In two recent decisions of Hedigan J, the High Court has re-affirmed the approach that the court will in take in adjudicating on appeals from decisions of the Financial Services Ombudsman (FSO).

Judgment in the first case of Governey v Financial Services Ombudsman & Ors [2013] IEHC 403 was given on 26 August 2013.  That case concerned an investment by the plaintiff of €500,000 in a property based fund promoted by Anglo Irish Assurance Co Ltd. The fund was a highly geared investment scheme in shopping centre in England (the Kennet centre). The plaintiff argued before the Financial Services Ombudsman that since the investment was structured in the form of a life assurance policy, full disclosure of all risks had to be made or else the contract would be open to rescission.  He argued that the investment failed because another shopping centre (the Parkway centre) had attracted lucrative tenants away from the Kennet centre and the risk of this had not been made clear to him.  Anglo claimed that it had disclosed all material facts, and the Parkway shopping centre was not seen as a risk but a positive as it was believed it would increase footfall in the local area.

The FSO found that there was no sufficient evidence to support the plaintiff's claim that the principal reason for the decline in value of the Kennet Centre, and thus the failure of the investment, was the development of the Parkway Centre.  He concluded that the plaintiff who was an experienced investor was made aware that this was an illiquid, high risk investment subject to the possibility of total investment loss.  Accordingly, he decided there was no misrepresentation of the investment and there was no material non-disclosure of risk.  The plaintiff appealed to the High Court.

Hedigan J, stated that the test for an appeal of this  nature was well established and quoted from the decision of Finnegan P in Ulster Bank v Financial Services Ombudsman & Ors [2006] IEHC 323 as follows:-

"To succeed on this appeal the Plaintiff must establish as a matter of probability that, taking the adjudicative process as a whole, the decision reached was vitiated by a serious and significant error or series of such errors.  In applying the test the Court will have regard to the degree of expertise and specialist knowledge of the Respondent."

Hedigan J extrapolated from that the decision that the elements of the test may be described as follows:-

  1. The burden of proof is on the party appealing the ruling
  2. The onus of proof is the civil standard
  3. The court should not consider complaints about process or merits in isolation, but rather should consider the adjudicative process as a whole;
  4. In light of the above principles, the onus is on the party appealing to show that the decision reached was vitiated by error; and
  5. In applying this test the Court will adopt what is known as a deferential stance and must have regard to the degree of expertise and specialist knowledge of the Ombudsman.

The plaintiff's main contention in respect of the FSO's ruling was that the decision did not fully consider the facts at hand, did not disclose how the respondent came to make that decision, and that the FSO was not mindful of the principle of utmost good faith in relation to disclosure of material facts in relation to contracts of insurance/assurance.

The FSO argued that he exercised his function in accordance with his jurisdiction and that there was no requirement that his findings be as detailed or as thorough as a court judgment.

In dismissing the appeal Hedigan J asked - "Was there relevant evidence before the FSO upon which it could reasonably come to this conclusion?"  He answered in the affirmative "On the evidence before him it was reasonably open to the FSO to conclude that no material non-disclosure of risk was made in this case."  He went on to say that the consideration of the balance of all of the matters before the FSO was an exercise by him of his expertise and his decision was, in the view of Hedigan J, "a judgment reasonably made and clearly based upon the evidence before him."

Judgment

Judgment in the second case – Smartt v The Financial Services Ombudsman [2013] IEHC 518 – was given on 20 November 2013. Here the plaintiff had complained to the FSO that the EBS incorrectly cancelled her serious illness cover without her consent and without notifying her.  The EBS stated that they had acted in accordance with the plaintiff's instructions to replace a mortgage protection policy which included serious illness cover with a mortgage protection policy without such serious illness cover. In essence the complainant argued that she was not informed that her serious illness cover would not continue. 

The FSO found that the plaintiff was put on notice of the reduced cover in her policy documentation.  He found that this was an important document which should have been carefully perused by her and was not confusing in any way. 

On appeal by the plaintiff Hedigan J re-iterated the comments made by him in Governey above about the appropriate approach by the court in an appeal of this nature and found that the decision by the FSO was a reasonable one based on the facts before him.  The FSO was entitled to rely upon the repeated signing of documents by the plaintiff, acknowledging that the risks and consequences of replacing her existing policy cover needed to be carefully considered by her. 

 Hedigan J concluded by saying:

"Thus, in my view, the FSO had before him and relied upon relevant evidence upon which he could rely in coming to the decision he did.  That is the test.  It is not for this Court to either agree or disagree with his finding as long as it is one reasonably based upon the evidence before him."