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What the landmark FOS ruling means for advisers (and consumers)

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Last week’s landmark Court of Appeal ruling finally brings clarity to the issue of whether a consumer can accept a Financial Ombudsman Service award and sue in court for additional redress.

For consumers the judgment means they have a clear-cut choice: they can either accept an award from the FOS, or reject it and bring court proceedings.

And for advisers, it means greater certainty on the extent of their liability for claims. 

Legal experts had warned if last week’s judgment had gone against In Focus, advice firms could face open-ended compensation claims which would in turn impact on professional indemnity insurance.

In the judgment, Lady Justice Arden said there will still be occasions when a complainant can bring court proceedings even after accepting a FOS award.

This is because the case hinges on the “doctrine of merger”, a legal principle which holds that a person cannot receive more than one judgment in a tribunal or court for the same cause of action, or on the same matter.

DWF Fishburns partner Harriet Quiney says this would only affect a minority of cases where a major incident – such as a fraud – only came to light after the FOS had considered the case.

But she says: “When responding to complaints, firms should ensure their decision letters cover all relevant complaints to reduce the risk of customers bringing subsequent court proceedings.”

The judgment has also been welcomed as a foil to a new breed of claims firms.

Lady Justice Arden said: “If they [consumers] lose court proceedings, it may lead to them losing all they have gained through the FOS. It may also lead to the development of a claims industry in this field that increases the costs of obtaining financial advice.”

So while an element of uncertainty remains, all in all this judgment is a major win for advisers.

Tessa Norman is regulation reporter at Money Marketing

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