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£100,000 cap for FOS binding awards confirmed by High Court

The High Court has confirmed today that it does not have the power to make a binding award requiring a redress payment in excess of £100,000.

CMS Cameron McKenna says that despite attempts by the Financial Ombudsman Service to circumvent the monetary award, the High Court has put a limit on the award granted.

CMCK says the decision ruled on two separate claims where a complainant had obtained a FOS award in his favour.

In each case, the award appeared to require a redress payment of more than £100,000 and in one of the cases it was over £1m.

The FOS has the power to make two types of binding award – a monetary award limited to a maximum of £100,000. Awards exceeding this amount can be granted but are not binding. The second type is a directional award – a direction that the firm takes such steps as FOS considers “just and appropriate,” which is not subject to a financial limit.

The two firms refused to pay the complainants more than the £100,000 redress, given the apparent cap on awards. Both complainants brought claims seeking to enforce the FOS decisions, saying the decisions were directional awards and were not subject to any cap.

FOS agreed with this argument.

CMCK acted for the firms in successfully resisting the enforcement proceedings.

A spokesman says the Court held that: “Whether or not an award is classed as a monetary or a directional award depends on the substance rather than the form of the award. If an award requires the payment of money to, or for the benefit of, the complainant it is a monetary award and therefore subject to the £100,000 limit.

It also said: “The FOS does not have the power to make a directional award that would require a firm to make a payment that exceeds £100,000. If the cost of compliance with a direction is unknown at the time it is made, it is subject to the implicit limitation that it will not be enforceable once the £100,000 limit is reached.”


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