Introduction
The office of the financial services ombudsman (hereinafter FSO) was created by the Central Bank and Financial Services Authority of Ireland Act 2004 which inserted sections into the Central Bank Act 1942 (hereinafter the Act of 1942).
Some prerequesites for a claim are:-
- A claim can only brought by a consumer which is defined to include a natural person or an incorporated body with an annual turnover of less than €3 million.
- A complaint can only be made against a regulated financial services provider (FSP) (as defined in Central Bank Act 1942 as amended). Generally this is a FSP regulated by the Central Bank or IFSRA or by an authority in the EEA country that performs similar functions. The definition is sufficiently broad to cover most banks, insurance companies, brokers, investment providers and investment advisers resident within Ireland. Difficulties can arise where the FSP is resident outside Ireland.
- The claimant must not be subject to legal proceedings before a court and the complaint must be brought within 6 years of the conduct complained of.
- The complainant must allow the relevant financial institution to investigate the complaint internally before bringing the claim to the FSO.
Common claims currently coming before the FSO include:-
- A customer argues that the terms of the loan sought be enforced by a bank should be interpreted in a particular way. It might be argued that the bank agreed interest only payments for a period.
- A customer argues that a bank was in breach of the code of conduct on mortgage arrears or the Consumer Protection Code 2012
- A customer argues his bank account has been dealt with wrongly, in particular that he has lost the benefit of a tracker mortgage by availing of a fixed rate mortgage for a period.
- An investor argues that a representation was made that an investment would be of a different nature to what it turned out to be eg. that it was capital guaranteed.
- An insured argues that a policy of insurance applies in circumstances where the insurer refused cover.
According to the FSO annual report 2012 the success rate for claims before the FSO was 27%.
The complaint can be upheld where (s. 57CI(2) of the Act of 1942) inter alia the conduct complained of was contrary to law. Importantly the complaint can also be upheld in circumstances where a common law action would not succeed such as where inter alia the conduct was unjust, oppressive or was based on an improper motive, an irrelevant ground or was otherwise improper. An example of this is Irish life and Permanent Plc v. FSO (Unreported, High Court, 3/8/12) where the court held in respect of one claimant that the bank should have informed the claimant more fully of the implications of terminating a fixed term mortgage early, being that the claimant would revert to a variable mortgage and not a tracker mortgage. The court held that the FSO was entitled to find for the claimant even if there was no obvious error of law or misrepresentation on the facts. This decision is under appeal to Supreme Court.
The hearing before the FSO is usually based on documentation furnished by both parties. The FSO has power inter-alia to compel the financial services provider to produce a document or to compel an employee's agent of the FSP to give evidence. The FSO may enter the premises of the FSP to inspect any document.
The FSO can order inter alia compensation up to €250,000 and/or compel a financial service provider to take any other lawful action. This could include an order that the claimant be given back the money for the product invested in.
Time limits for a claim
The complaint must be made within 6 years of the conduct complained of.
Caselaw on the time limit for a common law claim for misrepresentation might be useful in interpreting when time begins to run, though not determinative because of the difference in wording between the Statute of Limitations and the Act of 1942.
In O'Hara v. ACC Bank Plc (Unreported High Court 7/10/11) the defendant failed to have the court proceedings for misrepresentation struck out as being statute barred. The plaintiff invested in the fund in 2003 which matured in 2009 but did not issue proceedings until 2010. The court held that the financial loss was not crystallised within six years before the issuing of proceedings and therefore the claim was not statute barred.
Right to an oral hearing
The FSO can direct an oral hearing of the complaint. There is no obligation to do so.
In some cases an appeal has been brought from the decision of the FSO on the basis that an oral hearing was not directed by the FSO.
In Davy v. FSO 2010 IR 363 the court stated that the test was whether an oral hearing was imperative by reason of a dispute between the parties as to the reliability of the evidence or the accuracy of documentation.
This argument has been met with varying degrees of success depending on the facts of the case.
Cases in which the argument succeeded include the following
- In Davy v. FSO [2010] IR 363 the FSO had found in favour of the claimant who invested in particular funds in 2004 which had fallen considerably in value in 2008. The court held that the FSP was entitled to an oral hearing because of the conflict between the parties as the oral advice given to the claimant in relation to the funds.
- In Lyons v. FSO (Unreported, High Court, 14/12/11) the claimant failed in a claim before the FSO to the effect that an oral agreement had been reached that the bank would seek interest only on certain loans. The court determined that the claimant was entitled to an oral hearing where there was dispute as to whether an oral agreement was reached.
- In Hyde v. FSO (Unreported, High Court, 16/11/11) the FSO had found against the claimant who argued that he had agreed a loan in the sum of €965,000 and not just €715,000. The court determined that the claimant was entitled to an oral hearing where the dispute could not be adjudicated on the documentation alone. This was so even in circumstances where the claimant had not requested an oral hearing before the FSO.
- In Murphy v. FSO (Unreported, High Court, 21/2/12) the FSO found against the claimant who was refused insurance cover in relation to a burglary on the basis there no operable alarm system in the premises. The court directed that an oral hearing should have been directed where each party's expert differed in relation to the operability of the alarm system.
However, the fact that there is a dispute on the evidence does not mean that the FSO is obliged to direct an oral hearing. In Caffrey v. FSO (Unreported, High Court, 12/7/11) the claimant failed in a claim that he was lead to believe that a bond purchased had a guaranteed return. The High Court pointed to the fact that the claimant had not requested an oral hearing and that the events the claimant complained preceded the FSO adjudication by 5 years and it was unlikely an oral hearing would reveal anything.
In Cagney v. FSO (Unreported High Court 25/2/11) the court held that the FSO acted within jurisdiction to refuse an oral hearing even though the claimant had made an allegation before the FSO to the effect that his signature had been forged. The court outlined the fact that the claimant had failed to produce expert evidence to the effect that the signatures were forged.
The standard of review in a statutory appeal
A party may appeal the FSO decision to the High Court.
The standard of review is as stated in Ulster Bank v. FSO (Unreported High Court 1/11/06):-
Further In Molloy v. FSO (Unreported, High Court, 15th April, 2011) stated.
"(i) the burden of proof is on the appellant;
(ii) the standard of proof is the civil standard;
(iii) the court should not consider complaints about process or merits in isolation, but rather should consider the adjudicative process as a whole;
(iv) the onus is on the appellant to show the decision reached was vitiated by a serious and significant error or a series or such of errors - put in simple terms, the question is if the errors had not been made, would it reasonably have made a difference to the outcome;
(v) in applying this test, the court may adopt what is known as a deferential stance and may have had regard to the degree of expertise and specialist knowledge of the F.S.O."
The normal order would be for the matter to be remitted to the FSO for reconsideration.
Examples of cases where a party succeeded on appeal from the decision of the FSO on grounds other than merely that an oral hearing was not afforded include:-
- In Koczan v. FSO (Unreported High Court 1/11/10) the claimant was refused cover under a sickness payment policy in circumstances where he had a valid paid-up policy at the time the accident occurred but stopped making contributions after the accident occurred.
The High Court held there was an error law in that the FSO failed to analyse the document sufficiently to assess whether these circumstances meant that the policy did not apply and also
failed to assess whether the conduct of the insurer was unjust or oppressive.
- In Gabriel v. FSO (Unreported High Court 27/7/11) the FSO determined that the claimant had failed to bring a hire purchase agreement to an end by sending a letter to that effect. The court allowed the appeal on the basis that the FSO misinterpreted s.63 of the Consumer Credit Act 1995 in coming to its conclusion that the claimant could only bring the hire purchase agreement to an end by first discharging the liability to the finance company.
- In Haverty v. FSO (Unreported High Court 3/5/13) the claimant failed before the FSO in a claim to have a charge against property removed. The court allowed the appeal because the FSO failed to consider whether a charge had been invalidly registered against the family home because the spouse had not consented to the creation of the charge.
In a number of cases (including In Hayes v. FSO (Unreported High Court 3/11/08) and McManus v. FSO (Unreported High Court 28/7/11)) the court refused to overturn a decision of the FSO in circumstances where the point made on appeal had not been made before the FSO.
In 2012, 4 of 37 appeals that were heard were successful and 9 were unsuccessful.
Judicial review
Separate to a statutory appeal, a party might seek to judicially review the decision of the FSO. This is very rarely done as the statutory appeal would normally provide everything that judicial review would provide. One advantage might be that the time limit for judicial review is longer than the time for a statutory appeal (3 months or 6 months as opposed to 21 days).although the latter can be extended
In Davy v. FSO [2010] IR 363 the High Court and the Supreme Court found that the FSO should have furnished to Davys not only be letter of complaint but the attached appendices.
Running a FSO claim in addition to court proceedings
In O'Hara v. ACC Bank Plc (Unreported, High Court, 7/10/11) the claimant had failed in a claim before the FSO that the bank misrepresented to him, when investing in a particular fund, that the money would be invested in blue-chip companies when this did not turn out to be the case. The court held that the plaintiff was estopped from proceeding with fresh High Court proceedings claiming misrepresentation arising from the same facts.
"Absent a special reason of sufficient impact to nullify any potential abuse of process, it would be wrong for this court to say that complaint could be re-litigated all over again."
Conclusion
If there is a a dispute between the parties as to the reliability of the evidence or the accuracy of documentation, the clamant would be advised to ask the FSO for an oral hearing. If one is refused there may be a ground of appeal.
Either party might ask the FSO to compel the other party to furnish particular documentation if it is relevant – an indirect form of discovery eg. ask for phone recordings of conversations in dispute.
Each party would normally be entitled to a copy of all documentation furnished by the other side that is considered by the FSO. The parties should insist on this.
If the FSO has made a clear error of law, such as a misinterpretation of a statutory provision, an appeal might be successful. A claimant should be sure to raise all relevant points at FSO stage not just at appeal stage.
A claimant should choose between the FSO and the court route. One factor in the decision is costs – there is no liability for the other sides costs if the FSO claim is dismissed. Also the FSO can find for the claimant based on overall fairness in circumstances where there was no tort, breach of contract or breach of statute. As against this, there are more effective mechanisms for the discovery of truth before a court – discovery and an oral hearing. In a strong and valuable case for the claimant the court route might be the best.
The information in this article is not a substitute for legal advice. I intend to update this article as and when the law develops in relation to these particular areas.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
