Follow us

The Court of Appeal has handed down an important judgment holding that complainants who had accepted a Financial Ombudsman Service ("FOS") determination were barred from bringing court proceedings in relation to the same cause of action under the legal principle of res judicata.  In doing so, the Court of Appeal overruled a High Court decision that complainants to the FOS would be able to accept a determination awarding them the statutory maximum award (now £150,000) and then subsequently claim for damages above that amount through the courts.

The High Court decision in Clark v In Focus Asset Management & Tax Solutions Ltd [2012] EWHC 3669 (QB) ("Clark") had caused concern in the financial services industry as it had seemingly allowed complainants the opportunity to accept a FOS award which would then be used to fund further proceedings in the courts.

The Court of Appeal decision will be welcomed by the financial services industry because it prevents complainants who accept FOS awards from having "two bites of the same cherry".  The decision also removes the uncertainty as to the finality of FOS determinations which has existed since the High Court decision in Clark was handed down because it was in direct conflict with a previous High Court decision on the issue.

The Court of Appeal's decision leaves open the possibility that, where a complainant has two distinct causes of action, they may be able to submit one to the FOS, while bringing concurrent or subsequent court proceedings in relation to the other.  Such examples are likely to be relatively rare and would in any event have already entitled parties to bring two separate sets of litigation proceedings on the established principles.  In such cases, to have the court proceedings struck out, the burden of proof will lie with the respondent firm to demonstrate to the court that the causes of action of the FOS complaint and the litigation proceedings are the same.  However, even if a party with two separate causes of action did bring legal proceedings after having accepted a FOS award, they would not be entitled to double recovery of the same losses.  To read our full briefing on the decision, please click here.


Article tags

Related categories