The Australian Financial Complaints Authority (AFCA) has been admonished by a NSW Supreme Court judge over the manner in which it appeared to have stepped beyond its remit by encouraging a complainant to file a complaint against a financial services firm, DH Flinders.
At the same time, the judge also established a significant legal precedent by making clear that firms should not be held responsible for the actions of their corporate authorised representatives if those representatives are acting outside of or beyond their authorisation.
Justice James Stevenson of the NSW Supreme Court held that DH Flinders could not be held responsible for the actions of its corporate authorised representative, Equitable Financial Solutions Limited (EFSOL) with respect to products with which DH Flinders had no connection and no knowledge.
Those products were the EFSO Ameen Investment Program which saw EFSOL placed into liquidation in late 2019 but gave rise to 127 complaints and debts of $21.8 million.
The court had heard that a number of complaints had been raised against EFSOL but that some of those complaints were only directed towards DH Flinders when an AFCA staffer drew the attention of complainants to DH Flinders’ status as has having granted authorised corporate representative status to EFSOL and suggested they join the company in the their complaints.
The court heard that the complainants would not have known of the DH Flinders corporate authorisation in the absence of having been informed of it by an AFCA representative who then suggested “as discussed, you may lodge a complaint against DH Flinders and I can assist you with lodging that complaint”.
Justice Stevenson said that “this was hardly behaving in a manner procedurally fair to DH Flinders nor in a in manner which was impartial”.
His honour suggested that counsel for DH Flinders had “was correct to submit that AFCA had here ‘entered the fray’ and was acting in an advisory relationship with the complainants”.
Justice Stevenson found that AFCA did not have contractual authority, jurisdiction or power to determine the complaints.