FOS staff shortages oblige ANZ to suspend recovery action

Ian Rogers

ANZ will suspend action to recover a A$9 million debt owed by a Melbourne toy maker, after a court found the Financial Ombudsman Service erred in a decision to insist the case be considered by a court.

The case, heard in the Supreme Court of Victoria, also sheds light on staff shortages and skills weaknesses at the FOS.

Goldie Marketing, a maker of Mattel Hot Wheels, Transformers and 20th Century Fox characters, fell into default with ANZ in December 2013, only three months after the bank extended "seasonal funding" to the manufacturer.

The borrower swiftly took the matter to the FOS, claiming ANZ "negligently lent to GM when the company was 'over-leveraged', "delayed in assessing and approving seasonal funding for its business activities," and "failed to give enough assistance to the borrowers to help them overcome their financial difficulties."

This line of argument - that the bank both lent too much and too little - was not the question for the court, which turned on jurisdiction.

Larger businesses of the size of Goldie Marketing often cannot have their complaints considered by the Financial Ombudsman Service.

Justi Tonti-Filippini, the banking ombudsman, confirmed the decision to refer the matter to a court given the complexity of the dispute, the inability of FOS to cross examine all relevant witnesses and compel the production of information from third parties, as well as the need to engage experts.

In a decision handed down last week, Justice Cameron Macaulay found that the FOS jurisdictional decision "was made wholly or principally because of a temporary staff resourcing problem, and, secondly, [because] of the conclusion that a decision so made was not made in accordance with the terms of reference." Justice Macaulay added that this was linked to " a significant loss of banking advisors in the past six months," at the FOS.

"The company predicts sales in 2015, based upon various assumptions, of $18 million," Macaulay wrote.

"If it were to be placed into receivership a number of its eight licences would immediately be placed in jeopardy.

"At least one would automatically terminate and, with respect to at least three others, the receivership would trigger the ability of the licensor to terminate the licence."