Landmark ruling means complainants cannot sue in addition to FOS award
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The High Court has ruled a complainant cannot accept a Financial Ombudsman Service award and pursue the firm in court for additional redress over the same complaint, Money Marketing can reveal.
The FOS can award redress of up to £100,000, although it is proposed this should increase to £150,000. There has been legal uncertainty about whether the complainant has the right to sue for additional redress.
The judgement, handed down yesterday by Mark Pelling QC in the High Court in London, rules that a claimant who accepts a final decision from the ombudsman is bound by it and will not subsequently be able to bring a civil claim in relation to the same matter.
Fishburns Solicitors partner Harriet Quiney (pictured), who represented the IFA firm in the case, says: “This is useful clarification of the law for both financial advisers and their clients as it means that when FOS makes a decision the consequences of acceptance of that decision are clear.”
For a full analysis of the decision see next week’s Money Marketing.
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Readers' comments (9)
Anonymous | 5 Nov 2010 8:49 am
Itr is a shame that FOS decisions are so inconsistent and in contravention of the rule of law. How about a high court ruling on the FOS
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Bill Warren | 5 Nov 2010 8:57 am
Apart from the wider view on the FOS and its decisions,this is still a very important step forward for all firms and hopefully will also give some reassurance to PII insurers who are quite rightly concerned currently with the whole shift in the consumer claim arena.Well done Harriet Quiney and Fishburns.
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Anonymous | 5 Nov 2010 10:15 am
What a ridiculous ruling......if this is the case the FOS awards cannot be capped. If not it is no better than the FSCS.
Going to court is expensive and time consuming (not to mention that you are then at the whim of the judge) and the whole point of the FOS is to allow customers who have lost money to avoid this unreasonable expense.
So now anybody who has lost more than the capped award has got to go to court to get full redress, even in an 'watertight' case, which would allow the firm being sued to 'depocket' the customer ie spend so much money or their defence, however tenuous, that the customer is forced to give up because of the risk, even tiny, that they lose.
Though in reality this usually happens as the FOS seems content to only rule on simple cases with low payouts, referring as they are (bizarrely) allowed to duck a decision and refer the complainant to court anyway,
I foresee a lot more cases now skipping the FOS step (as it is pointless) and going straight to the civil case route with lots of no win no fee lawyers getting involved.
Perhaps the FSA might want to start enforcing their own regulations on behalf of the customer and not causing additional expense and stress to people who have already lost substantial amounts of money.
Nothing like 'protecting the customer' is there.......
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Adam Smith | 5 Nov 2010 11:09 am
Bill Warren et al. - don't lose sight of the fact that thsi ruling means that someone's seriously lost out on their pension because of poor advice from SBJ.
You can't be 100% pro-TCF and also applaud this judgement.
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Julian Stevens | 5 Nov 2010 12:51 pm
A ruling in a court of Law on the FSA's continuing (illegal) denial of the protection of the 15 year Longstop for complaints wouldn't go amiss either.
Another one for Gareth Fatchett's list of things to get sorted.
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Simon Kershaw | 5 Nov 2010 4:27 pm
The FOS made a non binding recommendation in this case that SBJ make additional payment to the client over and above the £100k maximum award. As the case ended up in court it seems this recommendation was not taken up.
I wonder if the client may not have been better rejecting the FOS award and taking the paperwork to back his case in court. I am sure that many barristers would take such a case no win no fee.
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Simon Mansell | 6 Nov 2010 12:06 pm
Is it not strange that when our rights are stolen we need to celebrate their return? Here we have an even stranger situation – our rights are stolen, this act of theft is aided and abetted by a Star Chamber Court and then the thief seeks a second theft through the legitimacy of the real courts.
NB: I use the term thief as an analogy of the loss of IFA rights and not as a mark of the legitimacy or otherwise of this particular case!
In the Opinion of Anthony Speaight QC:
“There are growing concerns that the pendulum of consumer protection has swung too far in the case of the Financial Ombudsman Service and small independent financial advisers. The FOS appears regularly to be exercising its discretion to adjudicate upon claims against small IFAs up to its maximum theoretical jurisdiction of £100,000. There is rarely an oral hearing. And there are good reasons to believe that sometimes FOS makes substantial awards in cases which would be rejected by the courts. On other occasions compensation seems to be calculated in a more generous manner than a court would assess damages. Some such IFAs are wholly uninsured; others have to bear very large excesses. There is no appeal on the merits.
Such a system would be tolerable if the maximum award were modest – say £5,000 (which is the maximum summary compensation under the legal professions’ schemes for “inadequate professional service”). It would also be tolerable if, as is the case with the summary system of adjudication in the construction industry under the Housing Grants Construction and Regeneration Act 1996, there could be a complete rehearing before a court. And it might even be tolerable if it were applied only against very large companies
But an unappealable, compulsory, summary jurisdiction against small traders making awards as great as £100,000 is, in my view, both wrong in principle and producing injustice in practice.”
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Bob Donaldson | 6 Nov 2010 6:31 pm
I also see a lot more people taking a a chance in court. If you had lost say £500,000+ and were awarded a poultry sum by FOS, then surely this would hearten your cause and give you further reason to take your case to court and claim the whole amount.
The only development I see here is the 'no win no fee' lawyers taking on more cases.
It is interesting in a recent case I have had the client was awarded compensation by the FSCS which they accepted, but then back peddled and decided to pursue the claim against me. Despite having accepted the award, the FOS then allowed him to pursue the claim against me.
I wonder how this would stack up in a Court of Law? Perhaps the FOS should consider this in the light of this judgement.
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Anonymous | 10 Nov 2010 8:39 am
Late coming to this article.
In future then, I would suggest that no-one should settle a claim with one of the mediators and all complainants should demand to have their case reviewed by an ombudsman. Only when I am convinced that the mediators really understand the business can I advise otherwise.
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