What is the appropriate method of challenging a legally binding award made by the Financial Ombudsman Service (FOS)? The usual answer is to pursue an application for judicial review, but in Berkeley Burke SIPP Administration LLP -v- Wayne Charlton & Anor [2017] EWHC 2396 (Comm), a novel argument was put forward that the ombudsman’s decision was in fact an arbitration award given under section 6 of the Arbitration Act 1996 and that an appeal against the decision could be made to the court.

Background

The history of the case was unusual. Mr Charlton had invested in a SIPP administered by Berkeley Burke and made a complaint against it in respect of certain losses which he incurred. In 2014, the ombudsman upheld Mr Charlton’s complaint and he accepted this as the final determination of his claim.

Berkeley Burke then stated its intention to seek judicial review of the ombudsman’s decision and, in the interests of saving time and costs, the parties subsequently agreed in correspondence that Mr Charlton's complaint would be reconsidered by another ombudsman. Crucially, this agreement was reached without the court making an order quashing the original decision. Subsequently, in February 2017, a second determination was issued, again upholding Mr Charlton's complaint. Mr Charlton accepted the second determination, which rendered it final and binding on both parties.

Berkeley Burke issued an application seeking judicial review of the ombudsman’s second determination. However, it was worried that a court might take the view that this determination could not be judicially reviewed and so it also made an application seeking permission to appeal from an arbitral award. The judicial review claim was therefore stayed while this latter application was heard.

Accordingly, the status of the ombudsman’s second determination became important. In essence, Berkeley Burke argued that:

  • FOS has no statutory power to reconsider a complaint and the parties had no power to confer on FOS a power which statute does not give it.
  • In the absence of a court order quashing the original decision, FOS had no power to reconsider the original complaint. This might mean that the ombudsman’s second decision could not be judicially reviewed.
  • In effect, therefore, the parties' agreement for FOS to reconsider the complaint amounted to an agreement for FOS to arbitrate the dispute between Mr Charlton and Berkeley Burke.

The court’s decision

The court comprehensively rejected Berkeley Burke’s argument that the second determination was made pursuant to an arbitration agreement. In brief, its reasoning was:

  • Whilst the relevant legislation contains no express power permitting an ombudsman to reconsider a complaint, such a power is part and parcel of the FOS's duty to consider a complaint that has been properly brought before it.
  • Where the ombudsman’s decision has been accepted by the complainant and has become binding on the respondent, the role of the ombudsman is normally at an end.
  • The effect of the parties’ agreement that FOS should re-determine the dispute was that Mr Charlton had withdrawn his acceptance of the ombudsman’s original determination.
  • The parties had continued to participate in the FOS statutory complaints resolution scheme with which Berkeley Burke was bound to comply. Participation in the scheme involves no agreement of any kind because Berkeley Burke was bound to comply with it by statute (and Berkeley Burke accepted that the scheme was not an arbitration agreement and that the decision of the ombudsman, if accepted by the complainant, could only be challenged by means of judicial review).
  • The parties had agreed to follow the aspect of the scheme’s procedure whereby any determination by an ombudsman is only final and binding once it is accepted by the complainant. Accordingly, the ombudsman was not ‘clothed with jurisdiction’ to resolve the dispute in a manner binding on the parties, which was a prerequisite for finding an agreement to arbitrate under the Arbitration Act 1996. As a consequence, FOS’ second determination could not be an arbitration award and could not be appealed pursuant to section 69 of the Arbitration Act.

It is often difficult to succeed with an application for judicial review, so it is not surprising that lawyers try to come up with imaginative alternatives. Berkeley Burke’s arguments here were certainly imaginative, but given that FOS is a creature of statute it is difficult to see how a court would have ruled that FOS was acting as an arbitrator, even in the very particular circumstances of this case.

However, all is not lost for Berkeley Burke. Although its application for permission to appeal from an arbitration award was doomed, it remains open to it to seek a judicial review of the ombudsman’s second determination. Although it did not make a definitive ruling on the point, the court expressed the view that it would be surprising if such a remedy was not available. On the face of it, this appears the correct view so presumably Berkeley Burke's application for judicial review will now proceed and the results will be awaited with interest by SIPP operators, trustees and administrators.