We first reported on the decision in Clark and another v In Focus Asset Management & Tax Solutions Ltd in January 2013. In essence, the claimants accepted the Financial Ombudsman's (the Ombudsman) decision arising out of their complaints against their financial advisers.
The losses were in excess of £500,000 and the Ombudsman found they were entitled to compensation. The maximum sum it could award was £100,000. The claimants accepted this sum, subject to their right to claim more in court proceedings. They then issued court proceedings which the defendant sought to strike out as an abuse of process, the matter already having been litigated or judged (the doctrine of res judicata).
The High Court held that the Ombudsman's decision, which was said to be 'binding and final', simply referred to the end of the Ombudsman's process and did not preclude court proceedings from subsequently being issued following the acceptance of a decision. As a result, the claimants were entitled to claim damages for an amount in excess of the sum they had accepted.
On appeal, the Court of Appeal held that an Ombudsman's decision could indeed preclude subsequent court proceedings if the cause of action before the Ombudsman was the same as that before the court. It was for the defendant to prove the causes of action were the same. If they were not, there would be no issue of res judicata. If it was the same, court proceedings would not be permitted to simply 'top up' the Ombudsman's award.
Parliament's intention had been that consumer protection did not go beyond the scheme. Complainants would therefore have to reject the Ombudsman's decision and bring court proceedings if they thought they could achieve a higher level of compensation than that considered appropriate by the Ombudsman.
Things to consider
The Court of Appeal's decision has put an end to the legal uncertainty as to whether claimants who had accepted the maximum amount that the Ombudsman can award could then sue in court for the balance of their losses. However, uncertainty will still surround the 'cause of action' point and whether the same case is being brought twice. Financial advisers should ensure that they cover all relevant issues when responding to complaints to reduce the risk of customers bringing subsequent court proceedings.