The powers and functions of the Financial Services Ombudsman of Ireland ("FSO") are set out in Section 57BK of the Central Bank Act, 1942 (the "Act").
The FSO's service offers aggrieved customers of financial service providers a forum for the resolution of their complaints. The key features of the FSO's powers are as follows:
- The power to find that a complaint has been substantiated even if the conduct complained of was in accordance with a law or regulatory standard but was nonetheless unreasonable, unjust, oppressive, or improperly discriminatory, based on a mistake or an irrelevant consideration or was otherwise improper.
- The power to direct the financial service provider to rectify, mitigate or change the conduct in question or its consequences, provide reasons, change a practice relating to the conduct, pay compensation for any loss suffered as a result, or take any other lawful action.
- There is no requirement for legal representation before the FSO, and no provision for the FSO to make costs orders, either in favour of or against the customer in respect of the FSO process.
- The FSO may decline to have an oral hearing to determine a complaint.
- The FSO may decline to hear a complaint where exactly the same rights and obligations could be brought before the appropriate court with jurisdiction to determine such matters.
- Where the FSO cannot dispose of a complaint through mediation, and where the FSO has not exercised its power to decline to hear a complaint, the FSO must proceed to rule on the complaint.
Where a complainant is dissatisfied with a finding of the FSO, he or she can appeal the finding to the High Court. The High Court can, amongst other things, affirm the finding of the FSO with or without modification, set aside the finding, or remit it to the Ombudsman for review. The standard of review for statutory appeals is well established (as per Finnegan J. in Ulster Bank Investment Funds v Financial Services Ombudsman1). The test for the High Court to vary or set aside the finding of the FSO is whether, taking the adjudicative process as a whole, the decision reached was vitiated by a serious and significant error or a series of such errors. Furthermore, in applying the test regard must be had to the FSO's expertise and specialist knowledge (this is commonly referred to as curial deference).
The Act provides that the determination of the High Court is final, save that a party may apply to either the High Court or the Supreme Court for leave to appeal the determination of the High Court on a point of a law.
Therefore, the FSO process is one by which aggrieved customers of financial service providers can pursue a broad range of complaints which extend beyond traditional actionable breaches of contract or negligence, at reduced costs, and without incurring any exposure to the costs of the financial service provider.
In Governey v Financial Services Ombudsman & anor,2 the customer claimed before the High Court that the financial service provider had failed to disclose to him certain material facts in respect of an unprofitable investment product (which was structured as a life assurance policy). He claimed that the failure amounted to a breach of a duty of utmost good faith entitling him to rescind the contract (and get his money back). He also complained that the FSO had given insufficient reasons for the finding reached by him.
The High Court, applying the case law on appellate review referred to above, concluded that it was only entitled to quash the decision of the FSO if it was satisfied that the FSO could not have reasonably come to its decision based on the facts before him. The High Court concluded that there was relevant evidence on which the FSO could come to the decision it reached, and that sufficient reasons had been given to the customer. Furthermore the High Court refused leave to appeal to the Supreme Court.
The customer then applied to the Supreme Court for leave to appeal. In granting leave to appeal, Mr Justice Clarke, delivering the unanimous decision of the Supreme Court, made the following notable comments:
- It was anomalous that the legislation should allow that a party dissatisfied with the determination of the High Court should have the option of applying to the High Court or the Supreme Court for leave to appeal that determination, without spelling out any mechanism for how this process was to be managed.
- The Court observed in passing that there was something to be said for transferring the decision on whether an appeal should be allowed from the High Court to the Court of Appeal, as there could always be the appearance of a lack of complete transparency where a trial judge was asked to certify an appeal against his/her own decision.
- As the provision restricted access to justice, it had to be interpreted narrowly. The Court was careful to insist that there was nothing inherently problematic about restricting or even excluding a right of appeal if this was clearly the legislature's intent.
- In the absence of any express language imposing a higher standard before leave would be granted to appeal (such as the "point of law of exceptional public importance" applicable to immigration cases) the Court held that the appropriate test was whether the appellant had identified a stateable appeal on a point of law. The Court rejected arguments by the FSO (and the financial service provider) that the imposition of a requirement for leave implicitly required a more exacting standard.
- Bearing in mind that there was no requirement that an application for leave to appeal be brought to the High Court before an application to the Supreme Court, the Court rejected the suggestion that it should afford any formal deference to the fact that the High Court had refused leave, or to the reasons for any such refusal. That said, it was accepted that the Court should consider the reasons why the High Court refused leave without in any way being bound by them.
- In assessing whether a stateable ground of appeal had been identified, the following issues are relevant; the FSO could uphold a complaint even if the conduct complained of was in accordance with a law or regulatory standard. Also, the range of remedies available to the FSO exceeded that which would be available in legal proceedings before a court and the FSO was entitled to decline to investigate a complaint where there was an alternative and satisfactory means of redress.
- Having regard to the fact that the FSO would, on occasion, be presented with complaints which might be wholly or largely based on a claim of breach of legal rights and obligations, the Court noted that it was at least arguable that in a case such as this, the degree of deference to be afforded to the expertise of the FSO by the Court should be significantly less. The Court went on to find that it was arguable that in this instance, the trial judge adopted an overly deferential attitude to the determination of the FSO.
- The Court held that there was no inherent obligation on the FSO to adopt a court-like procedure (such as providing for an oral hearing) when adjudicating a complaint. Where the FSO was entitled to decline to investigate a purely "legal" complaint, but failed to exercise that option and proceeded to make a finding, the Court found that it was at least arguable that the FSO would thereby assume "many obligations as to the manner in which those proceedings … are conducted."
- Having regard to all of the above, the Court concluded that the customer had met the (admittedly low) threshold, and granted leave to appeal the determination of the High Court to the Supreme Court.
There have been several cases challenging findings of the FSO where he has refused to direct an oral hearing and instead decided the case "on the papers" (with or without submissions by the parties). Equally, curial deference is a constant theme in the context of statutory appeals such as these. The Supreme Court's approach as to the appropriate degree of deference to be afforded, and to the appropriate procedure to be adopted when the FSO is determining complaints which wholly or largely relate to the legal rights and obligations of the customer, is likely to encourage complainants to appeal against unfavourable findings of the FSO. The decision of the Supreme Court, and some recent decisions of the High Court, strongly suggest that when the FSO's finding is in a purely legal zone, there will be minimal (if any) deference to the FSO's finding.
It remains to be seen whether this will also prompt the FSO to decline to investigate complaints which involve adjudicating upon the legal rights and obligations of the parties, in order to avoid being compelled to apply a procedure which the FSO may consider onerous.