Financial Ombudsman award bars further recovery in civil proceedings
A recent High Court judgement confirms that a claimant who accepts a final decision from the Financial Ombudsman Service is bound by it and will not subsequently be able to bring a civil claim in relation to the same matter.
The FOS provides consumers with a voluntary, quick, free and informal dispute resolution service. It is also free from the risk of the complainant having to pay the defendant firm’s costs should the complaint fail. Accordingly, it has many advantages over civil court proceedings.
On the other hand, the FOS’ processes are not as rigorous as those of a court. Furthermore, the FOS is free to reach its decisions based on what an Ombudsman considers to be fair and reasonable; although the law needs to be taken into account, an Ombudsman does not have to apply it.
For these reasons, the FOS’ binding award limit is £100,000. (Although this limit is currently under review and the FSA has proposed that it should be increased to £150,000 from January 2012.)
This decision brings some clarity to an issue that had not previously been tested in the courts: can a complainant accept a FOS award and then subsequently sue in the civil courts for additional losses? The answer is clearly “no”.
Of course, this will be of most relevance in complaints where losses exceed £100,000. In such cases, a complainant has a choice when deciding whether to accept an Ombudsman’s award, either to take the redress awarded by the Ombudsman, subject to the £100,000 limit, or instead to reject the decision and pursue a claim in the civil courts in order to make a full recovery without limit. What he cannot do is accept the FOS award and then seek the balance at court.
The decision will come as good news to FSA regulated firms and their insurers as it provides yet further confirmation that the FOS is an inappropriate forum for high value claims.
This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, please go to www.law-now.com