How "final" is a "final and binding" decision from the Financial Ombudsman Service?

At its most basic, the Financial Ombudsman Service (FOS) is there to resolve disputes between consumers and financial services providers.  If an "eligible complainant" makes an "eligible complaint", the FOS will consider the complaint and make a determination. If the complainant accepts the FOS' determination, "it is binding ... and final" (see section 228(5) of the Financial Services and Markets Act 2000). It's also enforceable in the Courts.

This works especially well for consumers with complaints that fall within the FOS' "Award Limit" of £150,000 because it's quick; it could also be risk and cost free.

But what happens if the FOS makes an award of £150,000, finds the complaint is worth more, and recommends a payment of (say) £500,000?

Until 19 December 2012, it was generally thought that if the consumer accepted  the FOS' award, the firm could be compelled to pay £150,000, but no more. For that reason, consumers with larger complaints either (i) issued proceedings to recover the whole of the value of their claim; or (ii) asked the FOS to determine their complaint and, if the FOS recommended a payment in excess of £150,000 but the firm declined to pay any more, rejected the FOS' determination (to avoid being bound by it) and issued proceedings instead.

That made sense: it was consistent with the Act ("binding...and final") and the decision in Andrews -v- SBJ Benefit Consultants, where the High Court found that if a complainant accepted the FOS' determination, he couldn't issue proceedings in the hope of recovering any more.

On 19 December 2012, the High Court handed down its decision in Clark -v- In Focus Asset Management & Tax Solutions Limited, and turned the earlier thinking on its head.

Andrews and Clark turned on the "doctrine of merger": "...a person who has obtained a final judgment in a tribunal of competent jurisdiction is precluded from later recovering in court a second judgment for the same relief in respect of the same subject matter" (per Cranston J, at paragraph 23 of the decision in Clark).

In Andrews, the Court found that when the complainant accepted the FOS' award, he obtained "a final judgment in a tribunal of competent jurisdiction". He couldn't therefore ask for a second judgment from the Courts.

In Clark, the Court found that the FOS was not a "tribunal", and that when a complainant accepted an award of £150,000 which included a recommendation that the firm should pay more, that was not a "final judgment", it was merely the end of the FOS process. The complainant could therefore accept the FOS' determination, bank the firm's payment of £150,000, and ask the Court to order more.

This necessarily creates uncertainty for firms which can only be resolved by Parliament or the Court of Appeal. (It's not yet clear whether In Focus Asset Management & Tax Solutions Limited will appeal.) In the meantime, there are a number of reasons for supposing that Andrews is more likely to prevail than Clark. However, that outcome cannot be guaranteed. Firms should therefore consider using other appropriate ways of mitigating their "doctrine of merger" and other risks until the issue is resolved one way or the other.