The High Court has recently decided that a complainant who accepts a decision by the Financial Ombudsman Service ("FOS"), which will then become binding on both the complainant and the respondent, is prohibited from bringing a separate action at Court over the same subject matter.

In this case, the FOS upheld the Claimant's complaint and awarded him £100,000, which is the statutory limit for awards that the FOS can make. The FOS went on to make a non-binding recommendation that the Defendant should pay additional compensation in excess of £100,000 according to the relevant guidance. The Claimant subsequently commenced Court proceedings in relation to the same dispute, albeit on a different legal basis, to try to recover sums in excess of the £100,000 that had been awarded.

The Court found that the FOS is, in the context of its complaint scheme, a Court/Tribunal. The decision of the FOS, which the Claimant had chosen to accept, had become binding on both the Claimant and the Defendant. Under the doctrine of merger, the Court held that the Claimant was not entitled to re-litigate the dispute.

Whilst this decision is only binding on the County Courts, it sets a persuasive precedent. On the face of it, therefore, if a successful complainant suffers a loss in excess of £100,000 but chooses to accept the final decision of the FOS, it will be unable to pursue further proceedings against the respondent to recover any losses in excess of £100,000.

Complainants should therefore think very carefully before choosing to accept the decision of the FOS, and may wish to obtain legal advice before making a decision. Thought should also be given, in circumstances where a complainant believes their losses are in excess of £100,000, as to whether a complaint to the FOS is the appropriate forum within which to seek redress. It may be more appropriate to pursue proceedings in Court.

Case: Andrews v SBJ Benefit Consultants Limited [2010] EWHC 2875 (Ch)