In recent years there has been a trend for findings by the Financial Services Ombudsman ("FSO") being appealed to the High Court on the basis that the FSO failed to hold an oral hearing.
A recent decision of the High Court held that where there is a material conflict of fact in a complaint before the FSO, the constitutional right to fair procedures requires the FSO to hold an oral hearing.
In Smith & Anor v Financial Services Ombudsman & Anor ( IEHC 40), the appellants, on the advice of Ulster Bank, joined a consortium of investors who invested in property. The investments performed badly and the appellants suffered significant financial losses as a result. The appellants made a complaint to the FSO, alleging that they were never properly advised that the investment scheme was of a high risk nature. In response, Ulster Bank argued that the appellants were furnished with a memorandum outlining the risk strategy, though the appellants submitted that this was sent after they had made the investment. The appellants sought an oral hearing on the basis that the complaint could not be dealt with on documents alone.
The FSO took the view that there was no material conflict of fact and found that the complaint was not substantiated. The FSO stated that any conflicting accounts by the parties could be resolved on the basis of the documents before him, and as such it was not necessary to hold an oral hearing in order for them to reach a decision.
Barrett J considered the role of the Court in an appeal from a decision of the FSO and confirmed that the “Ulster Bank test”, as set out in Ulster Bank Investment Funds Limited v Financial Services Ombudsman and Others ( IEHC 323) ought to be applied. This test requires the Plaintiff to establish, as a matter of probability, that the FSO’s decision was vitiated by a serious and significant error or a series of such errors. In applying this test, the Court is also compelled to have regard to the degree of expertise and specialist knowledge of the FSO. Barrett J noted that the case-law suggests that this deference extends to the FSO’s area of specialisation, ie financial services matters, but not to areas of procedural fairness.
The Court held that by declining to hold an oral hearing the FSO, in effect, denied the appellants the opportunity to test by way of cross examination the various factual issues arising between the parties, the determination of which was necessary to enable the appellants to establish the merits of their complaint.
Therefore, the Court held that the failure to hold an oral hearing was an error of such significance as to vitiate the FSO’s finding. Barrett J. held that as the question of whether an oral hearing is required is a matter that is not within the specialised area of knowledge of the FSO, the issue of deference to be accorded to that expertise did not arise. Accordingly, the Court ordered that the appellant’s complaint be remitted back to the FSO for fresh consideration.
This decision highlights that while the courts will not require the FSO to exercise all the procedures and requirements of a court of law, they will not allow a complainant’s constitutional right to fair procedures be overlooked.
Appeals of findings made by the FSO on the basis that an oral hearing should have been held by the FSO have been coming before the High Court with increasing frequency. While in this instance, the High Court determined that an oral hearing should have been held, there have been numerous instances where the High Court reached the opposite conclusion. Therefore, the absence of an oral hearing before the FSO will not necessarily lead to the finding being overturned on appeal by the High Court. An oral hearing tends to be necessary when there is dispute of fact between the parties. It seems that complex disputes of a commercial nature are increasingly coming before the FSO and it is questionable whether it is appropriate for a complex dispute to be brought by way of complaint before the FSO, rather than by litigation before the courts.