The Royal Court has recently handed down its judgment in the first judicial review of a decision of the Channel Islands Financial Ombudsman ("CIFO") Future Finance Limited v Channel Islands Financial Ombudsman  JRC041.
CIFO was set up in 2015. The primary role of CIFO is to resolve complaints about financial services provided in/or from the Channel Islands. When CIFO receives a complaint about a Financial Services Provider ("FSP"), it will conduct an investigation, will try to facilitate a settlement of the dispute and, if that fails, will make a determination. If the determination is accepted by the consumer it becomes binding on the FSP. CIFO is not a court or a regulator and therefore does not fine or discipline FSPs, but it can make awards requiring the FSP to pay money to the complainant, and the awards can be enforced in court as a civil debt up to £150,000.
Future Finance Limited ("Future Finance") was subject to a determination by CIFO in relation to a private mortgage which was arranged for a Jersey couple (“the Complainants”) by Future Finance Ltd. The Complainants had approached Future Finance to find the best deal available for a mortgage. Future Finance agreed to do so but advised the Complainants that they would not be able to obtain a conventional mortgage and that the best option available was a private mortgage. Consequently, the Complainants entered into a private mortgage proposed by Future Finance. Shortly after the purchase the Complainants found themselves in financial difficulty.
The Complainants complained that the private loan was not suitable for their needs at the time. The complaint was subsequently referred to CIFO, who determined that, contrary to their assurances, Future Finance had not made reasonable efforts to find the best mortgage for the Complainants. CIFO ordered Future Finance to pay compensation to the Complainants. Future Finance applied for a judicial review of CIFO's decision.
Judicial Review: Grounds
Future Finance sought a judicial review on the grounds that CIFO acted ultra vires, illegally or irrationally by
- making factual errors;
- assuming that it had jurisdiction over Future Finance in respect of mortgage broking business;
- failing to take into account relevant considerations; and
- taking into account irrelevant considerations.
Under ground (2), the Court held that Future Finance was a "relevant ancillary business" as defined under Article 9 of the Financial Services Ombudsman (Jersey) Law 2014 ("the 2014 Law") and was not exempt under Article 6 of the 2014 Law. Therefore, CIFO had jurisdiction over Future Finance’s mortgage broking business.
The Court dismissed Future Finance's submissions under grounds (1), (3) and (4). The Court held that "the complainants had a legitimate expectation in all the circumstances that Future Finance Limited would make reasonable efforts to find a conventional mortgage before putting forward a more expensive private lender" and "it was reasonable of the Ombudsman to conclude that the expectation had not been met in this case" [at paragraph 68].
CIFO applied to preserve the anonymity of the Complainants on the grounds that it is the policy of the Ombudsman, as with other such Ombudsman schemes, to maintain confidentiality over the identity of a complainant. Complainants are informed of this at the outset of the CIFO process and the Ombudsman undertakes to maintain confidentiality, subject to legal obligations, preserving such confidentiality as far as possible so as to encourage complainants to use the Ombudsman process. In a small community like Jersey there is all the more need to avoid revealing personal information about people's personal financial affairs [paragraph 75].
The Court accepted that the Complainants’ identities were irrelevant to the proceedings [paragraph 80]. The Court anonymised the judgment to avoid reference to the Complainants’ identities and ordered that publicly available documents held by the court shall not identify them. However, the Court did not think it proportionate on the facts of this case to impose wide ranging reporting restrictions on the press which were not time barred.
This case is the first of its kind in the Channel Islands. CIFO will doubtless be satisfied that it has successfully defended the first major challenge to its authority.
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