A Court of Appeal judgment has recently addressed what constitutes a complaint for the purposes of DISP [Clive Davis v Lloyds Bank [2021] EWCA Civ 557]. It is important to identify when a complaint is made as a regulated firm for two primary reasons: first, a complaint triggers the dispute resolution procedure under DISP of the FCA's Handbook and second, it stops time running for the purposes of time bar when it comes to a complaint to FOS.

Background Facts

The background to the Court of Appeal judgment is with respect to redress arrangements put in place by banks to compensate customers so far as there was a mis-selling of interest rate swaps. The Claimant, Mr Davis, bought two interest rate swaps in 2002 and 2005 respectively from Lloyds Bank plc (the Bank). He participated in the Bank's review process and as a result of the review the Bank offered him compensation in respect of both financial products. Mr Davis accepted the basic redress offer in relation to the 2002 swap; but not in relation to the 2005 swap. Having rejected the redress for the 2005 swap he sought to bring a claim for breach of statutory duty.

The Issues

At case management stage the court ordered the initial hearing of two preliminary issues:

Issue 1: “Did the Claimant make a complaint under DISP in relation to the sale of the interest rate hedging products which are the subject matter of the proceedings?”

Issue 2: “If so, was the Bank bound by the statutory duties under DISP 1.4.1R to assess the Claimant's purported complaint in accordance with the terms of what had been agreed between the Defendant and the Financial Conduct Authority regarding the Defendant's review process into interest rate hedging products?”

Guidance from the Court of Appeal

It was agreed that Issue 2 only arose if the answer to Issue 1 was "yes". The High Court found that no complaint under DISP had been made and Mr Davis appealed. The Court of Appeal upheld the High Court's decision that no complaint had been made by Mr Davis with respect to the 2005 swap. The Court of Appeal provided some useful guidance as to what constitutes a complaint under DISP. DISP is defined in the FCA Handbook as:

“any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a financial service or a redress determination which:

(a) alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience; and

(b) relates to an activity of that respondent … which comes under the jurisdiction of the Financial Ombudsman Service.”

The Court of Appeal first confirmed that acceptance of an invitation to participate in a review and the subsequent conduct of the review cannot, without more, be treated as a complaint for the purposes of DISP. The Court of Appeal then went on to say:

There are three relevant aspects to the definition. First, so far as the form of a complaint is concerned, there must be an expression of dissatisfaction. Although the definition does not say so in terms, it is obvious that the expression of dissatisfaction must be one that is communicated to the provider of the financial service. Second, it is not just any expression of dissatisfaction that qualifies as a complaint. The expression of dissatisfaction must be about “the provision of, or failure to provide, a financial service or a redress determination”. The conduct of a review under an agreement such as the one in this case is not the provision of a financial service. It must also be a complaint about something which comes under the jurisdiction of FOS. A complaint about the review process does not come under FOS’s compulsory jurisdiction. Third, a complaint must also allege that the complainant “has suffered (or may suffer) loss” etc. It is common ground that because the definition of “complaint” includes part of a complaint, a complaint (as defined) may be contained in a series of communications.

Whether a communication or series of communications meets this test is a question of interpretation. The ultimate question is: what meaning would be conveyed to a reasonable recipient of the communication or series of communications? In determining that meaning, the context in which the communication was made is of the utmost importance. Although it is possible for a complaint to be contained in more than one communication, I do not consider that it is permissible to attempt to construct a complaint by a mosaic of acontextual statements made in the course of a series of communications.

The Court of Appeal analysed the wording of the communications Mr Davis relied upon as meeting the definition of "complaint". Although Mr Davis had referred in these communications to being better off without the product, the Court of Appeal held that that did not mean he was dissatisfied with it as he was referring when making this comment to his net worth. The Court of Appeal finding that "The purpose of the interest rate swaps was to deal with the risk that interest rates might move. The fact that, with hindsight, they moved in the wrong direction, thus meaning that Mr Davis was worse off in net worth terms than he would have been if he had not entered into the transaction, does not amount to a complaint about the fact that he was sold the product in the first place. But to say that, in retrospect, Mr Davis bought the wrong product does not, in my judgment, amount to a complaint about the provision of the financial service in the first place."

Takeaways

It is normally relatively straightforward to identify when a complaint satisfies the DISP definition and which in turn triggers the complaint handling rules under DISP. However, there are some instances where there is a dispute. Further the Court of Appeal commentary around a complainant relying on a number of different communications to constitute a complaint is helpful.

Knowing when a complaint is made for FOS purposes is important when considering time bar, as the 6 and 3 year rules for a complaint at FOS are judged by reference to when the complaint is first made. The Court of Appeal judgment helpfully breaks this down in to three component parts – "expression of dissatisfaction", about "the provision of or failure to provide a financial service" and must allege that the complainant "has suffered a loss". The latter part does not mean the loss has to be quantified just that it is alleged. This should mean that most data subject access requests if limited to a request for documents under data protection regulations without something more do not qualify as a complaint for DISP purposes and so will not stop time running for FOS complaint purposes. However there will always be grey areas and firms will have to continue to look at what is said and the wording of correspondence to see if it passes the threshold to constitute a "complaint".