The High Court has ruled that the Financial Ombudsman Service does not have the power to make binding “directional” awards requiring redress payment of over 100,000.
The FOS has the power to make two types of binding awards, a monetary award capped at 100,000 and a directional award, in which a firm takes such steps as the FOS considers “just and appropriate”, which is not subject to a financial limit.
However, the ruling was brought on two separate cases where a complainant had obtained an FOS award in his favour, which appeared to require a redress payment of over 100,000 and, in one, well over 1m.
The complainants – Roger Bunney and Jeremiah James Cahill – brought the case to the High Court after Burns-Anderson and Timothy James and Partners refused to pay more than 100,000.
The two firms, represented by law firm CMS Cameron McKenna, argued that 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.
The court held that it is not necessary for an award to be quantified in monetary terms in order to be classed as a monetary award and so the 100,000 payment cap is applicable to any directional award that requires payment.
CMS say this ruling prevents the FOS circumventing the 100,000 cap by using formulae to calculate redress rather than stating specific figures.
Financial Ombudsman Service spokesman David Cresswell says: “We have always pointed out that it is for the courts to decide how much money can be awarded in the event that a consumer pursued an ombudsman award through the legal system and up to the courts to enforce. This is welcome clarification.”
Collegiate legal director Martin Archer says: “Insurers derive real comfort from the 100k FOS limit when assessing premiums and this judgement is an important victory