1. Executive Summary
In D H Flinders Pty Ltd v Australian Financial Complaints Authority Limited [2020] NSWSC 1690, Stevenson J held that, under the AFCA Rules then in force, the Australian Financial Complaints Authority did not have contractual authority, jurisdiction or power to determine complaints against AFSL holder D H Flinders Pty Ltd arising from conduct of its corporate authorised representative, Equitable Financial Solutions Pty Ltd (EFSOL), where that conduct was outside the representative’s actual, ostensible or apparent authority.
The distinction at the centre of the case was important. Under Div 6 of Pt 7.6 of the Corporations Act 2001 (Cth), particularly ss 917A–917F, a financial services licensee may be statutorily responsible to a client for conduct of its representative even where the representative acted outside authority. However, Stevenson J held that this statutory attribution of responsibility did not expand AFCA’s contractual jurisdiction under the AFCA Rules as they then stood.
The Court emphasised that AFCA is a “complaints-handling body, not a regulator” and that its authority to determine these complaints was derived from the contractual framework constituted by the AFCA Rules. The Rules therefore determined the boundary of AFCA’s jurisdiction. At the time, the definition of “Financial Firm” did not extend to representatives acting outside authority.
The judgment also contains significant observations about procedural fairness. Although it was unnecessary to decide the point, Stevenson J indicated that AFCA had gone beyond assisting complainants to navigate its process. AFCA staff had identified D H Flinders through their own searches, suggested that complainants bring claims against it and adopted a position that D H Flinders was responsible for EFSOL’s conduct. His Honour considered that AFCA had “entered the fray” and was acting in an advisory relationship with complainants.
The specific jurisdictional gap identified by the Court was subsequently addressed. On 5 January 2021, ASIC issued a legislative instrument requiring AFCA to amend its Rules so that the relevant definitions expressly captured representatives acting within or outside authority. Those changes applied to complaints received from 13 January 2021.
Accordingly, the case remains important for the principles governing AFCA’s contractual jurisdiction, statutory responsibility for representatives and procedural fairness, but its central jurisdictional outcome should not be treated as describing AFCA’s current Rules. The current AFCA Rules expressly include representatives regardless of whether their conduct is within or outside authority.
2. Citation & Context
| Item | Detail |
|---|---|
| Case | D H Flinders Pty Ltd v Australian Financial Complaints Authority Limited [2020] NSWSC 1690 |
| Court | Supreme Court of New South Wales |
| List | Equity — Commercial List |
| Judge | Stevenson J |
| Hearing | 18 November 2020 |
| Decision / orders | 26 November 2020 |
| Plaintiff | D H Flinders Pty Ltd |
| First defendant | Australian Financial Complaints Authority Ltd |
| Other defendants | Muhammad Imad Khan, Brahim Nassereddin and Ahmed Ibrahim |
| Principal legislation | Corporations Act 2001 (Cth), including Div 6 of Pt 7.6 |
| Principal issue | Whether AFCA had contractual authority to determine complaints against a licensee relating to unauthorised conduct of its corporate authorised representative |
| Outcome | Declaration that AFCA had no contractual authority, jurisdiction or power to determine the relevant complaints |
D H Flinders held an AFSL. EFSOL was its corporate authorised representative for a limited purpose associated with the EFSOL Income Fund, a wholesale product that never became operational. EFSOL separately promoted the EFSOL Ameen Investment Program, with which D H Flinders had no involvement. EFSOL subsequently entered liquidation.
Dr Khan and Mr Ibrahim had invested through the Ameen Investment Program and complained to AFCA after EFSOL failed to return their invested funds. AFCA then accepted complaints against D H Flinders based on EFSOL’s status as its corporate authorised representative. There were 24 active complaints arising from the Ameen Investment Program, meaning the proceedings operated practically as a test case.
3. Material Facts and Governance Context
D H Flinders appointed EFSOL as its corporate authorised representative solely to act as investment manager of the EFSOL Income Fund. D H Flinders later suspended and terminated EFSOL’s authority after learning it had been conducting unrelated business.
The Ameen Investment Program was separate. D H Flinders had not authorised EFSOL to offer it and there was no evidence that D H Flinders had held EFSOL out as having authority to do so. The Court recorded that D H Flinders had no knowledge of or involvement in that activity until it took steps concerning EFSOL’s representative authority.
That created two distinct legal questions:
- Could D H Flinders nevertheless be legally responsible for EFSOL’s conduct under the Corporations Act?
- Even if it could, did the AFCA Rules give AFCA jurisdiction to determine that liability through the AFCA Scheme?
The Court answered that these questions were not interchangeable.
Sections 917A–917F establish a statutory attribution regime for conduct of financial services representatives. Section 917B relevantly provides that, where a representative represents only one licensee, the licensee may be responsible as between itself and the client whether or not the representative’s conduct was within authority, subject to the statutory conditions and exceptions. Stevenson J accepted that D H Flinders might therefore face liability if a complainant brought court proceedings.
But that did not determine AFCA’s jurisdiction.
4. Issues and Findings
| Issue | Position considered | Finding | Pinpoint |
|---|---|---|---|
| Nature of AFCA jurisdiction | Whether statutory liability under Div 6 automatically conferred AFCA jurisdiction | No. AFCA’s jurisdiction depended on its Rules as a contractual matter | [53]–[54] |
| Rule B.2.1 | Complaint had to arise from the provision of a Financial Service by a Financial Firm to the complainant | D H Flinders had not itself provided the Ameen financial service to complainants | [60]–[64] |
| “Financial Firm” | Whether EFSOL’s status as representative caused its unauthorised conduct to be treated as conduct of D H Flinders | Not under the Rules then in force | [69]–[89] |
| Corporations Act ss 917A–917F | Whether statutory attribution expanded contractual AFCA jurisdiction | No | [42]–[52], [74]–[89] |
| Judicial review / contractual jurisdiction | Whether AFCA’s jurisdictional determination attracted only a legal-unreasonableness standard | No; the anterior question was whether contractual authority existed at all | [90]–[94] |
| Procedural fairness | Whether AFCA acted impartially in facilitating complaints against D H Flinders | Not necessary to decide, but the Court indicated it would have found concerns | [95]–[136] |
| Relief | Whether declaration should issue | Yes | [137] |
The decisive proposition was that the word “representative” in the then AFCA Rules carried its ordinary meaning of a person authorised to act for another. The Rules did not incorporate the broader statutory attribution created by s 917B.
Accordingly, because EFSOL had no relevant authority to provide the Ameen Investment Program on behalf of D H Flinders, the complaints did not arise from provision of the financial service by D H Flinders to the complainants within Rule B.2.1. AFCA therefore lacked jurisdiction.
5. Key Legal Principles
AFCA’s authority is derived from the contractual scheme rules
Stevenson J treated the AFCA Rules as forming a binding tripartite contract between AFCA, the member financial firm and the complainant once a complaint was made. The scope of AFCA’s adjudicative authority therefore had to be determined by construing that contract.
This distinction is critical for licensees. AFCA operates within a statutory framework, but the existence and extent of jurisdiction over a particular non-superannuation complaint may turn on the Rules.
A disagreement about whether AFCA has correctly exercised a discretion within jurisdiction is therefore conceptually different from a dispute about whether the Rules confer jurisdiction in the first place.
Statutory responsibility and AFCA jurisdiction are separate questions
The Court expressly recognised the protective purpose of Div 6 of Pt 7.6. A licensee may be responsible for representative conduct even where that conduct exceeded authority.
But the Court declined to import that statutory rule into the contractual definition of “Financial Firm”.
This meant that, under the Rules applicable to these complaints, the existence of a potential court cause of action against the licensee did not itself establish AFCA jurisdiction.
For licensees, the broader governance point remains important despite the subsequent rule amendment: limitations placed in an authorised representative agreement do not necessarily confine the licensee’s external statutory exposure.
AFCA’s jurisdiction is not unlimited simply because it determines its own process
AFCA submitted that even an error about jurisdiction was within its contractual decision-making function and could only be disturbed on principles of legal unreasonableness.
Stevenson J rejected that characterisation in this case. The question was anterior: whether AFCA had contractual authority to consider the complaints at all. His Honour distinguished authorities dealing with decisions made within an established contractual jurisdiction.
This remains significant when a financial firm considers a jurisdictional objection. It should distinguish between:
- disagreement with AFCA’s exercise of a discretion; and
- a contention that an essential jurisdictional requirement under the Rules is not satisfied.
Assistance to complainants has limits imposed by impartiality
The Rules permitted AFCA to help complainants submit complaints, while also requiring independent, impartial and procedurally fair treatment.
The Court considered that those provisions contemplated assisting a person to formulate or lodge a complaint the person had decided to pursue. They did not necessarily authorise AFCA to identify another potential respondent and positively encourage a complaint against that entity.
AFCA personnel had discovered the D H Flinders relationship through their own ASIC searches, discussed opening complaints against D H Flinders and communicated a view that D H Flinders was responsible.
Although the point was technically obiter because jurisdiction had already been resolved, Stevenson J considered there was substance to the complaint that AFCA had moved from neutral assistance into advocacy.
6. Orders and Practical Effect
There were no civil penalties, compensation orders or findings of contravention against D H Flinders.
The substantive relief was declaratory. Stevenson J proposed to declare that AFCA had “no contractual authority, jurisdiction or power” to determine the relevant complaints.
Importantly, the decision did not determine that D H Flinders could never be liable for EFSOL’s conduct.
Indeed, the Court expressly recognised that the statutory attribution provisions could expose D H Flinders to liability if complainants pursued proceedings independently of AFCA.
That distinction should be preserved in any compliance interpretation of the judgment:
Outside AFCA jurisdiction did not mean outside legal liability.
7. Relevance for Licensees and Authorised Representatives
The decision supports several practical propositions for AFSL governance.
Authorised representative scope is not a complete liability shield. Contractual restrictions on an authorised representative are important operational controls, but Div 6 of Pt 7.6 can attribute responsibility to a licensee beyond the representative’s authority.
Supervision should test actual business activity, not merely contractual authority. A representative agreement saying what an AR may do is not evidence that the AR is only doing those things.
Product and service surveillance matters. Licensees should be capable of detecting representatives promoting products, investment schemes or advice services that are not on the approved product or service inventory.
AFCA jurisdiction should be assessed separately from substantive liability. A firm faced with a complaint should identify the relevant version of the Rules, applicable jurisdictional provisions, factual customer relationship and representative status before addressing merits.
Procedural concerns should be documented contemporaneously. Where a firm considers that AFCA has crossed from process assistance into advocacy, it should identify specific communications and explain precisely how the alleged conduct affects fairness rather than making broad assertions about bias.
8. Risk Management & Compliance Recommendations
| Audience | Control Type | Legal Rationale | Risk Indicator | Practical Control |
|---|---|---|---|---|
| Board / Risk Committee | Governance | Licensee exposure for representative conduct | AR operates outside approved business model | Periodic AR risk reporting covering products, advice activity and exceptions |
| Responsible Managers | Preventative | Div 6 representative liability | Services inconsistent with representative authority | Documented scope controls and periodic activity testing |
| Compliance | Detective | Actual conduct may exceed contractual authority | Unapproved products or marketing material | Website, marketing and product surveillance |
| Product Governance | Preventative | Representative product activity | Product not on approved list | Approved-product register linked to AR permissions |
| Monitoring / Supervision | Detective | Licensee exposure may arise despite lack of authority | Complaints mentioning unfamiliar investments | Complaint-triggered AR investigation protocol |
| Legal | Governance | AFCA jurisdiction differs from underlying liability | Jurisdictional objection | Rule-version and jurisdiction assessment before merits response |
| Complaints | Preventative | AFCA procedural obligations | Complaint scope changes during EDR | Maintain chronology of complaint formulation and AFCA communications |
| AR Governance | Corrective | Unauthorised activity | Evidence of scope breach | Immediate containment, client population review and regulatory assessment |
9. Regulatory and Governance Significance
The most important qualification to this case is what happened immediately afterwards.
ASIC considered that D H Flinders had exposed a “jurisdictional gap” between the AFCA Rules and statutory attribution of liability for representatives. On 5 January 2021 it made the ASIC Corporations (AFCA Scheme Regulatory Requirement) Instrument 2021/0002. The instrument required AFCA to amend its definition of “Representative” and its definition of “Financial Firm”.
The required amendment expressly extended the relevant definition to a representative regardless of whether the representative’s conduct was within or without authority.
AFCA records that the amended Rules applied to complaints received from 13 January 2021. Complaints received before that date continued to be dealt with under the earlier Rules.
That position remains reflected in the current Rules. As at March 2026, AFCA’s definition of Financial Firm continues expressly to include a Representative irrespective of whether the relevant conduct is within or outside authority.
Accordingly, this case should not now be used for the proposition that AFCA generally lacks jurisdiction over complaints involving unauthorised conduct by an authorised representative.
Its enduring value lies elsewhere:
- AFCA’s jurisdiction must be found in the governing Rules;
- contractual EDR jurisdiction and substantive statutory liability are analytically distinct;
- licensees can carry statutory exposure for representatives acting outside contractual authority; and
- impartiality and procedural fairness remain important features of external dispute resolution.
10. Recommended Next Steps
For AFSL holders with authorised representative networks, the priority actions are:
- Reconcile representative appointments with actual activities. Test whether each representative’s website, marketing, advice, dealing and product activity corresponds with the scope approved by the licensee.
- Monitor for off-panel products and schemes. Search for investments, managed products and services marketed by representatives that do not appear in the licensee’s product or service register.
- Use complaints as supervision intelligence. A complaint concerning an unfamiliar product should trigger investigation of the representative’s broader activity rather than being treated solely as an individual dispute.
- Review indemnity and contractual recourse. Because statutory liability may exceed contractual authority, representative agreements should address indemnities, insurance, audit access and rights following unauthorised conduct. Those provisions manage recovery and control risk; they do not themselves eliminate client-facing statutory liability.
- Apply the correct AFCA Rules. For any historic jurisdictional issue, identify the Rules applicable when the complaint was received. The D H Flinders outcome arose under the pre-13 January 2021 Rules.
- Separate jurisdiction from merits. Where an AFCA complaint raises a genuine jurisdiction question, document that analysis independently from the firm’s substantive response to liability and loss.
- Preserve procedural-fairness evidence. Retain AFCA communications and chronology where there is concern that complaint framing or party identification has been materially influenced during the EDR process.
11. Referenced Cases and Current Position
Casaclang v WealthSure Pty Ltd (2015) 238 FCR 55; [2015] FCA 761 — statutory responsibility of licensees for representative conduct under Div 6 of Pt 7.6 — considered at [50]–[51].
Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd [2014] VSCA 179 — contractual character of EDR schemes and judicial review of decisions made within contractual authority — distinguished at [90]–[94].
Mickovski v Financial Ombudsman Service Ltd (2012) 36 VR 456; [2012] VSCA 185 — review of an ombudsman’s exercise of powers under scheme rules — distinguished at [90]–[94].
Patersons Securities Ltd v Financial Ombudsman Service Ltd [2015] WASC 321 — contractual EDR authority and review of decisions — distinguished at [90]–[94].
Current-law qualification
The decision was based on the AFCA Rules applicable in 2020. ASIC required those Rules to be amended following the judgment, and the amended definition applied to complaints received from 13 January 2021. The current 2026 Rules continue to capture representatives acting within or outside authority.