The Hardiman principle – whether it applies to AFCA
In MetLife Insurance Limited v Australian Financial Complaints Authority (No.3)  FCA 849 (20 July 2022), the court gave detailed consideration to the Hardiman principle in the context of the argument on costs following the determination of the proceedings.
This is the principle articulated in R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 at 35‑6, to the effect that an administrative decision-maker – which has continuing functions to be exercised in respect of the subject matter of the decision under challenge – is expected to maintain its impartiality in proceedings, challenging its decision by not entering the field as a protagonist. Or, if it does, by confining its submissions to issues of its powers and procedures.
The question arose whether, and to what extent, the principle applies to the Australian Financial Complaints Authority (AFCA). AFCA is the operator of a scheme for the resolution of disputes, being a scheme that was established to give effect to laws introduced into the Corporations Act 2001 (Cth).
AFCA is a private body whose members are financial services licensees. Any person who is the holder of a financial services licence and who provides certain types of services specified in the Corporations Act must be a member of the scheme.
The defendant (MetLife) is a member of AFCA. Certain complaints were made by a person about MetLife to AFCA, and AFCA determined them in the complainant’s favour. MetLife commenced proceedings seeking declaratory relief that AFCA had no authority to determine the complaints.
The original complainant filed a submitting appearance. AFCA actively defended the proceedings and also commenced a cross-claim against MetLife, claiming an order for specific performance of its own determination.
In a defence to MetLife’s claim, AFCA advanced claims of estoppel and acquiescence. AFCA also advanced a defence to the effect that if the complaints had not been determined under the scheme, then there had been separate ad hoc agreements by which MetLife, AFCA and the complainant had agreed that AFCA should have the power to determine the complaints.
In determining a separate question, the court in earlier reasons held that AFCA had authority to make the determinations:  FCA 23. A dispute then followed as to the appropriate order as to costs to be made. MetLife sought an order that AFCA bear its own costs of the proceeding because AFCA failed to adopt a position of neutrality of a kind it was required to adopt.
AFCA argued that it was appropriate to take the course it did and, as it has been successful, a costs order should be made in its favour. In this context, the court addressed the case law on the Hardiman principle (at -). Colvin J also addressed the “somewhat unusual” status of AFCA (at -). While it is not a statutory body and exercises consensual authority, the scheme is mandatory for financial services licensees and this gives AFCA attributes of a statutory decision-maker.
In exercising its discretion on costs, the court held that it was appropriate to distinguish between four categories:
- the costs associated with the question whether AFCA had jurisdiction to make the determinations
- the costs associated with the cross-claim by which AFCA sought specific performance of the determinations
- the costs associated with the claim that there were ad hoc agreements to the effect that AFCA would make the determinations
- the costs associated with the defences of acquiescence and estoppel (at ).
For category 1, the court held it was consistent with the Hardiman principle for AFCA to make submissions in answer to MetLife’s claims that AFCA lacked jurisdiction. In the usual course, the appropriate order was that there be no order as to costs (at ).
For category 2, AFCA’s cross-claim was simply the obverse of MetLife’s application for declaratory relief and did not raise additional issues. The court was not persuaded that the appropriate order was that there should be an order for costs in favour of AFCA (at -).
Category 3 also did not support a costs order for AFCA. AFCA had no interest in advancing a claim that there had been ad hocagreements which bound MetLife to the terms of the determinations, and MetLife was successful on whether there had been such agreements (at ).
Category 4 also did not support a costs order for AFCA, noting that the additional defences had not been determined (at ).
Note: The Full Court heard MetLife’s appeal from the separate question judgment on 23 August 2022. AFCA’s cross-appeal on costs has been stood over until the Full Court has decided MetLife’s appeal.
Dan Star QC is a Senior Counsel at the Victorian Bar, ph 03 9225 8757 or email firstname.lastname@example.org. The full version of these judgments can be found at austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment.