External Dispute Resolution: Limits to Disputing Decisions

external dispute resolution

Recent case law highlights the limited options open to Financial Service Providers (FSPs) when faced with adverse decisions made by external dispute resolution tribunals.

What should Financial Service Providers know about external dispute resolution schemes?

Background to external dispute resolution schemes

There are currently two ASIC-approved external dispute resolution schemes (EDR) operating in the Australian financial and credit industries. They are the Financial Ombudsman Service (FOS) and Credit and Investments Ombudsman (CIO). Both have broad remedial powers when it comes to resolving complaints.

Once an applicant accepts a determination it is binding on all parties to the dispute. This means the determination is final. Unlike applicants who retain their rights to take their complaint to court should they be unsatisfied with the determination, the avenues open to FSPs are much narrower. Also, courts have generally only been willing to intervene in favour of FSPs where the tribunal’s decision is manifestly unreasonable.

What is an unreasonable determination?

Courts have held that the decision by the tribunal ‘must not be so unreasonable that it is not open to a reasonable decision maker’. The Victorian Court of Appeal in Cromwell Property Securities Limited v FOS found that decisions that are merely bizarre, unfair, or irrational will not necessarily be classified as unreasonable. This is a very tough benchmark to satisfy. And made more difficult by the broad aims of EDR schemes to resolve disputes having regard to law, applicable industry codes, good industry practice and fairness.

It is important to remember that an EDR tribunal is not a court. And it is possible that a FSP will face a decision that does not entirely coincide with legal rules. Further, a court finding that a determination is unreasonable might not adequately resolve the dispute from the FSP’s perspective. Why is this?  Because the likely outcome is the return of the matter to the tribunal for re-consideration.

Breach of Contract

The contract forms the basis of the relationship between a FSP and an EDR scheme. The relevant rules and terms of reference clarify the terms of the contract. In theory, a FSP could rely on a breach of contract in appealing a determination in court. However, as the powers of EDR tribunals are broad and discretionary, it is hard to conceive of a situation where a tribunal would have stepped so far out of its ambit so as to ground a breach of contract claim.

What about Judicial Review?

The judicial authority on this point is clear. Determinations made by EDR tribunals are not subject to judicial review.

Lessons regarding decisions made by EDR tribunals

In summary, the above analysis highlights the lack of effective rights of review for decisions made by EDR tribunals. However, of some comfort to FSPs is that disputes are often resolved without the need for the tribunal to make a final determination. Rather, the vast majority of complaints result in a mediated outcome.

In any event, FSPs should review their processes to minimise their exposure to unpredictable EDR decision-making processes.

For more information go to the Australian Securities and Investments Commission ASIC website.


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This publication is provided for your general information and interest only. It is not intended to be comprehensive, and does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.


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