FOS v Pioneer Credit Acquisition Services [2014] VSC 172

FOS determined that the certain debts were unenforceable. The lender argued that there is an implied term in its contract with FOS that FOS must correctly decide questions of law. The judge held this was not the case:

The Membership Contract only requires FOS to have regard to applicable legal principles. They are only one of the matters to be taken into account. Therefore, it cannot be that FOS is required to apply legal principles to the exclusion of all else, nor that it will be in breach of the Membership Contract should it fail to apply the law strictly…Given the conclusion which I have reached, it is not necessary to determine whether the Findings made by the case managers were correct, but for the wrong reasons.

With respect to the judge the if the legal principles having regard to are not in fact legal principles but rather pseudo-legal nonsense made up by FOS officers with no legal training, then they are not really having regard to legal principles in reaching their determination.

The correct decision would have been to say that FOS must first articulate what it thinks are the correct legal principles and explain why they are not being applied. This is the only way it can be seen that they are having regard to legal principles.

During the trial Mr Field the Lead Ombudsman – Banking & Finance for FOS gave evidence that:

We have to reach a resolution of the dispute and in order do that you have to take into account the legal principles that apply to that particular dispute. That’s what we do and if that involves the interpretation of the law and the application of those legal principles to the facts in dispute, then that’s what we are required do, that’s our job.

Despite this the judge held that FOS was not acting as a court, something prohibited by the constitution. You be the judge.

In this case FOS ordered the lender not to commence proceedings even though if it did they would become statute barred, because if it did the borrower would be given an adverse credit listing. The judge held:

The next question is did FOS did exercise its discretion reasonably when it refused its consent to the commencement of proceedings. As Mr Field made clear, the decision was carefully taken after weighing up a number of factors, including the likelihood of the debts becoming statute barred. In particular, account was taken of the fact that the dispute concerned the very consequence which would flow from the commencement of proceedings; that is, the credit default listing. That was a serious matter for the individuals concerned. On the other hand, FOS also took into account the serious consequences for Pioneer should it not be able to recover its debt if the claim was statute barred. In my opinion, FOS having weighed up the consequences for both Pioneer and the Disputants, the decision that it arrived at was reasonable.

With respect to the judge the decision was not reasonable. An adverse credit listing is something that can be expunged once the matter has been resolved, the loss of the lenders rights forever is permanent. In any event it would have been far more reasonable to ask the debtor to file a holding defence which would have prevented any adverse credit listing rather than extinguishing the lenders rights. Extinguishing a lenders rights by preventing it from having access to the courts attacks the very foundation of a free society.

A man has but poor encouragement to bestow labour and expense upon a piece of ground, in which he has no secure property; and when neither himself, nor his posterity, will, probably, ever derive any permanent advantage from it.

Joseph Priestley—

Is the institution of private property expedient? It is. Man’s happiness greatly depends upon the satisfaction of his temporal wants. The fruits of the earth are a necessary means of satisfying those wants. Those fruits can never be produced in abundance without cultivation. That cultivation will never prevail without the stimulus of certain possession. No man will sow when others may reap. We have abundant proof of this, in the history of every savage nation.

Herbert Spencer—

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