(1) Mr Barry Clark & (2) Mrs Julie Clark v In Focus Asset Management & Tax Solutions Ltd [19.12.12]
High Court allows claim for additional damages to proceed against financial services provider despite acceptance of maximum award by Financial Ombudsman Service (FOS).
Should financial advisors and their insurers despair? Not just yet. The decision is being appealed. As this decision and Andrews are both High Court decisions, neither takes priority over the other. Even if this decision is upheld, all is not lost. The courts do not find in favour of complainants as readily as the FOS; and they necessarily have a healthy regard to following the law, which cannot be said of the FOS. Indeed, there are a number of instances where the courts have found in favour of advisors where the FOS has found for complainants on the same issue.
Advisors and their insurers would also be wise to keep in their back pocket DISP 3.3.4(10) from the FSA handbook. This allows advisors to submit to the FOS that complaints should be summarily dismissed without consideration of the merits where the case would be more appropriately considered by the courts. If argued successfully, this would be a useful tool to prevent complainants obtaining that fighting fund.
This recent appeal has potentially changed the landscape of financial services complaints.
Before this decision, the case of Andrews v SBJ Benefit Consultants Ltd  EWHC 2875 (Ch) was considered as authority that complainants in the financial services context essentially had to decide whether they wished to pursue their complaint before the FOS or the courts.
At present, the FOS can award a maximum of £150,000 (recently increased from £100,000). The FOS has typically been a more favourable forum for complainants, with the FOS only required to have regard to the law - they need not follow it. Complainants also benefit from the fact that the FOS scheme is straightforward, free of costs (for the complainant) and relatively quick. As a result, those with a complaint worth under £150,000 would ordinarily complain to the FOS, whereas those with a complaint over that amount would usually go to court.
If those with substantial complaints went to the FOS, Andrews stated that they would not be able then to pursue in the courts the amount of their claim in excess of the FOS limit. Admittedly, some complainants with large claims would choose to take their claim first to the FOS but then reject a final determination in their favour to pursue a court action, so that they could go to court with a FOS finding "in the bag", although not the monetary award. The FOS also believed that this was how the scheme operated; concluding their final decisions with a comment highlighting that acceptance of the FOS decision would likely preclude the complainant taking court action as well.
The principle outlined above is based on the doctrine of merger. In summary, this means that if one tribunal or court has made a finding on an issue, it is not then open to a complainant to pursue the same case before a different court or tribunal.
In this case, the High Court disagreed that the FOS process amounted to a tribunal and, on that basis, was able to find that the doctrine of merger did not apply. The court was comfortable with the fact that, as a result, complainants with substantial claims could effectively secure a fighting fund from the FOS (i.e. a £150,000 award) with which to fight a court action.