AFCA has the final word: Courts will only disturb AFCA determinations in limited circumstances

30 November 2022
Edward Martin, Partner, Sydney

Australia Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Limited [2022] NSWCA 204

The NSW Court of Appeal has upheld a decision that AFCA had jurisdiction to decide that a lender engaged in unconscionable conduct by taking a guarantee such that it was unenforceable and compensation had to be paid, despite the lender having commenced court proceedings to enforce against the borrower.

Key takeaways

  • As Australian Financial Complaints Authority Limited (AFCA) had jurisdiction, its decision was final on unconscionability, despite the lender’s complaint that evidence was not considered and there was no cross-examination.
  • For compensation claims under $1 million, AFCA has a wide discretion so respondents should be careful to put all relevant evidence and submissions before it.


Australia Capital Financial Management (ACFM) appealed against a decision of Ball J dismissing a challenge to a determination made by AFCA in favour of the complainants.

The complainants, Mr Bai and Ms Yang, established an export business which was conducted through a corporate entity. The company entered into a loan for approximately $2 million ACFM which was guaranteed by the complainants and supported by a mortgage over two properties they owned in Victoria, one of which was their place of residence while they resided in Australia.

The company defaulted on the loan with ACFM, and ACFM commenced proceedings against the complaints in the District Court.

The complainants lodged a complaint with AFCA, seeking compensation of over $500,000 and alleging that ACFM acted inappropriately and unconscionably in taking the guarantee, rendering the guarantee unenforceable. ACFM sought for the complaint to be excluded on jurisdictional and discretionary grounds.  AFCA rejected the exclusion application, carried out its investigation, and made its final determination in favour of the complainants, resulting in invalid and unenforceable guarantees and mortgages.

The primary proceeding

Justice Ball found that a determination by AFCA is generally not susceptible to judicial review, and that AFCA’s jurisdiction powers and obligations are governed solely by the contract set out in the AFCA rules. The exceptions to this general proposition are if a decision is made that no reasonable decision-maker could properly come to on the evidence (that is ‘Wednesbury unreasonableness’) such as because of fraud, dishonesty, lack of good faith, or because the determination has not been carried out in accordance with the rules.  What is important is whether the decision has been reached in accordance with the rules, not whether there the decision-maker arrived at an incorrect conclusion whilst applying the correct rules.

Justice Ball rejected ACFM’s assertions that the value of the AFCA claim exceeded AFCA’s jurisdictional limit of $1 million. Although Justice Ball found that the security property was not the couple’s primary residence at the time the complaint was made, this did not matter because the value of the claim was still under $1 million, and therefore within AFCA’s jurisdiction.

The Court of Appeal

The Court of Appeal noted that each member of AFCA agrees to be bound by the AFCA rules, and this forms a binding tripartite contract between the complainant, AFCA and the member the subject of the complaint.  A complaint is within AFCA’s jurisdiction provided it meets the requirements of that contract or it is outside AFCA’s jurisdiction.

In the appeal, ACFM challenged the correctness of the primary judge’s conclusion in relation to the AFCA rules relating to its jurisdiction and discretion to determine a complaint. The Court of Appeal agreed with the primary judge’s conclusions that AFCA’s determination did not depart from the tripartite agreement.

Further, in respect of the application of the AFCA rules, the Court agreed that AFCA’s decisions on the jurisdictional questions and its decision to accept that the complaint was within its jurisdiction, were open to a reasonable decision-maker to make in good faith.

ACFM also argued that it had been denied procedural fairness by AFCA in that by not exercising its jurisdiction to exclude the complaint AFCA prevented existing District Court proceeding from progressing. This was of particular importance to ACFM as it took issue with some evidence led by the complainants and was unable to cross-examine them.

The Court also found against ACFM on this argument because the AFCA rules permit AFCA, in its discretion, to apply a relatively informal procedure when it comes to evidence and, in any event, ACFM was given the opportunity to make written submissions in the course of the AFCA complaint.

Finally ACFM argued that AFCA’s determination that the mortgages were given to support the guarantees was unreasonable to the ‘Wednesbury unreasonableness’ standard and was made in circumstances entailing a denial of procedural fairness. The Court found the primary judge was correct to in holding it would be unrealistic to treat the guarantees and mortgages as entirely separate, and the Court found that AFCA’s conclusion was open to it.


AFCA members should keep in mind that:

  • In the context of an AFCA complaint, it is best practice to compile all of the relevant evidence comprehensively at an early stage so that it can be put before AFCA at the time AFCA invites the parties to put their case in writing.
  • They should prepare detailed and considered written submissions in support of their arguments when addressing AFCA at the first instance as a Court’s preference is to not engage in a fresh assessment when determining whether or not a complaint falls within a particular AFCA exclusion.
  • It will likely be difficult to challenge an AFCA determination where the determination has been arrived at in accordance with the AFCA rules.
  • AFCA decisions will still be susceptible to judicial intervention where an AFCA determination is unreasonable to the ‘Wednesbury unreasonableness’ standard or because the determination has not been carried out in accordance with the rules.

Authored By:

Edward Martin, Partner
Trish Kastanias, Senior Associate

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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