Contributed by Noel Davis, Barrister, Sydney
The relevant Commonwealth Minister was authorised by amendments made to the Corporations Act 2001 in 2018 to authorise the Australian Financial Complaints Authority to be an authority to which complaints involving financial services can be made, including complaints involving superannuation funds, provided the Minister is satisfied that the mandatory requirements of s 1051 of the Corporations Act are satisfied. The Authority replaces the Superannuation Complaints Tribunal as a complaints mechanism for superannuation matters, including insurance issues in superannuation funds.
The Australian Financial Complaints Authority (AFCA) had its genesis in amendments made to the Corporations Act by the Treasury Laws Amendment (Putting Consumers First — Establishment of the Australian Financial Complaints Authority) Act 2018.
Part 7.10A of the Corporations Act provides, in s 1050, for the relevant Minister to authorise the implementation of AFCA if it meets the requirements of s 1051 and 1051A and any other requirements the Minister considers relevant.
The Minister has authorised Australian Financial Complaints Limited to establish and operate AFCA. That company is required to ensure that the mandatory requirements set out in s 1051 are complied with (s 1052).
The Commonwealth Government appoints an independent person as the chair of the Board of AFCA and a minority of the directors (s 1051(3)(e)). AFCA’s constitution must provide that there must be an equal number of directors (including those appointed by the government) with experience in representing consumers and directors who have experience in carrying on financial services businesses (including superannuation) (s 1051(3)(d)). The initial directors have been appointed.
The company operating as AFCA is required to be a company limited by guarantee and to be financed by the contributions made by the financial services entities which are members of it (s 1051(2)(b) and (3)(b)). Its constitution must require that it not be operated for profit (s 1051(3)(c)).
The membership of AFCA must be open to every entity that is required to be a member of an external dispute resolution scheme authorised under Pt 7.10A of the Corporations Act (s 1051(2)(a)). Trustees of regulated superannuation funds must be members of the AFCA scheme (s 101 of the Superannuation Industry (Supervision) Act 1993 (SIS Act)). They are required to become members of AFCA by 21 September 2018.
From the date on which AFCA commences to operate on 1 November 2018, financial services complaints are able to be made to AFCA and superannuation complaints are no longer able to be made to the Superannuation Complaints Tribunal. The Tribunal, however, continues to deal with complaints lodged with it prior to the date on which AFCA commences operations.
Complaints must be resolved by AFCA (including by making determinations) in a way that is fair, efficient, timely and independent (s 1051(4)(b)). Whether decisions of AFCA have been made in an independent manner is likely to be the basis of some litigation, particularly if there is a possibility the person making the decision has a conflict of interest.
The provisions of Pt 7.10A discussed below govern the operation of AFCA in relation to superannuation complaints. Some of the provisions of the Part mirror provisions in the Superannuation (Resolution of Complaints) Act 1993 (the Complaints Act) which are summarised in Chapter 58 of The Law of Superannuation in Australia. The decided cases on those sections of the Complaints Act are, therefore, relevant to the equivalent provisions governing AFCA.
For superannuation complaints (complaints made in accordance with s 1053(1) discussed below), there are no limits on the value of claims that may be made to AFCA by complainants and there are no limits on the value of remedies that may be determined by AFCA (s 1051(4)(f)). That replicates the effect of the Complaints Act under which remedies for unlimited amounts can be provided.
Making complaints to AFCA
Section 1053(1) permits a person to make a complaint that the trustee of a regulated superannuation fund or an approved deposit fund has made a decision (including before the commencement of this legislation) relating to a particular member or former member that was unfair or unreasonable. Such a complaint is a superannuation complaint (s 1053(3)).
For the purposes of s 1053, a trustee or an insurer or another decision-maker or a person acting for one of them is deemed to have made a decision if it makes or fails to make a decision (s 1053(5)(a)), whether or not the decision involved the exercise of discretion. That is similar to the combined effect of s 4(a) and 14AA of the Complaints Act.
Also, a trustee or an insurer or other decision-maker or a person acting for one of them is deemed to have made a decision if it engages in conduct, or fails to engage in conduct, in relation to making a decision (s 1053(5)(b)). That is similar to the basis on which some complaints are made to the Superannuation Complaints Tribunal in reliance on s 4(b) and 14AA(1) of the Complaints Act. A complaint can, therefore, be made in relation to conduct.
The effect of s 14AA(1), which states that a complaint may be made whether or not the decision involved the exercise of a discretion, has been considered in a number of cases discussed in Chapter 58 of Law of Superannuation.
Section 1053A sets out the circumstances in which a person is taken to be a member of a fund for the purposes of making a complaint to AFCA. That includes a non-member spouse to whom a splitting order under the Family Law Act 1975 has been made or who is a party to a superannuation agreement under that Act.
Notices of death benefit decisions
Section 1056A(1) requires that if a death benefit decision-maker makes a decision relating to the payment of a death benefit and is notified by AFCA of a complaint relating to the decision, the decision-maker must, within 28 days, give notice to each person (other than the complainant) who the decision-maker believes, after reasonable enquiry, may have an interest in the death benefit.
The meaning of “an interest in a death benefit” is not defined in the Act. It, therefore, has its ordinary meaning. A person who comes within the list of possible beneficiaries of a death benefit set out in the governing rules of the fund has an interest in the death benefit because of the possibility of the trustee paying some or all of the death benefit to that person.
The notice to each person must set out details of the complaint and state that the person may apply to be joined as a party to the complaint by giving notice to AFCA within 28 days or such longer period as AFCA allows (s 1056A(2)).
Making death benefit complaints to AFCA
The effect of s 1056(1) is that a person can only make a superannuation complaint to AFCA in relation to the payment of a death benefit if the person has an interest in the death benefit, which is discussed above.
Also, a death benefit complaint cannot be made if the decision-maker gave the complainant notice of a proposed decision and that the complainant could object within 28 days and the complainant did not object to the decision-maker within the 28 days after being given notice (s 1056(2)(a)).
Furthermore, a death benefit complaint cannot be made if the decision-maker gave the complainant notice that it has made a decision and that the complainant may make a complaint to AFCA within 28 days after the notice and a complaint is not made to AFCA within the 28 days (s 1056(2)(b)).
However, if the complainant has not been given either of the notices referred to in s 1056(2), AFCA can accept a complaint if it is satisfied that the complainant has an interest in the death benefit and it was unreasonable for the decision-maker not to give the notice to the complainant (s 1056(3)).
It should be noted in relation to death benefit complaints that s 101(1)(d) of the SIS Act requires that the trustees of regulated superannuation funds must ensure that written reasons are given in accordance with s 101(1B) which permits ASIC to specify to whom and in what circumstances written reasons are given for decisions.
Joining parties to a complaint
- • a person who has applied to become a party to a complaint
- • a trustee of a regulated fund
- • an insurer
- • a person who AFCA decides is responsible for determining the existence and extent of a disability, if the subject matter of the complaint is a disability benefit.
- • the person applies within 28 days (or any longer period that AFCA allows) after having been notified by the trustee (in accordance with the requirements of s 1056A(1) discussed above) that a complaint has been made in relation to the payment of the death benefit, or
- • AFCA is satisfied, in all the circumstances, the person should be joined as a party despite not applying.
AFCA’s power to obtain information and documents
Under s 1054A(1), if AFCA has reason to believe that a person is capable of giving information or producing documents relevant to a superannuation complaint, it may require the person to give AFCA the information or to produce documents. AFCA can copy documents and permit them to be inspected by a person who is entitled to do so (s 1054A(2)).
Section 1054B(1) gives AFCA the power to compel the parties to a superannuation complaint to attend a conciliation conference. It can also compel attendance by any other person, who in AFCA’s opinion, is likely to be able to provide information relevant to the settlement of the complaint or whose presence would, in AFCA’s opinion, be likely to be conducive to settling the complaint. Failure to attend, when required to do so, by a person other than the complainant is an offence (s 1054B(4)). It is surprising that it can be an offence for a person who has been joined as a party to a death benefit complaint, because of an interest that person has in the death benefit, to fail to attend a conciliation.
Section 1054B is similar in its effect to s 28 of the Complaints Act. A difference is that under s 30 of the Complaints Act, what is said in a conciliation cannot be evidence in a subsequent review meeting by the Tribunal, but there is no equivalent provision in relation to AFCA.
However, under s 1054BA(1), AFCA may, in connection with, or as part of the process of, determining a superannuation complaint, give directions prohibiting or restricting the disclosure of documents or information relating to the complaint and give directions as to who may be present at any meeting held by AFCA relating to the complaint.
Conciliations are an important part of resolving superannuation disputes and it is often the case that disputes are settled in conciliations held by the Superannuation Complaints Tribunal.
Referring questions of law to the Federal Court
Section 1054C(1) provides for AFCA, on its own initiative or on the request of a party to a superannuation complaint, to refer a question of law, arising in relation to the making of a determination, to the Federal Court for a decision. AFCA must not then do anything inconsistent with the opinion of the court.
The Superannuation Complaints Tribunal has rarely exercised a similar power under s 39 of the Complaints Act, perhaps because the Tribunal members have, generally, made their own determinations on legal issues. AFCA may take a different approach.
An important function of AFCA is making determinations, as is the case with the Superannuation Complaints Tribunal. The section dealing with making determinations, s 1055, is very similar in its effect to s 37 of the Complaints Act. The many decisions that have been made by the Federal Court on s 37 in appeals from Superannuation Complaints Tribunal determinations are, therefore, relevant to AFCA in making its determinations. Those decisions are discussed in Chapter 58 of Law of Superannuation.
In making a determination, s 1055(2) requires that AFCA must affirm a decision or conduct if it is satisfied that the decision in its operation in relation to the complainant, or the conduct, was fair and reasonable in the circumstances. In relation to a death benefit, the decision must be affirmed if AFCA is satisfied that the decision, in its operation in relation to the complainant and any other person who has been joined as a party, was fair and reasonable in the circumstances (s 1055(3)).
Therefore, as is the case with the Superannuation Complaints Tribunal, AFCA’s first task, in making a determination, is to decide whether the decision or conduct in issue was fair and reasonable within the meaning of s 1055(2) and (3). If it decides that the decision or conduct was fair and reasonable, AFCA must affirm the decision or conduct and cannot make any other decision. This obligation has been considered by the Federal Court in many cases which are discussed in Chapter 58 of Law of Superannuation.
Section 1055(4) states that if AFCA is satisfied that a decision in its operation in relation to the complainant, or conduct, is unfair or unreasonable, AFCA can take the actions referred to in s 1055(6) for the purpose of placing the complainant, as nearly as practicable, in such a position that the unfairness or unreasonableness no longer exists. Section 1055(5) is to similar effect in relation to death benefits if AFCA is satisfied the decision or conduct is unfair or unreasonable in relation to the complainant and a joined party.
In making a determination, AFCA, like the Superannuation Complaints Tribunal, has all the powers, obligations and discretions that are conferred on the trustee, insurer or other decision-maker or a person involved in conduct that is the subject of a complaint (s 1055(1)).
Section 1055(6) sets out the types of determinations AFCA can make including varying the decision or setting aside the decision and substituting another or remitting it for reconsideration by the decision-maker in accordance with AFCA’s directions or recommendations. If AFCA decides that a complainant was unfairly or unreasonably admitted into a life policy held by the trustee for the purposes of the fund, it can require a party to the complaint (eg an insurer) to repay all or part of the money paid into the life policy, vary the terms and conditions of the life policy or cancel the complainant’s membership of the life policy (s 1055(6)(c)). Those may be wider powers than the Superannuation Complaints Tribunal has in relation to life policies.
The role of AFCA, in making a determination, is to consider whether the actual decision of the decision-maker, rather than the process by which the decision was reached, was fair and reasonable in the circumstances (Colonial Mutual Life Assurance Society Limited v Brayley  FCA 1333 at ; Board of Trustees of the State Public Sector Superannuation Scheme v Edington  FCAFC 8 at ). However, depending on the circumstances, unfairness in process may lead to unfairness in the decision, which can, therefore, be set aside (Mercer Superannuation (Australia) Limited v Billinghurst  FCAFC 201 at ).
By virtue of s 1055(7), AFCA cannot make a determination that is contrary to law or the governing rules of a fund or, subject to what is said above in relation to s 1055(6), the terms and conditions of an insurance policy. AFCA can, therefore, vary the terms and conditions of an insurance policy which it decides are unfair or unreasonable. Section 1055(7) has some similar restrictions to s 37(6) of the Complaints Act. There have been a number of decisions of the Federal Court in relation to s 37(6) which are discussed in Chapter 58 of Law of Superannuationand which are relevant to AFCA and its powers under s 1055(7).
As with the Superannuation Complaints Tribunal, in making a determination, AFCA is undertaking a hearing de novo, standing in the shoes of the decision-maker, and is required to make findings on the facts on which it bases its decision (Marks v CSS Board of Trustees  FCA 797 at –; Board of Trustees of the State Public Sector Superannuation Scheme v Edington  FCAFC 8 at ).
An important basis for many decisions of the Superannuation Complaints Tribunal is that a trustee, either by virtue of a provision in its governing rules or by virtue of a provision in each of the State and Territory Trustee Acts, has a power to compromise claims. Consequently, the Tribunal has made numerous determinations setting aside decisions of trustees and substituting others by exercising the trustee’s compromise power (see Retail Employees Superannuation Pty Ltd v Crocker  FCA 1330 in relation to the power to make compromise determinations). AFCA is, in that respect, in the same position as the Tribunal.
Because AFCA, in making a determination, can affect the interests of the parties to the complaint, it is in the same position as the Superannuation Complaints Tribunal in that it must accord procedural fairness to the parties. Therefore, if a determination is proposed to be made on a ground on which an affected party has not made a submission, the parties must first be given the opportunity to make submissions on that issue. In Employers First v Tolhurst Capital Ltd  FCA 616, Branson J said, in that respect:
“The obligation on the tribunal to afford procedural fairness to the parties to a review means that it may not make a determination adverse to the interests of a party to that review without giving that party a reasonable opportunity to make written submissions to the tribunal on the approach the tribunal is contemplating.”
AFCA to give reasons
Section 1055A requires that AFCA, in making a determination, must give written reasons for the determination, in the same way that the Superannuation Complaints Tribunal is required by s 40 of the Complaints Act to give written reasons for its decisions. The obligation to give reasons can result in a submission in an appeal that insufficient or inadequate reasons were given for the decision.
The operation of a determination
A determination by AFCA comes into operation immediately upon the making of the determination unless AFCA specifies in the determination that it is not to come into operation until a later date (s 1055B(1)). If the determination varies a decision or substitutes another decision for the decision-maker’s original decision, AFCA’s determination has effect from the date on which original decision-maker’s decision had effect, unless AFCA otherwise orders (s 1055B(3)).
Appeals to the Federal Court
Section 1057(1) provides for a party to a complaint to appeal to the Federal Court, on a question of law, from a determination of AFCA. What is a question of law, rather than a finding of fact, has been a frequent issue in appeals to the court against determinations of the Superannuation Complaints Tribunal. The decided cases dealing with this issue are discussed in Chapter 58 of Law of Superannuation.
The court cannot order costs against a complainant who does not defend an appeal instituted by another party (s 1057(5)). It is surprising that the same restriction on costs orders does not apply to a person who is a party to a death benefit complaint and does not defend an appeal instituted by another party.
Referring contraventions and breaches to the regulators
Section 1052E(1) requires that if AFCA becomes aware, in connection with a complaint, that a serious contravention of a law or a contravention of the governing rules of a fund or a breach of the terms and conditions of an insurance policy may have occurred or that a party to a complaint may have refused or failed to give effect to a determination made by AFCA, it must give particulars to the relevant regulator.
Section 1052E is similar to s 64 and 64A of the Complaints Act which require the Tribunal to give notice to the regulators of a contravention of a law or of the governing rules of a fund or a breach of the terms and conditions of an insurance policy. Under s 65 of the Complaints Act, the Tribunal is required to report to the regulators any failure it becomes aware of to give effect to a tribunal determination.
Differences between AFCA and the Superannuation Complaints Tribunal
There are some differences between the legislation that governs AFCA and that which governs the Superannuation Complaints Tribunal, which are significant in relation to the operation of AFCA. Some of these are set out below. It is likely that some of the differences will be dealt with in rules adopted by AFCA.
- • Section 19 of the Complaints Act requires that the Tribunal cannot deal with a complaint unless the complainant has first made a complaint to the trustee but that is not required for complaints to AFCA.
- • Section 14(5) of the Complaints Act states that the Tribunal cannot deal with a complaint that relates to the management of the fund as a whole. That restriction has been read down by the Federal Court in appeals against Tribunal determinations. AFCA is not prevented from dealing with complaints that relate to the management of the fund as a whole.
- • Section 9 of the Complaints Act prescribes how the Tribunal is to be constituted for the purposes of hearing a complaint. That is not the case with AFCA.
- • Section 9(5) of the Complaints Act states that if more than one member of the Tribunal hears a complaint and the members disagree on a determination to be made, a decision of the majority is taken to be the Tribunal’s decision. There is no such prescription in relation to AFCA.
- • Members of the Tribunal are required by s 10 of the Complaints Act to give notice of any financial interest they may have in a matter they are hearing. That does not apply to AFCA members, but they are required by s 1051(4)(b) to give independent determinations.
- • Section 13 of the Complaints Act required the Tribunal to prepare a memorandum available to the public explaining how the Tribunal operates. AFCA does not have that obligation.
- • Under s 14 of the Complaints Act, there are time limits in which disability complaints must be made to the Tribunal, after the decision is made. Those time limits do not apply to complaints to AFCA.
- • Section 15(1) of the Complaints Act permits, for a person acting for another person (such as a minor or a person with a disability), to make a complaint on that person’s behalf. There is no such provision for complaints to AFCA.
- • Section 16 of the Complaints Act requires the Tribunal to assist complainants to make complaints. AFCA is not so required.
- • Section 17 of the Complaints Act specifies what the Tribunal must do in advising the complainant, trustees and other interested parties that a complaint has been received but that is not specified for AFCA.
- • Section 22 of the Complaints Act permits the Tribunal to withdraw a complaint if the Tribunal thinks that the complaint is trivial, vexatious, misconceived or lacking in substance and in some other circumstances. AFCA is not so permitted by the legislation governing it.
- • Section 23 of the Complaints Act permits the Tribunal to grant representation to parties in some circumstances. AFCA’s legislation does not contain such a provision.
- • Section 24 of the Complaints Act requires that a trustee or an insurer must, within 28 days after being advised by the Tribunal of receipt of a complaint, give the Tribunal a copy of all documents that are relevant to the complaint. That does not apply to complaints to AFCA.
- • Section 31 of the Complaints Act states that if there is a settlement at a conciliation, the Tribunal can give details of the settlement to the regulator if the Tribunal thinks it may require investigation. AFCA is not given that power by its legislation.
- • The Tribunal is required by s 32 of the Complaints Act to invite the parties to make written submissions before conducting a review meeting. AFCA is not so required but will no doubt do so.
- • By virtue of s 36 of the Complaints Act, the Tribunal is not bound by technicalities, legal forms or rules of evidence. There is no such provision in AFCA’s legislation.
- • If the Tribunal requires a lawyer to provide information or a document and giving the information or document would involve disclosing a privileged communication, the lawyer is entitled to refuse to comply with the requirement unless the person on whose behalf the communication was made consents to the lawyer complying with the requirement (s 60 of the Complaints Act), which is a legal professional privilege protection. There is no such provision in the legislation for AFCA.
- • Under s 61 of the Complaints Act, a Tribunal member is not liable for any act undertaken in good faith but there is no equivalent provision in relation to AFCA employees or members.
- • The legislation for AFCA does not specify how it is to go about making determinations for superannuation complaints whereas the Complaints Act requires that the Tribunal hold a review meeting at which it is determined what the decision of the Tribunal is or that the review meeting be adjourned to obtain further submissions from the parties. When a decision has been made, the Tribunal is required to provide to the parties a written determination. It is not yet apparent what procedure AFCA will adopt in making determinations.