R (on the application of Heather Moor & Edgecomb Ltd) v Financial Ombudsman Service [2008] EWCA Civ 642, [2008] All ER (D) 126 (Jun)
Laws, Rix and Stanley Burnton LJJ
11 June 2008
On the true construction of s 228 of the Financial Services and Markets Act 2000 (FSMA 2000), the ombusdman is not obliged to determine a complaint in accordance with the common law.
Anthony Speight QC and Kate Livesey (directly instructed) for the claimant.
Charles Flint QC and James Strachan (instructed by the Financial Ombudsman Service) for the defendant.
The claimant was a company acting as independent financial advisers. In late 2003, a client, L, complained about the advice he had received. The claimant rejected the complaint and L then complained to the defendant regulatory authority. An adjudicator in the defendant upheld the complaint.
By letter of August 2004, the claimant rejected that opinion. It contended that since the claim exceeded the maximum amount that the defendant could require a firm to pay a claimant, fairness required that it be determined by litigation in court, and the defendant should accordingly decline jurisdiction. In the alternative, a hearing was required so that disputes of fact could be resolved after hearing witness evidence. The defendant responded that the financial limitation did not preclude hearing of the claim by the defendant, and that there was no contradictory evidence and therefore no need for a hearing. It later rejected the submission that the claimant’s right to a fair trial under Art 6(1) of the European Convention on Human Rights (the Convention) were affected, given the opportunity of judicial review.
The ombudsman went on to determine the complaint in L’s favour. It directed that the claimant arrange an assessment of L’s loss and that it pay the amount of that loss up to the sum of £100,000 and recommended that if the amount of L’s loss exceeded that sum, the claimant should pay the balance into L’s pension fund. The claimant applied for judicial review. Permission was refused on the papers, and the claimant appealed to the Court of Appeal, which granted permission and decided to hear the substantive application itself.
LORD JUSTICE STANLEY BURNTON:
The claimant contended that, on its true construction, FSMA 2000, s 228 required the defendant to determine complaints in accordance with the rules of English law, otherwise Art 6(1) of the Convention would be breached; if necessary, s 3 of the Human Rights Act 1998 (HRA 1998) compelled such a conclusion. It further submitted that the ombudsman in this case had failed to apply the rules of English law and had instead made his decision according to what he considered fair and reasonable. In any event, he should have held an oral hearing in public, and given his decision in public, but had failed to do so.
His lordship considered first whether the ombudsman was required to apply the law. Section 228(2) of FSMA 2000 provides: “A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case”.
Confining oneself to the wording of s 228 and the other relevant provisions of FSMA 2000, the ombusdman was not obliged to determine a complaint in accordance with the common law.
Nor did the Convention alter that conclusion. His lordship referred to The Sunday Times v UK (App no 6538/74) [1980] ECHR 6538/74. The scheme established under FSMA 2000 was compatible with the requirements of the rule of law as set out in that case.
Relevant laws
The ombudsman was required by DISP 3.8.1 to take into account the relevant law, regulations, regulators’ rules and guidance and standards, relevant codes of practice and, where appropriate, what he considers to have been good industry practice at the relevant time. He was free to depart from the relevant law, but if he did so he should say so in his decision and explain why. In those circumstances, the rules applied by the ombudsman were sufficiently predictable. So far as guiding the conduct of financial advisors were concerned, provided they complied with “the relevant law, regulations, regulators’ rules and guidance and standards, relevant codes of practice and, where appropriate,…good industry practice”, they could be assured that they would not be liable to their client in the absence of some exceptional factor requiring a different decision. Last, the common law required consistency: that like cases were treated alike. Arbitrariness on the part of the ombudsman would be a ground for judicial review.
His lordship turned to whether the ombudsman was required to hold an oral and/or public hearing. He referred to R (on the application of Thompson) v Law Society [2004] All ER (D) 341 (Feb). There was no unfairness in this case in the ombudsman’s decision that the evidence should be entirely written.
So far as the requirement of Art 6 of a public hearing was concerned, there had been a public hearing before the Court of Appeal. Where a complaint could fairly be determined on written evidence and without oral submissions, given the nature of the jurisdiction and the desirability of speedy decision at minimum cost and with minimum formality, it was normally not necessary for the ombudsman to hold a public hearing. The application would therefore be dismissed.
LORD JUSTICE RIX:
His lordship agreed with the judgment of Burnton LJ. He added that the following values were all to be appreciated and brought into a pragmatic balance: that an efficient and cost-effective and relatively informal type of alternative dispute resolution should not be stifled by the imposition of legal doctrine; that the opportunity for the development of new ideas fitting to financial service industries operating in consumer markets should be appreciated for the benefits they could bring; that on the other hand transparency, consistency and accessibility as to the principles which informed the ombudsman’s determinations remained virtues in the new setting; and that publicity as to those principles and those determinations could assist in that regard.
Lord Justice Laws agreed with both judgments
