Suing for the balance – High Court tips the scales the other way

In a shocking about-turn, the High Court yesterday handed down judgment holding that a FOS complainant may accept a maximum monetary award and then bring a civil claim in court to claim for the balance.

The case of Clark -v- In Focus Asset Management & Tax Solutions goes against previous case law which had held that complainants could not take further action once they had accepted the FOS award. Whilst this case will probably be appealed, the judgement has a potentially huge effect on high value claims which are eligible to be referred to the FOS.  

In December 2010, we reported on the Andrews -v- SBJ Benefit Consultants case in which the High Court finally confirmed that the FOS award limits cannot be sidestepped by a separate court action.  Applying the doctrine of 'merger' of causes of action, Andrews held that complainants who accept a final determination from the FOS will be bound by it and cannot then bring a civil claim in relation to the same matter through the courts for any amounts the respondent firm is recommended to pay above the maximum award limit.  Since the judgment in Andrews, the issue has been assumed to be fully and finally resolved.

In the Clark case, the FOS upheld the claimants' complaint in January 2010, determining that the respondent's investment advice was unsuitable.  The FOS awarded the maximum and recommended that the firm pay the balance. However, the Ombudsman explained that the FOS could only enforce payment of the statutory maximum award (£100,000 at the time of the determination, now £150,000) and that should the award be accepted, it would be 'final and binding' and the claimants might not be able to obtain a greater amount in the courts.

The claimants' solicitors asked the FOS to clarify the meaning of 'final and binding' and whether the claimants would be able to pursue a civil claim for the remainder (this was prior to Andrews, which was decided later that year). The FOS replied stating: "the court would make its own decision on whether or not to award anything." The claimants accepted the decision but included wording on the acceptance form stating: "We reserve the right to pursue the matter further through the civil court."

The claimants then issued proceedings in the County Court seeking to recover the balance. The judge at first instance rejected the claim and ordered that it be struck out, stating that the judgment in Andrews was binding.

The appeal to the High Court questioned whether it was open to parties, having accepted a FOS award, later to claim in court for damages to cover what they allege to be their full loss.  Mr Justice Cranston held that in his view the judge at first instance was wrong to regard the decision in Andrews as determinative of the claimants' case.

Amongst other reasons, the judge noted that the FOS deals with complaints and not with causes of action and therefore a cause of action should be capable of further consideration by the court.  It is surprising, to say the least, that a court should hold that FOS is not a 'tribunal' for these purposes.  However, in Mr Justice Cranston's view, acceptance of an award under the statutory FOS scheme does not preclude claimants from bringing a further claim in damages for additional losses.

As both the Andrews and Clark cases were heard in the High Court, neither judgment takes precedence, although (as the later decision) Clark must be assumed to apply until the point is resolved by the Court of Appeal ruling otherwise.

In other words, whilst we wait for clarification of the law, complainants with a FOS award above the statutory maximum will be able to issue court proceedings to recover the balance of their loss.