I'm interested in…

  • Strategy & Procedure
  • Catastrophic Injury
  • Professional Indemnity
  • Motor
  • Fraud
  • Disease
  • Liability
  • Commercial Insurance
  • Costs
  • Local Authority
  • Scotland

When is a FOS decision binding?

On 14 February 2014, the Court of Appeal handed down judgment in Clark & Clark v In Focus(1).  Reversing the first instance decision, the Court held that it is not possible to collect an award from the Financial Ombudsman Service (“FOS”) and then litigate the same matter in court, upholding our first instance decision in Andrews v SBJ Benefit Consultants Ltd(2).  

Court of Appeal

The Court of Appeal ruled that this is not possible.  Further, it is not open to a Claimant to accept a FOS award and then reserve the right to go to court.  In reaching its decision the Court considered the principle of “res judicata”, which holds that when a matter has been judicially decided, it cannot be decided again.

In her leading judgment Lady Justice Arden said:

The Court of Appeal ruled that this is not possible. Further, it is not open to a Claimant to accept a FOS award and then reserve the right to go to court. In reaching its decision the Court considered the principle of “res judicata”, which holds that when a matter has been judicially decided, it cannot be decided again. In her leading judgment Lady Justice Arden said: “I am satisfied that the ombudsman’s award is a judicial decision for the purposes of the requirements of res judicata. …The fact that the ombudsman has to reach a conclusion on the basis of what in his opinion is far and reasonable does not in my judgment exclude the application of res judicata.”

 

Comment

This should give certainty to firms subject to the jurisdiction of FOS including banks, building societies, insurers, financial advisers, insurance and mortgage brokers that once a claim has been determined by FOS, that determination has been accepted by the customer and compensation has been paid, the claim is over.

The only issue which remains undetermined is the extent to which a customer may argue that while FOS has considered some aspects of his or her claim, there are other issues which were not considered by FOS, which might still be considered by the court.  Lady Justice Arden said:

…there will be occasions when a complainant may bring court proceedings against an adviser even though he has accepted an award to which s228(5) applies. Whether that can happen depends on whether the substance of the proceedings asserted before the courts are the same as that before the Ombudsman Service. Fresh proceedings are not permitted if based on the same cause of action so a complainant cannot use proceedings to top up his award for that wrong. The burden of showing that the requirements for res judicata are made out on the facts of the two sets of proceedings will fall on the adviser.”

 

Satellite litigation is therefore possible, particularly where the same or similar facts are raised but the losses alleged are different.  It will be for the adviser to show that the two cases are in substance the same.

While the Court of Appeal decision is therefore to be welcomed as providing clarity and preventing customers from taking two bites of the cherry at least in respect of the same losses, we conclude that when responding to FOS complaints, firms should ensure that they cover all relevant issues to reduce the risk of customers bringing subsequent court proceedings.

(1) Clark & Anr v In Focus Asset Management & Tax Solutions Ltd [2014] EWCA Civ 118

(2) 2010 EWHC 2875 (Ch)

Contact

For further information please contact Harriet Quiney, Partner on 020 7280 8873.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Top