2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
Mr and Mrs Barry Clark lost over £300,000 due to negligent investment advice and received £100,000 from the Financial Ombudsman Service. They sued for additional compensation but were initially blocked by the doctrine of merger. The High Court allowed their appeal. However, the Court of Appeal, guided by the doctrine of res judicata, held that acceptance of the Ombudsman’s award precludes further legal action. The ruling affirms that section 228(5) of FSMA does not oust the common law doctrine of res judicata, ensuring finality and preventing re-litigation of the same issues.
Judgment
Lady Justice Arden :
ISSUE: EFFECT OF AWARD UNDER FINANCIAL OMBUDSMAN SCHEME SET UP TO DEAL WITH CONSUMER COMPLAINTS AGAINST FINANCIAL SERVICE PROVIDERS
Parliament has by primary legislation, namely the Financial Services and Markets Act 2000 (“ FSMA ”), set up a dispute resolution scheme called the Financial Ombudsman Service (“the Ombudsman Service”) for consumers who have disputes with providers of regulated financial services. This Service determines disputes and may award compensation. If a consumer accepts an award of compensation, the award is binding on the adviser and the complainant, and is final. Parliament gave the financial services regulator (now the Financial Conduct Authority (“the FCA”)) power to fix a maximum award of compensation that could be awarded. The scheme is very important to consumers not least because it is free to them: financial advisers against whom complaints are made are liable to pay fees to the Ombudsman Service and those fees largely fund it. But nothing was said in the legislation about consumers taking legal proceedings after accepting an award under the scheme. It is on one view at least consistent with the consumer-facing purpose of the provisions that the consumer should be able to do this. However, there are now conflicting decisions at the level of the High Court as to whether consumers can do this. We must resolve this conflict on this appeal.
I shall need to summarise the background to this appeal, the statutory scheme, the ambiguity in FSMA and the conflicting decisions of the High Court. Then I will set out the submissions and my reasons for my conclusions in relation to those submissions. In summary, for the detailed reasons given below, and having been assisted by the able submissions of all parties, I consider that this appeal should be allowed for the following reasons:
Leaving aside FSMA, acceptance of an award would preclude a complainant from starting legal proceedings to pursue complaints which he had already submitted to the Ombudsman Service, and which the ombudsman had decided, because of the common law doctrine of res judicata , which I explain below; and
The relevant provision of FSMA, section 228(5) FSMA (set out below), does not exclude the operation of the common law doctrine of res judicata .
Common law doctrines preclude a person who has obtained a decision from one court or tribunal from bringing a claim before another court or tribunal for the same complaint. These rules ar