When a couple received negligent advice from a firm of financial advisers, they complained to the Financial Ombudsman Service (FOS). The ombudsman ruled in their favour and ordered that compensation should be paid to the monetary limit (which was then £100,000) and that the balance of the loss they had suffered should be determined by a formula.

The financial advisers accepted the decision and sent the couple a cheque for £100,000.

The couple then started proceedings in the County Court to recover the balance of their loss. The Court refused to consider their claim as the dispute had been settled by the payment of the sum awarded by the ombudsman. The couple appealed.

The question for the Court of Appeal was whether or not a matter that has already been accepted as settled by a ‘binding and final’ determination by the ombudsman can then be retried on the same facts if the ombudsman’s award is deemed to be inadequate. In other words, does the decision of the ombudsman extinguish all rights of action with regard to the matter?

The decision turned in part on the nature of the FOS, which the Court held to be a quasi-judicial body. It could not be said, therefore, that if a decision of the FOS was a final decision, from which there was no appeal, the right to have access to the law to settle disputes – a right under the European Convention on Human Rights – was infringed.

Nor, said the Court, was it appropriate for a defendant to have to defend two sets of legal proceedings on the same facts.

The Court was unequivocal that the acceptance of an ombudsman’s decision shuts the door on future litigation relating to the same matter unless there is material new evidence available.

Choosing to use an ombudsman scheme rather than litigation is a decision which should be taken with legal advice, especially if the claim exceeds the maximum that can be awarded by the ombudsman: the current maximum that can be awarded by the FOS is £150,000.


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