UK: FOS: Court Of Appeal Decisions

Last Updated: 2 July 2008
Article by Simon Morris and Sarah Redlich

Recent Court of Appeal Judicial Review and Appeal decisions confirm FOS procedures are lawful and reasonable


The Court of Appeal has recently confirmed in Judicial Review Proceedings before it that the Financial Ombudsman Service ("FOS") fair and reasonable jurisdiction does not require it to follow the law, nor is it obliged to hold a hearing or, as a matter of course, make its decisions public. In an Appeal before the same Court, the Court of Appeal has also held that FOS's case fee system is both lawful and reasonable, it is able to delegate certain aspects of its decision-making process, and that while it must consider the dismissal grounds provided under its procedural rules it has discretion not to apply these in certain circumstances. Overall, the decisions maintain current FOS practice and endorse earlier cases considered by the Courts.

To view the article in full, please see below:

Full Article

Recent Court of Appeal Judicial Review and Appeal decisions confirm FOS procedures are lawful and reasonable


The Court of Appeal has recently confirmed in Judicial Review Proceedings before it that the Financial Ombudsman Service ("FOS") fair and reasonable jurisdiction does not require it to follow the law, nor is it obliged to hold a hearing or, as a matter of course, make its decisions public. In an Appeal before the same Court, the Court of Appeal has also held that FOS's case fee system is both lawful and reasonable, it is able to delegate certain aspects of its decision-making process, and that while it must consider the dismissal grounds provided under its procedural rules it has discretion not to apply these in certain circumstances. Overall, the decisions maintain current FOS practice and endorse earlier cases considered by the Courts.


1.The Judicial Review proceedings

An IFA, Heather Moor and Edgecomb ("HME"), brought Judicial Review proceedings in respect of a particular complaint and FOS's decision to uphold that complaint and its award for redress, which amounted to more than the statutory cap of £100,000. HME challenged FOS's decision and award on the basis that:

(i) FOS was required to determine complaints in accordance with English law – this was intended so as not to infringe Articles 1 and 6 of the European Convention of Human Rights ("ECHR");

(ii) In this case, FOS had failed to apply English law and, therefore, its decision was irrational and should be quashed;

(iii) Furthermore, the Ombudsman should have held an oral hearing in public and given his decision in public, but wrongly refused to do either.

2. The Appeal case

The FOS brought proceedings against the same IFA to reclaim unpaid case fees in respect of four mortgage endowment complaints which it had investigated but ultimately dismissed. These proceedings were heard at the same time as the Judicial Review proceedings.

HME defended the proceedings on the basis of a number of arguments:

(i) In these cases, FOS did not consider the grounds for dismissal set out in its procedural rules;

(ii) Alternatively, to the extent dismissal was considered in these cases, this decision was delegated, which is not permitted under the Financial Services and Markets Act 2000 ("FSMA") and, therefore, is unlawful;

(iii) FOS has a policy of always investigating mortgage endowment complaints (as a opposed to dismissing them when appropriate), which is unlawful and ultra vires;

(iv) If there had been lawful consideration of the dismissal grounds, the cases would have been dismissed, they would not have become chargeable cases, and the case fees would not have become payable.

At first instance, District Judge Rutherford rejected the contention that FOS has a "policy" not to reject mortgage endowment complaints and was not persuaded that any of the complaints should have been dismissed - given the lack of evidence to determine this either way - but he found for HME on the basis that:

(i) The case fee system is unfair and unreasonable for a number of reasons including that (a) it is unjust that a case fee is charged where cases are investigated and then ultimately dismissed; (b) FOS already receives revenue through an industry-wide levy; (c) the case fees are supposed to only provide 50% of FOS's funding but, in light of the numbers of mortgage endowment complaints, this proportion has been significantly exceeded; and (c) no other professional body charges fees to "innocent" respondents;

(ii) FOS had no power to delegate, from an Ombudsman, the decision as to whether or not to dismiss a complaint (although he said the decision would not have been different if it had not been delegated).

The Court of Appeal decisions

1. The Judicial Review proceedings

The Court of Appeal rejected HME's application, holding that:

(i) While FOS must take account of the law, its fair and reasonable jurisdiction does not require it to follow the law. If the Ombudsman believes a fair and reasonable outcome differs from English law, he is able to make an award on that basis provided it is reasonable in all the circumstances. The decision of R (IFG Financial Service Ltd) v Financial Ombudsman Service [2005] EWHC 1153 (Admin) confirmed;

(ii) FOS had, in this case, done just that; taking account of the common law duty of care and the reasonable standard expected of a reasonable IFA and actually following the law in reaching the view that HME had acted negligently;

(iii) FOS is not under an obligation to hold an oral hearing, provided the Ombudsman considers the need for one; this was done in this case, the Ombudsman correctly concluding that the written evidence carried greater weight than the oral evidence;

Furthermore, the Court considered the need for the hearing to be held in public and confirmed that the right to a public hearing needed to be considered in the context of the whole procedural process, including Judicial Review. The right to apply for Judicial Review, which would provide a public hearing, met this requirement;

(iv) In relation to the contention that the Ombudsman should provide his decision in public, in this case it had, in fact, been done by way of the Judicial Review proceedings. However, in general, in order to comply with Article 6 of the ECHR, decisions or judgements do not, as a matter of course, need to be made public – the Court has flexibility to decide whether this is necessary in the circumstances.

2. The Appeal case

The Court of Appeal reversed District Judge Rutherford's decision finding for FOS and confirming:

(i) The case fee process is lawful and reasonable, principally on the basis that it is not linked to the outcome of the case and, therefore, preserves the Ombudsman's independence and neutrality. The Court said it was a rational response to the need to fund FOS;

(ii) That while, in these cases, it was not clear from the evidence whether dismissal had been considered, if a complaint is thereafter investigated but then rejected, the case fee is properly payable;

(iii) That while FOS is under an obligation to consider the dismissal grounds, it has discretion not to dismiss the complaint even if one or more grounds apply if the Ombudsman considers there is a reasonable possibility that investigation will indicate the complaint is well-founded;

(iv) That FOS may lawfully delegate the exercise of the power to dismiss to a suitably qualified member of staff; while FSMA deliberately excludes the "determination" of a complaint from FOS's delegation powers, it includes "dismissal".

Potential impact/effects of the Court of Appeal's decisions

1. The Judicial Review proceedings have confirmed the operation of FOS's fair and reasonable jurisdiction and its obligation to consider hearing – principles that some of the industry have considered established for some time. In light of this, it seems unlikely that further such challenges will be made in the near future;

2. The Court of Appeal's view that the case fee process is lawful and reasonable makes the likelihood of any change to it more remote. This may mean that firms' recent moves to seek change in the form of non-payment for complaints rejected on the basis of FOS's jurisdiction may be more difficult or not succeed, although the recent Hunt Review of FOS has recommended that the waiver of case fees for complaints outside FOS's jurisdiction is considered;

3. The Judicial Review proceedings has effectively bolstered FOS's practice of adapting to the fluctuating nature and volume of complaints by swelling its lower ranks to carry out the jurisdiction and dismissal reviews of complaints prior to investigation. This must be the appropriate and cost-effective way to run the Scheme for the benefit and in the interests of all its stakeholders but it may mean challenges in relation to the quality of FOS decisions or procedural irregularity may continue;

4. Overall, these cases emphasise once again how important it is for FOS to be able to show its decisions are reasonable and demonstrate its procedure is followed impeccably. It is quite clear from these cases that there are the resources and increasing confidence to bring challenges, whatever their chances of success, if firms and/or complainants believe there is a case to answer.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

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 30/06/2008.

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.