A High Court judgement handed down yesterday confirms that a
claimant who accepts a final decision from the Financial Ombudsman
Service is bound by it and will not subsequently be able to bring a
civil claim in relation to the same matter.
The FOS provides consumers with a voluntary, quick, free and
informal dispute resolution service. It is also free from the
risk of the complainant having to pay the defendant firm's
costs should the complaint fail. Accordingly, it has many
advantages over civil court proceedings.
On the other hand, the FOS' processes are not as rigorous as
those of a court. Furthermore, the FOS is free to reach its
decisions based on what an Ombudsman considers to be fair and
reasonable; although the law needs to be taken into account, an
Ombudsman does not have to apply it.
For these reasons, the FOS' binding award limit is
£100,000. (Although this limit is currently under
review and the FSA has proposed that it should be increased to
£150,000 from January 2012.)
Today's decision brings some clarity to an issue that had not
previously been tested in the courts: can a complainant
accept a FOS award and then subsequently sue in the civil courts
for additional losses? The answer is clearly
"no".
Of course, this will be of most relevance in complaints where
losses exceed £100,000. In such cases, a complainant
has a choice when deciding whether to accept an Ombudsman's
award, either to take the redress awarded by the Ombudsman, subject
to the £100,000 limit, or instead to reject the decision and
pursue a claim in the civil courts in order to make a full recovery
without limit. What he cannot do is accept the FOS award and
then seek the balance at court.
The decision will come as good news to FSA regulated firms and
their insurers as it provides yet further confirmation that the FOS
is an inappropriate forum for high value claims.
Further reading
Bunney v Burns Anderson plc[2007] EWHC 1240 (Ch)
Andrews v SBJ Benefit Consultants [2010], as yet
unreported
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 05/11/2010.