FOS decision benefits advisers and consumers

15 November 2010 8:00 am

The decision of Judge Pelling QC in Andrews v SBJ Benefit Consultants Ltd has important implications for advisers and all other firms subject to the compulsory jurisdiction of the Financial Ombudsman Service. It establishes that if a complainant has accepted an FOS decision, he or she cannot sue on the same facts.

In brief, Robert Andrews was offered redress under the pension review, considered that the redress offered had been calculated incorrectly and complained to the FOS, which found in Mr Andrews’ favour, awarded compensation of £100,000 and recommended that the firm pay the balance, which was to be assessed by an actuary.

Andrews asked the FOS to explain the implications of accepting the award and it replied: “I cannot advise you as to whether acceptance of the final decision will preju-dice any action that you may take in court to recover the balance. Different judges have taken different views on this. You will need to seek your own legal advice on this matter.”

Andrews accepted the award, received his compen-sation and sued, at which point the firm made an application to determine if his claim had been extinguished by the FOS decision.

A key part of the decision concerned whether the FOS is a judicial tribunal. The judge had to consider matters such as whether evidence could be presented to it and whether the parties could make submissions. The judge therefore concluded that the FOS is a judicial body.

Andrews also argued that despite the FOS’s judicial nature, it is not a tribunal as its procedures are informal, it has a fair and reasonable jurisdiction and does not have to apply the law. These arguments were discounted by the judge, who also concluded that an FOS decision becomes final once accepted by the complainant.

The judge therefore held that the FOS is a judicial tribunal of competent juris-diction which had made a final judgment on the matters sought to be raised in the litigation, such that Andrews’ claim could not succeed.

Some commentators have expressed concerns that this ruling will force consumers with claims worth over £100,000 to embark upon expensive litigation. These concerns misunderstand the nature of the FOS, which is a quick and informal dispute resolution process for lowervalue claims based on what is fair and reasonable. This is exemplified by the fact that currently only 0.1 per cent of claims, or about 120 a year, are thought to be worth more than £100,000. In any event, consumers with claims worth more than £100,000 are not prevented from using the FOS and may consider it worthwhile to sacrifice a proportion of their claims in return for removing the need to fund litigation and the risk of adverse costs orders.

This decision has benefited both advisers and consumers, as consumers now know that in order to litigate on the same facts, they must reject any FOS award.

Harriet Quiney is a partner at Fishburns Solicitors and represented SBJ Benefit Consultants in this case

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