Does the AFCA have jurisdiction to decide your financial dispute? Guidance from the decision in AgriWealth Capital Limited v Australian Financial Complaints Authority Limited  FCA 1336
10 February 2023
In a recent case concerning a complaint brought against a financial services business operating several registered forestry management investment schemes in New South Whales (the Complaint), the Federal Court of Australia considered an application that challenged the jurisdiction of the Australian Financial Complaints Authority Limited (AFCA) to decide the Complaint.
Following the review of the financial system external dispute resolution and complaints’ framework in 2018, a new external resolution framework for the financial system was introduced. The framework enabled the authorisation of the Australian Financial Complaints Authority Limited (AFCA) for the purposes of the Corporations Act 2001 (Cth).
For a financial dispute to be eligible for resolution by AFCA, the complaint must satisfy the Australian Financial Complaints Authority Complaint Resolution Scheme Rules (AFCA Rules). When a complaint is made under the AFCA Rules, a tripartite contract between AFCA, the complainant and the member of AFCA, who is the subject of the complaint, is formed. Without satisfying the AFCA Rules, it may be the case that ACFA does not have jurisdiction to resolve the dispute.
AgriWealth Capital Limited (AgriWealth) and Australian Forestry Management Pty Ltd (AFM) brought an application against AFCA and the complainant, Mr Kirby in which it challenged AFCA’s decision that it had jurisdiction to decide Mr Kirby’s complaint against ACL (the Complaint).
ACL is a financial services business that operated a registered management investment scheme that Mr Kirby was an investor (the Scheme). AFM was the manager appointed under the Scheme management agreement (the Management Agreement). ACL held membership with AFCA and the requisite licence to enable its operation of the Scheme; AFM held neither.
The application was rooted in the above, provided Rule A.4. of the AFCA Rules requires a ‘complaint must be about a Financial Firm that is an AFCA Member’.
The Court also considered the validity of the application having regard to the following AFCA Rules:
- Rule C.1, which prescribes specific exclusions to investment complaints; and
- Rule B.2.1(a) and/or (e), which when deciding whether it had jurisdiction for the Complaint, AFCA believed supported it having limited jurisdiction to consider Mr Kirby’s concerns about the entitlement to charge certain fees and retain moneys to meet some of those fees under the Management Agreement.
In Agriwealth Capital Limited v Australian Financial Complaints Authority Limited  FCA 1336, Markovic J reasoned that:
- 2.1(e) provided a proper basis for AFCA to assume jurisdiction, as it did, provided:
- Rule.2.1 gives AFCA jurisdiction to consider a complaint arising from or in relation to a legal or beneficial interest of the Complainant, i.e., Mr Kirby, arising out of a financial investment such as, relevantly, an interest in a managed investment scheme;
- The interest of investors under the Scheme should be interpreted as including the rights, interests and title of investors under the Management Agreement;
- It follows that Mr Kirby’s interest in the Scheme included his interest under the Management Agreement;
- The parts of the Complaint for which jurisdiction was disputed concerned charges and fees, and/or deductions from insurance proceeds, made pursuant to the Management Agreement; and
- Therefore, the Complaint had its origins or foundations in, or related to Mr Kirby’s legal or beneficial interest in a financial investment, of which the management Agreement formed a part; and
- The requirement that the Complaint relate to or arose from the provision of a ‘Financial Service by the Financial Firm’ per Rule.2.1(a) was satisfied, as:
- For the purposes of Rule B.2, a ‘Financial Firm’ includes a AFCA member and any contractor of the financial firm;
- The Management Agreement formed a tripartite agreement between Mr Kirby, ACL and AFM, with the effect of imposing obligations on AFM as manager and also ACL as responsible entity;
- Mr Kirby was required to retain AFM as manager in order to participate in the Scheme, and without doing so the Scheme could not function;
- ACL could not operate the scheme without AFM;
- The obligations undertaken by AFM as manager under the management Agreement were carried out as much for ACL as for the investors; and
- In those circumstances, in his Honours view, AFM was a contractor of ACL for the purposes of a ‘Financial Firm’ as it applies to Rule B.2; and
- The Complaint was not required to be excluded because even though the Complaint concerned Mr Kirby’s objection to charges invoiced to him, it did not follow that, because ACL levied the same charges, and made deductions, to other investors of the Scheme, that the Complaint related to the management of the Scheme as a whole.
Whilst AFM was not a AFCA member, AFCA ‘s jurisdiction was not excluded having regard to the nature of the relationship between Mr Kirby, AFM, ACL, the Management Agreement and the Scheme.
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Susan Forrest, Partner
Carma Holland, Graduate
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.