A recent High Court decision has found that acceptance of a favourable decision of the Financial Ombudsman Service ("FOS"), awarding £100,000 (the then maximum sum which could be awarded by the FOS), did not preclude the recipient of that sum from claiming further losses via the courts, even though the award was expressed to be binding and final.

The decision may have a significant impact on financial institutions who, on the basis of an earlier decision in 2010, believed that where an award made by the FOS was accepted by a complainant, liability was capped at the level of the award.    

The FOS complaint

Mr and Mrs Clark were advised by In Focus following the sale of a family business in 2001 and the sale of business premises in 2004.  Losses resulted from that financial advice and they subsequently complained to the FOS.  An initial FOS adjudication found that the complaint should be upheld and recommended that In Focus pay the Clarks £100,000 in full and final settlement of the complaint.  In Focus did not agree with the decision but made an offer of £100,000 in full and final settlement.  This was rejected by the Clarks who requested that the Ombudsman give a decision.  The Ombudsman gave a provisional decision, largely adopting the reasoning and conclusions of the adjudicator.  The decision stated that compensation should be in accordance with a formula which was designed to put the Clarks back where they would have been prior to the advice – and that the formula might produce a greater amount than the maximum he could award, namely £100,000 plus interest.  He recommended that the amount should be paid in full and final settlement of the complaint.  Again, In Focus offered £100,000 to the Clarks and they again refused to accept. 

Some months later the Ombudsman issued his final decision.  He upheld the complaint along the lines of the provisional decision.  He explained in a letter to the Clarks that they had 28 days within which to decide whether to accept the offer and that if they accepted, they would "be bound by the decision, which will be final".  Prior to accepting the decision, the Clarks' solicitor wrote to the Ombudsman asking for clarification as to the meaning of the words 'final' and 'binding' and asking whether his clients would be prejudiced in any way by accepting the decision.  The Ombudsman did not give a view as to whether they would be prejudiced, were the £100,000 to be paid – this was a matter for the court.

The Clarks completed the pro forma acceptance / rejection form, indicating that they accepted the decision but adding a rider "We reserve the right to pursue the matter further through the civil court".  The adjudicator responded stating that the Clarks' acceptance letter meant that the final decision was binding on all the parties and that In Focus needed to settle the complaint in accordance with its terms.

The civil claim

Aware that their actual damages were likely to be significantly higher than the maximum £100,000 compensation directed by the Ombudsman (as he had indicated), the Clarks subsequently brought a civil action seeking further damages.  The Particulars of Claim acknowledged the £100,000 awarded by the FOS, for which the Clarks would give credit.  In Focus applied to have the claim struck out, on the basis that, because the FOS award had been accepted, the court had no jurisdiction to consider a further claim. 

At first instance, the Judge found for In Focus, applying the decision in a previous case, Andrews v SBJ Benefit Consultants (2010), in which case the question of whether further damages could be sought via a civil clam, following acceptance of a FOS award, was considered by His Honour Judge Pelling QC.   In Andrews, the Court concluded that by accepting the final decision of the FOS, the Claimant was precluded afterwards from recovering from any other English court or tribunal a second judgment for the same relief in respect of the same subject matter.  Such a claim was precluded by the "doctrine of merger".  Applying that decision and the doctrine of merger in the Clarks' case, the application of In Focus was successful and the claim struck out.  The Clarks appealed.

Appeal before Mr Justice Cranston

Cranston J disagreed with the Judge at first instance, and the Judge in Andrews.  He did not agree that the doctrine of merger applied, on the basis that the FOS considers complaints, not causes of action, and is not a tribunal.  He stated that in his view the correct approach was to consider the FOS scheme as a whole – the statutory aims of which were to provide a scheme for the summary and informal resolution of disputes.  A further claim in the courts was not inconsistent with such aim.  The term 'final' should not be taken to mean that there were no other routes available to the complainant, but simply that it was the end of the FOS process.  Whilst the ability of the Ombudsman to recommend a settlement sum greater than £100,000 might encourage parties to compromise without recourse to the courts, this would not necessarily be the case.  He stated "It seems to me that for a complainant to use an award of £100,000 to finance the legal costs of bringing court proceedings for a greater amount is not inconsistent with the statutory aims."  He therefore concluded that the doctrine of merger did not apply and so the Clarks were free to continue their claim for further damages in the civil courts.


The possible impact of the Clark decision, if it becomes settled law, is significant for institutions who face adverse decisions by the FOS where the actual damages figure is likely to be more than the maximum compensation that can be awarded by FOS (currently £150,000 for complaints issued after 1 January 2012).  Liability will no longer be capped at that level and acceptance of a FOS decision may no longer be the end of the matter on any particular complaint.  Trade bodies have expressed concern about the recent decision, suggesting that it is unfair and contrary to the intention of the FOS complaints procedure.

Given that Andrews and the Clark decision are both decisions of the High Court, whilst contradictory, Andrews is not overruled – which means that the law on this point is now unclear.  It remains to be seen whether In Focus will appeal to the Court of Appeal, which would then hopefully provide clarity on the matter.