Financial Ombudsman Service Decision Not a Bar to Further Court Action

High Court ruling in Clark v In Focus  of assistance to complainants who have accepted a decision via the Financial Ombudsman Service; ruling determines that this in itself is no bar to bringing separate civil proceedings for a greater amount than the statutory maximum award.

In the recent case of Barry Clark and Julie Clark v In Focus Asset Management & Tax Solutions Ltd, Cranston J ruled that, where the claimants had accepted an award from the Financial Ombudsman Service of £100,000 (the maximum the Ombudsman could then award – now raised to £150,000), this was no bar to bringing separate civil proceedings for the balance of the amount the claimants said was due to them.

Doctrine of merger does not apply

The doctrine of merger provides that a person who has received a final judgment in one competent tribunal, may not apply to a second tribunal for effectively the same relief arising from the same subject matter.  The two causes of action are said to have ‘merged’ so that the final ruling on the first also extinguishes the second.

However Cranston J held that this did not apply to rulings of the Ombudsman, as it is not a tribunal in the relevant sense.  This is because: (a) the Ombudsman attempts to resolve cases by mediation, (b) the Ombudsman sometimes makes non-binding recommendations, (c) even when the Ombudsman makes a final determination, it does not bind either party unless the complainant assents and (d) the Ombudsman deals with complaints and not causes of action (see paragraph 27 of the judgment).

The learned judge went on to find that, considering the statutory scheme as a whole, the policy of the Ombudsman procedure was not inconsistent with permitting further recourse to the courts, and that the Ombudsman’s ruling was said to be ‘final’ only in the sense that it completed the Ombudsman process, and not in the sense that it would preclude other remedies.

Relevance to financial services litigation such as bank swaps mis-selling

This case may well be helpful to those with substantial claims whom chose the FOS route and obtained a positive determination.  In particular victims of swaps mis-selling, that have previously accepted a determination by the Ombudsman, may now wish to apply for further relief through the courts.

Indeed, Cranston J, went as far to note that there was no objection to a complainant using the statutory award (previously £100,000) received from the Ombudsman’s determination in order to fund further litigation.

Read the full judgment:

Barry Clark and Julie Clark v In Focus Asset Management & Tax Solutions Ltd [2012] EWHC 3669 (QB) – LEXLAW Solicitors

M Ali Akram (Principal)