2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
This Court of Appeal decision resolves conflicting High Court authorities on the effect of accepting a Financial Ombudsman Service award. Mr and Mrs Barry Clark alleged over 3 300,000 loss from negligent investment advice and obtained an Ombudsman award of 3 100,000 with a recommendation for full compensation. They accepted the award while purporting to reserve a right to sue for the balance, then issued court proceedings. HHJ Barratt QC dismissed the claim on merger grounds, relying on Andrews v SBJ Benefit Consultants; Cranston J reversed. Writing for the Court, Arden LJ holds that cause of action estoppel (res judicata) can attach to accepted Ombudsman awards where the complaint involves facts constituting a cause of action, and section 228(5) FSMA does not exclude res judicata. Black LJ and Davis LJ concur. Acceptance of an Ombudsman award bars relitigation of the same grievances in court; claimants must reject the award to preserve judicial remedies.
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