Andrews v SBJ Benefit Consultants – accepted FOS decision precludes further proceedings [2010] EWHC 2875 (Ch)

Parties who have had a dispute heard by a judicial tribunal of competent jurisdiction should not be allowed to litigate the same issues in the courts. The Financial Ombudsman Service (FOS) is such a tribunal and, where a claimant accepts its award, he cannot bring court proceedings to recover loss above the FOS compensation limit of £100,000.

Mr Andrews suffered financial loss following advice by SBJ Benefit Consultants (SBJ) to transfer preserved benefits in his occupational pension scheme to a personal pension. SBJ admitted liability but the level of compensation could not be agreed. Mr Andrews submitted his claim to the FOS which awarded him £100,000 and made a non-binding recommendation that SBJ make a further payment to Mr Andrews in respect of his full loss plus interest.

Mr Andrews formally accepted the FOS decision, having been warned by the FOS that this might preclude him from bringing court proceedings, and SBJ refused to pay him more than £100,000. He sued SBJ for breach of their statutory duty to him under section 150 of the Financial Services and Markets Act 2000 (FSMA) claiming the balance of his loss.

The judge held that the merger doctrine applied to prevent Mr Andrews from bringing the court proceedings. A person in whose favour an English judicial tribunal of competent jurisdiction has pronounced a final judgment is precluded from afterwards recovering before any English tribunal a second judgment for the same civil relief in the same cause of action. The basis of the doctrine is that the cause of action, having become merged in the judgment, ceases to exist.

For the doctrine to apply, the following requirements must be satisfied:  

  • the cause of action must be the same in both proceedings; and
  • the earlier proceedings must have been before a judicial tribunal, and not merely before an administrative authority.

Looking at the first requirement, Mr Andrews argued that the subject matter of his complaint to the FOS was a mis-selling claim in negligence whereas his claim before the court was a claim for damages for breach of statutory duty. The judge concluded that the question to be answered was whether the facts said to give rise to liability in the proceedings were or included the same facts as those relied upon in the complaint to the FOS. The losses for which damages were claimed in the proceedings were not different in nature from those before the FOS and the merger doctrine could therefore apply.

As for the status of the FOS, the judge had little difficulty in finding that it is a judicial tribunal. Its procedure bears all the hallmarks of a court, allowing the parties to present evidence and argument. Moreover, in R (Heather Moor & Edgecombe) v FOS & Lodge, the Court of Appeal held that Article 6 of the European Convention on Human Rights and Article 1 of the First Protocol apply to the activities of the FOS. It would not be consistent with that decision to conclude that the FOS should not be treated as a judicial tribunal for the purposes of the merger doctrine.

If the FOS’s decision had not been accepted, it would have become a nullity and Mr Andrews could have claimed in court. The judge was satisfied that precluding him from going to court once he had accepted the decision did not bar access to justice or breach his right to a fair trial because he had a free choice whether or not to accept the decision.  


This decision clarifies an important uncertainty concerning the effect of an FOS award and is likely to lead to large claims bypassing the FOS and proceeding straight to court. Having said that, many independent financial advisers (IFAs) believe FOS decisions to be more consumer friendly than court decisions, given the FOS’s freedom to decide what is “fair and reasonable” without being bound by the law (see R v FOS & Lodge). In particular, the FOS is free to ignore the 15 year longstop under the Limitation Act 1980 (R (Bamber & BP Financial Services) v FOS). Consumers with claims in excess of the £100,000 limit may therefore still decide to use the FOS, concluding that it is to their advantage to forfeit part of their claim in exchange for a favourable hearing without the risk of paying significant legal costs in court proceedings.

The FSA is currently considering an increase of the limit to £150,000 for any complaint referred to the FOS on or after 1 January 2012 ( However, it reports that currently only 0.1 per cent of claims, or about 120 a year, are thought to be worth more than £100,000 so the number of cases affected by the proposed change is small. The FOS is unable to make a direction that would require a firm to make a payment exceeding the statutory cap (Bunney v Burns Anderson plc).

This decision about the merger doctrine will be of relevance to other tribunals and ombudsman services. The doctrine doesn’t apply to foreign judgments but, where a claimant before the English court has already obtained a foreign judgment for the same relief, the defendant will be able to rely upon a res judicata defence and allege cause of action and/or issue estoppel – see section 34 of the Civil Jurisdiction and Judgments Act 1982 and the House of Lords’ decision in Republic of India v India Steamship Co Ltd (The Indian Grace).

A similar concept of merger applies in arbitration. A claimant who has obtained an arbitration award may not bring the same claim again in a different arbitration or in court proceedings since his cause of action will have merged with the award, and his right of action now arises solely out of the award. This can cause problems where the claimant has suffered further loss which he was not able to claim in the arbitration. Unless this loss can be said to flow from a new cause of action, it cannot be recovered.