FOS: Pit stop on the road to court?
As I reported in December, following the case of Clark v In Focus Asset Management and Tax Solutions, a complainant may now accept a maximum monetary award from FOS and then bring a civil claim through the courts to sue for the balance of their loss.
In response to the Court's finding in Clark, the FOS has moved swiftly to amend its online guidance on recommendations above the statutory limit.
The FOS guidance reads:
"Until recently, if a consumer accepted our decision they could not then take the business to court. However a decision from the High Court in December has taken a different view on this decision. For more information about this, please see our consumer factsheet on compensation over £150,000.
Whether or not we uphold their complaint, the consumer should always take their own legal advice before deciding whether they would be better off taking a financial business to court."
It is some comfort for firms that FOS recognises that "there are time limits that apply for taking cases to court – and these continue to run while a case is with us".
Complainants are being advised that they can accept a FOS decision, rendering it 'final and binding', and yet still pursue a claim at court. We are now likely to see more complainants using FOS as a 'pit stop' on their way to court. A complainant will be able to take on board a 'fighting fund' at FOS, in the form of a FOS award, to fund their journey to court. The FOS complaint can also serve as a 'test drive'; enabling a complainant to obtain evidence, test the respondent's case and receive an independent, quasi-judicial ruling – and all for free, and without prejudice to their legal rights.
This, I believe, undermines FOS' statutory purpose. A complainant has always been free to choose between two different tracks: FOS or the court. FOS is designed to deliver quick and cost effective solutions in lower value complaints. FOS is not required to apply the law, but simply to look at what is 'fair and reasonable' in the circumstances of the individual complaint. For this reason, there is a limit on the monetary awards FOS is able to make, and a complainant with a higher value or more complex complaint has always been able to bring court proceedings instead, where an unlimited award can be made.
It also makes a mockery of FOS' statutory power to make decisions which really are 'final and binding'. What happens if a complainant who has successfully obtained the maximum award before FOS then takes their case to court to sue for the balance - and loses? Will the complainant be required to repay their FOS award?
This decision creates a number of potholes in the path of the smooth administration of justice, and we will follow any appeal with interest.