The Financial Ombudsman Service (FOS) – two bites of the cherry?
At Redress Law we deal with a variety of claims against banks, financial advisers and others who provide financial services in the UK. Some cases proceed straight to litigation, but there are good reasons why we pursue complaints initially to FOS on behalf of our clients.
Three good reasons to make a complaint to FOS
- The scheme can be quicker and less formal than court proceedings: Section 225 (1) of the Financial Services and Markets Act 2000 which provides for the Redress Scheme says that it is aimed at resolving disputes quickly, with minimal formality by an independent person.
- FOS can make binding awards of up to £150k, and if it thinks it appropriate make a recommendation that a complainant should be awarded more than £150k where it is “fair and reasonable”. Considerable pressure can be used to encourage payment of a higher sum.
- And… the award could be used to fund a court claim!
As for 3, what is the court’s approach?
Pursuant to Section 228 (5) if the complainant notifies FOS that he accepts the determination, it is binding and final.
There have been two recent conflicting court decisions as to whether final does in fact mean final, or whether once an award is made by FOS that money can be used to fund a civil claim.
In Andrews v SBJ Benefit Consultants HHJ Pelling QC said “if it was intended that a complainant could both accept an award from the FOS and commence proceedings in respect of the same dispute, then no sensible use of the language could the scheme have been described, since by definition in at least some cases the dispute would not be resolved by the FOS’ determination, even if the award was accepted.”
However, in Clarke v Focus Asset Management & Tax Solutions Cranston J disagreed with this approach and said “it seems to be that for a complainant to use an award of £100,00 (as it was then) to finance legal costs of bringing court proceedings for a greater amount is not inconsistent with the statutory aims..”
Why the court has ruled there is no “doctrine of merger”
The principle at stake was whether there was a “doctrine of merger” or whether complaints to FOS were merely that and not causes of action giving rise to a civil claim. In Clarke the judge outlined the considerable differences between a typical court tribunal and the Ombudsman, who deals with disputes informally and without necessarily applying the law. If the Ombudsman cannot be considered a tribunal of competent jurisdiction, the doctrine of merger cannot apply. He therefore concluded that the FOS decision was not a binding determination of the Clarks’ cause of action, meaning that they were able to bring a claim at court for the same remedy.
Impact of the Clarke case
The successful appeal of an application to strike out the Clarkes’ claim means that claimants are not prevented from claiming damages in court that exceed the FOS award that they have received as a result of accepting a FOS decision. However, the High Court in this case only determined whether the application to strike out the Claimant’s case should have been successful: no determination was made as to the damages that should be awarded to the Claimants. However, it is a relief to that claims which previously could not be made twice, can now be. That does not mean that the law in this area is settled since that decision is being appealed so watch this space for further developments!
The implications
Allowing an initial low-cost and risk-free decision by an independent FOS review, will give confidence to a claimant to seek full damages above £150,000 at court.
How we can help…
Our expertise in dealing with financial disputes including mis-sold Interest Rate Hedging Products, Mortgages and other loans means that can utilise both forums to get the maximum amount of compensation possible.
Act quickly …. there are strict time limits for FOS complaints….
If you think you have a claim, please contact us. There are strict time limits for bringing claims to FOS which means that complaints must be brought within 6 months of receiving a final response letter to a complaint from the bank or financial adviser.
