept FOS's determination, Justice Pagone considered that once his complaint was lodged, Mr Mickovski became bound by the process required to be undertaken up to the making of FOS's decision.  In the course of the judgment His Honour approved of the Federal Court decision in Financial Industry Complaints Service Ltd v Deakin Financial Services Pty Ltd5 in which Justice Finkelstein held that the source of the power of FICS to hear and determine complaints against a member was the contract between FICS and that member.

The significance of the finding that a tripartite contract is established upon a complaint being made to FOS is that parties would be entitled to consider, as possible breaches of contract, any failures by FOS to comply with the TOR.

On the facts of this case, however, Justice Pagone found no breach of contract by FOS, as he considered that it had correctly concluded that it lacked jurisdiction to determine Mr Mickovski's complaint against MetLife.   Accordingly the proceeding was dismissed.


Mickovski now appears to stand in direct contrast to the decision of the NSW Supreme Court in Masu, albeit the NSW Supreme Court considered the availability of judicial review in the context of FOS's predecessor.  It should also be noted that Mickovski was decided under FOS's previous TOR, although in principle the decision ought to apply to the current TOR6.

While tension exists between these first instance single justice decisions of two state Supreme Courts, some uncertainty will reign.  Given the increasing number of claims being brought by applicants before FOS, and the expansion of its jurisdiction and monetary limits, we expect this issue will be revisited by the courts fairly soon.

Indeed, a case such as Mickovski may ultimately give the High Court the opportunity to consider the Datafin principle, and its application in the context of these external ADR schemes that have proliferated in recent times.

While some doubt exists in relation to the availability of judicial review as a remedy for parties seeking to challenge decisions of FOS, for the present it is encouraging that the Victorian Supreme Court has confirmed the existence of a tripartite contract between FOS, its member and the applicant, once a complaint is filed.   The scope of this tripartite contract, and the remedies available to parties suing for breach, are aspects that we anticipate will be subject to further judicial consideration in the near future.

In the meantime, financial service providers that are subject to FOS complaints and their insurers will need to give careful consideration to FOS's obligations under the TOR, having regard to this recent decision.


Patrick McGrath | Partner 

Kate Clark | Special Counsel

Further Information

1.  Members may give FOS notice under Clause 10 that the dispute involves an issue that might have important consequences for their business or an important point of law, and must undertake to institute proceedings within 6 months in a superior court or tribunal capable of making a binding determination on the issue.

2.  Masu Financial Management Pty Ltd v Financial Industry Complaints Services Limited (Nos. 1 and 2) (2004) 50 ACSR 554.

3.   The Supreme Court of Victoria had also previously considered decisions of FICS to be potentially amenable to judicial review. In National Mutual Life Assoc of Australasia Ltd (t/as AXA Australia) v Financial industry Complaints Service Ltd [2006] VSC 121 Bongiorno J considered whether a decision of the Panel was an error that might render FICS or the Panel liable to judicial review in the nature of certiorari, or relief for breach of contract. His Honour in that case found no error founding either.

4.   R v Panel on Take-overs and Mergers; Ex parte Datafin Plc [1987] QB 815.

5.  [2006] FCA 1805

  1.  Applicable to disputes lodged since 1 January 2010.


Australia: No scope for judicial review of FOS (Financial Ombudsman Service) decision

Last Updated: 16 January 2013

Mickovski v Financial Ombudsman Service Limited & Anor [2012] VSCA 185

The proceeding concerned a challenge by Mickovski to a decision of the Financial Ombudsman Service Limited (FOS) that it lacked jurisdiction to deal with a complaint made by him in relation to entitlements allegedly payable by MetLife Insurance Ltd (MetLife).

Background Facts

Mickovski was injured in a workplace accident in February 1995. He claimed and was paid salary continuation benefits under an insurance policy issued by MetLife (SCI Policy). Mickovski subsequently claimed a TPD benefit under a second MetLife insurance policy. MetLife ceased SCI payments in July 1999 and paid Mickovski a TPD benefit in August 1999. At that time, both Mickovksi and MetLife were acting under a misconception that the SCI Policy provided for the cessation of SCI benefits upon Mickovski becoming totally and permanently disabled.

In 2006 Metlife applied to the Court to rectify the SCI policy so that the benefit period ceased upon the insured member becoming totally and permanently disabled. Rectification was granted on 13 November 2007. Thereafter, Mickovski sought to reinstate and backdate SCI benefits from July 1999 on the basis he was not totally and permanently disabled as defined under the rectified SCI Policy. MetLife rejected Mickovski's SCI reinstatement claim on 7 October 2008. Mickovski lodged the FOS complaint in December 2008.

FOS Decision

The FOS Terms of Reference prevented FOS from dealing with complaints where the complainant knew or should reasonably have known of all the relevant facts more than six years before first notifying the complaint. Mickovski argued the 2007 rectification of the SCI policy and Metlife's 2008 denial of the reinstatement claim both constituted relevant facts. FOS decided that neither was a relevant fact, and declined jurisdiction on the basis that the complaint was lodged out of time. The decision was affirmed in a review by FOS's Panel Chair.

Appeal Decision

Mickovski sought judicial review of FOS' decision or, if judicial review was unavailable, a declaration that FOS had breached its contractual obligations to Mickovski to comply with its Terms of Reference.

Judicial review

The first controversy was whether FOS, as a private company, was amenable to judicial review.

English Courts apply the test from R v Panel on Take-overs and Mergers; Ex parte Datafin Plc [1987] QB 815 (Datafin) to determine whether private entities are subject to judicial review. Historically, judicial review was confined to exercises of statutory and prerogative power. The Datafin test recognises that some private entities operate in a public law context, rendering judicial review appropriate. The Datafin test considers both the source and nature of the power being exercised. Judicial review is attracted where the private body exercises public law functions or the exercise of power has public law consequences. It remains undecided whether the Datafin principles form part of Australian law.

The trial judge, Justice Pagone, decided that the Datafin test should be applied in Mickovski's case, but noted its application was somewhat controversial under Australia law. Pagone J ruled that FOS was not exercising a public duty because its jurisdiction was invoked consensually by the parties to the dispute. According to Pagone J, FOS failed the Datafin test and its decisions did not attract judicial review.

The Court of Appeal agreed that FOS exercised only private law functions. It found that FOS was a private company and its powers were derived solely from contract. The fact that FOS was created to fulfil the statutory self-regulation requirements prescribed by the Corporations Act was not sufficient to bring FOS's operation within a public law sphere. The determinative indicators of FOS's private law context were: (1) the public had the choice to pursue their complaint through FOS or through the courts; (2) FOS's power over members was derived solely through contract; and (3) FOS's decisions were of an arbitrative nature in private law and were not supported by any public law sanctions. The Court of Appeal therefore ruled that FOS' decisions were not amenable to judicial review.

The Court of Appeal overruled Pagone J and decided the Datafin test did not apply to FOS. Given the appellate decision that FOS operated solely within a private law context, it followed that the Datafin test could not apply in the absence of any public law justification for the imposition of judicial review. As a result, it remains undecided whether Datafin applies in Australia.

The Court of Appeal acknowledged that there had been some limited recognition given to the Datafin principle in Victorian Courts. It was also acknowledged that, due to increasing privatisation of governmental functions, there was a need to extend judicial review into a wider range of public and administrative functions and that the Datafin principle, in an appropriate case, offered an "appealing" and "logical" response. It was noted, however, that there were doctrinal difficulties in extending judicial review and that the Datafin test was "still to be perfected". Given these comments, it appears the Victorian Courts may adopt some modified version of the Datafin test when the appropriate case arises.

Breach of Contract

The trial and appeal courts both ruled that, upon Mickovski and MetLife agreeing to submit their dispute to the processes of FOS, they became bound in contract to observe the Terms of Reference and entitled as a matter of contract to require that FOS proceed in accordance with those Terms. The Court of Appeal stated that FOS's decisions must be consonant with the contract and, if not, the court will grant a declaration to that effect and an injunction at the suit of an aggrieved party.

The Court of Appeal decided that FOS erred in law when construing its Terms of Reference, by misinterpreting the nature of the "relevant facts" that must be known before the limitation period commenced. According to the appeal court, a "relevant fact" was one that "rationally affected the way in which [Mickovsky] might have behaved if he had been aware of it". Applying that test, the 2007 rectification of the SCI Policy was a relevant fact that became known by Mickovski only one year before lodging the complaint. FOS therefore erred in deciding the complaint was lodged out of time.

However, the Court of Appeal decided that FOS's Terms of Reference prevented the court from reviewing errors of the type made by FOS in the case at hand. Mickovski's complaint had been reviewed by the FOS Panel Chair pursuant to Clause 15.3 of the Terms of Reference, which provided that the decision was "final". By reason of Clause 15.3, the parties were "taken to have agreed that the [Panel Chair's] determination would not be subject to review unless affected by fraud or dishonesty or lack of good faith or...unless it is otherwise apparent that the determination has not been carried out in accordance with the agreement".

According to the Court of Appeal, FOS's decision, although incorrect, was made squarely within the ambit of its decision-making power conferred under the Terms of Reference. By reason of Clause 15.3, the error was not reviewable. The appeal was dismissed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


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  • doyla66
    doyla66 Wednesday, 01 January 2014

    FOS are not transparent

    FOS don't tell people that both themselves and the banks are bound by the credit contract which includes the banking codes of conduct , they are quick to bring in legal technicalities when it suits them and ignore the most basic legal doc which is the credit contract and the basic reason they were established to ACT WITH FAIRNESS and not to engage in diatribe laced with legal semantics.

    FOS are top heavy with " wannabes" who ignore the concept of fairness and no wonder few trust them. WE have all been road-testing their services and our collective knowledge is gaining strength.

  • doyla66
    doyla66 Thursday, 02 January 2014

    FOS to lose license

    You are right FOS are in breach for Terms of Reference , they are licensed to operate only if they adhere to their terms of reference , these TOR's have been broken in at least two regards and probably more
    (1) They are not taking action to prevent FSP"s starting or continuing enforcement action when a dispute has been lodged with FOS
    (2) There appears to no review panel for the Finance and Banking arm of FOS
    Both of the above constitute serious breaches of the conditions FOS had to fulfill in order to operate as an EDR, ASIC should be revoking their license or is ASIC a beneficiary of these breaches and adopting the (three monkeys role)

  • doyla66
    doyla66 Thursday, 02 January 2014

    Under the ASIC regulations, says; " we also have the power to vary or revoke approval of an EDR scheme: see regs 7.6.02(4) and 7.9.77(4), Corporations Regulations and reg 10(4)(c), National Credit Regulations."...In order for an [FOS] approval to remain in force, a scheme must continue to comply with the guidelines contained in this guide [RG139], and with any new or additional guidelines that are introduced in accordance with our regulatory objectives.

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