UK: FOS Awards No Longer "Final"?

The English High Court has recently delivered a decision in Clark v In Focus Asset Management & Tax Solutions Ltd (2012), which allows complainants who had previously accepted and been paid the statutory maximum award made by the Financial Ombudsman Service ("FOS"), to pursue a claim against their IFA for the balance of what they allege is their full loss caused by unsuitable investment advice.

The FOS Scheme

The FOS provides a free and independent dispute resolution service for customers of FSA-regulated firms. While detailed rules exist relating to the jurisdiction of the FOS, those who can use its services, the subject matter of complaints and the timeframe within which complaints should be referred, some of the key rules are as follows:

  • In certain circumstances, the FOS may dismiss a complaint without consideration of its merits. This includes where the subject matter of the complaint has been the subject of court proceedings where there has been a decision on the merits; is currently the subject of current court proceedings (unless stayed); or would be more suitable to be dealt with by a court, arbitration or another complaints scheme
  • The ombudsman is required to determine complaints by reference to what is, in his opinion, "fair and reasonable" in all the circumstances of the case. In considering this, the FOS will take into account relevant law and regulations, regulators' rules, guidance and standards, codes of practice, and, where appropriate, what it considers to have been good industry practice at the relevant time
  • If the complainant accepts an FOS determination within the specified time limit, the determination is "final and binding" on both the firm and the complainant. If the complainant rejects it (or makes no response, which is treated as a rejection), the determination is not binding on anyone. The firm has no ability to reject the determination – the only right of challenge available to it is on public law grounds by way of an application for judicial review
  • Where a complaint is determined in favour of the complainant, the FOS may make a money award in a sum which it considers to be "fair compensation" for financial loss, up to a limit of £150,000 (prior to 1 January 2012 the limit was £100,000)
  • Firms are required to comply with FOS money awards and, in the event of non-compliance, they are enforceable through the courts
  • If the FOS considers that "fair compensation" requires the payment of a sum in excess of the maximum limit, the FOS can recommend that the firm pay the balance, but neither the FOS nor the complainants have any ability to compel the firm to do so

The facts

Mr & Mrs Clark made a complaint to the FOS in November 2008, alleging that In Focus Asset Management and Tax Solutions Limited ("In Focus") had provided them with unsuitable investment advice in light of their risk profile. Mr & Mrs Clark had been advised by In Focus in 2001 and 2004 to invest in traded endowment policy plans on which they suffered loss alleged to be in excess of £500,000.

Following an investigation conducted by the FOS, a provisional decision was issued in November 2009. The complaint was upheld and the FOS stated that the Clarks' compensation should be such as would put them back in the position they would have been in, although FOS could not direct In Focus to pay any more than £100,000. The decision stated that the Clarks "may not be able to enforce a greater amount [than £100,000] in the courts. A court would make its own decision of whether to award the recommended greater amount above £100,000. However, I would recommend that [In Focus] pays the full amount in full and final settlement of this complaint". In Focus offered £100,000 in settlement, which the Clarks rejected.

The FOS then issued the final decision, in predominantly the same terms as the provisional decision, noting that if Mr and Mrs Clark accepted the award that they "would be bound by the decision, which will be final".

The Clarks' solicitor, on receipt of the decision, contacted the FOS to confirm the meaning of "final and binding" and asked: "Would the complainants' rights to pursue a civil claim through court proceedings for their additional loss (in negligence or otherwise) be prejudiced in any way by accepting the Final Decision and, if so, how?" FOS responded stating that "if the business did not pay the recommended balance and [the Clarks] decided to sue for the balance in court, the court would make its own decision on whether or not to award anything".

In February 2010, Mr and Mrs Clark accepted the award using the acceptance form provided by FOS, however they also inserted and countersigned the following statement: "we reserve the right to pursue the matter further through the civil court". Later that month the FOS wrote to both parties confirming that the final decision was now binding and asked In Focus to settle the award. The Clarks confirmed that they had received two cheques amounting to £100,000, which were then paid into their bank account.

First instance

In June 2010, Mr & Mrs Clark issued proceedings in the County Court alleging breach of contract, breach of fiduciary and statutory duties and negligence. They sought their full alleged loss less the £100,000 already paid. In Focus applied to strike out the claim on the basis that Mr & Mrs Clark had accepted the FOS determination and the £100,000 payment in full and final settlement and the Court had no jurisdiction to entertain a claim for further sums.

In granting the strike out application, His Honour Judge Barratt QC considered the High Court decision of Andrews v SBJ Benefit Consultants Ltd [2010] EWHC 2875 (Ch). In summary, Andrews involved an individual who had issued a complaint after suffering losses estimated to be in excess of £400,000 following a transfer from an employee pension scheme to a personal pension scheme. The FOS upheld the complaint and awarded the maximum award of £100,000 with a recommendation that the firm in question pay the balance. The individual accepted the award and issued proceedings claiming damages for the balance. It was held that, as the FOS was a "tribunal", its final determinations were "judgments" for the purposes of the doctrine of merger, the effect of which is to preclude the claimant from pursuing a recovery in the courts in relation to the same subject matter.

In Clark, the claim was struck out by Judge Barratt QC on the basis that Andrews was binding. As the issues in front of the court were the same as the issues put before the FOS, the doctrine of merger applied and the Clarks were therefore precluded from bringing a claim against In Focus for the balance of their alleged loss.


Mr and Mrs Clark appealed the order to the High Court, and asked the Court to determine whether parties who had accepted a favourable determination of the FOS are subsequently able to bring a claim for damages for the balance of their alleged loss.

Cranston J found that they were. For various reasons, he took issue with the decision in Andrews. These reasons included that the FOS only makes recommendations which are not binding unless the complainant consents, such that the functions of the FOS differ from those of a typical tribunal. Cranston J also noted that "the doctrine of merger turns on a cause of action being extinguished – it is merged in the judgment", therefore as the FOS deals with complaints, not causes of action, the doctrine is not (he said) applicable. Further to this, he noted that the FOS scheme had to be "considered as a whole" and that the term "final" referred to the end of the Ombudsman's process, not the end of the resolution of the dispute.

Consequently, Cranston J held that the doctrine of merger did not apply to those who have accepted favourable determinations from FOS and, so, does not preclude those who have accepted the maximum award from claiming damages for an amount in excess of that award.


Unless and until a decision is handed down by the Court of Appeal clarifying whether parties who have accepted the maximum award from FOS can bring a claim for damages for the balance of their loss, the High Court decisions of Clark and Andrews represent contradicting authority. It is therefore to be welcomed that In Focus has lodged an application for permission to appeal to the Court of Appeal.

In the meantime, in response to the uncertain state of affairs to which Cranston J's decision gives rise, the FOS announced that it had amended the wording on its website and in its final decisions to reflect that complainants may be able to pursue a claim in the courts for further damages in respect of complaints which exceed the current £150,000 maximum award.

According to the FOS' annual review for 2011/2012 only 1% of cases last year involved the FOS recommending that a business pay compensation in excess of the maximum award, which suggests that only a limited amount of FOS decisions will be affected by this judgment. However, complaints concerning certain types of financial services and products (for example pensions and investment portfolio management) can often involve alleged losses way in excess of the £150,000 FOS cap and, were Clark to stand, it is possible that this would encourage more higher value claims to be referred to the FOS as a pre-cursor to litigation. Indeed, Cranston J did not think it would be inconsistent with the statutory aims of the FOS scheme for customers to refer complaints to the FOS with a view to using the money award to finance court proceedings for a greater amount. No doubt many will disagree with this view.

However, just because a complainant is successful before the FOS it does not automatically follow that they will be successful in an action before the courts. While the FOS is required to take into account "relevant law", it was established by the Court of Appeal in R (on the application of Heather Moor & Edgecomb Ltd) v Financial Ombudsman Service & Simon Lodge (2008) that the Financial Services and Markets Act 2000 does not require the FOS to determine complaints in accordance with the law. Consequently, the court's assessment of the claim may well differ from the FOS's view of what is "fair and reasonable", despite the common subject matter.

Nevertheless, until the position is clarified, FSA authorised firms (and their professional indemnity insurers) will need to exercise extra care when evaluating complaints which likely have a value in excess of £150,000.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.