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IFA firm wins landmark appeal over FOS compensation

by Michelle Abrego on Feb 14, 2014 at 09:57

IFA firm wins landmark appeal over FOS compensation

The Court of Appeal has ruled that investors who accept an award from the Financial Ombudsman Service (FOS) cannot pursue their adviser through the courts for further compensation.

The ruling comes at the end of a long legal battle between Portsmouth-based advisers In Focus Asset Management & Tax Solutions and former clients Barry and Julie Clark over whether the Clarks were free to pursue further compensation from the firm after accepting an Ombudsman award.

In December 2012 judge Ross Cranston ruled the Clarks could claim further redress from In Focus despite having already accepted an award of £100,000 from the Ombudsman, which at the time was the maximum amount the FOS could ask firms to pay.

The pair alleged they incurred losses of £500,000 after being mis-sold endowment policy plans following the sale of their business, and had been seeking a further payout through the courts.

In Focus appealed the ruling on the grounds that it clashed with a 2010 decision by judge Mark Pelling who ruled that accepting a FOS award ruled out court action over the same complaint.

In October 2013, the Court of Appeal heard that the firm had settled the Clarks' claim with ‘a substantial sum… over £100,000’ but has continued its legal fight against the decision on a point of principle.

Today Justice Mary Arden upheld the firm's appeal. She said that the claimants should have rejected the award from the FOS if they wanted to seek further compensation from In Focus and then taken the case to court.

She said: 'They are not able to raise the same claims in court proceedings even if they could have recovered more in court proceedings. What they had to do to obtain this higher level of compensation was to reject the award and bring court proceedings for that amount.'

She added that Parliament did not 'manifest any intention that complainants to the Ombudsman service should be in any different position from other claimants who have taken their claim for compensation through a tribunal for dispute resolution and obtained a decision'.

The other judges sitting on the case, justice Black and justice Davis agreed with Arden's judgement.

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17 comments so far. Why not have your say?

John Invest

Feb 14, 2014 at 10:09

James Edwards has a lot to answer for!

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Sam Caunt

Feb 14, 2014 at 10:10

Cynical I may be but the rules (law) will be changed in the future.

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Paul Nedas

Feb 14, 2014 at 10:17

Please could you publish the actual judgement or provide the url

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Man in Black

Feb 14, 2014 at 10:20

Well thank God for that, and good show to Focus for pursuing the legal point like this.

I second @Paul Nedas request - its not on Bailii yet from what I can see.

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Evan Owen

Feb 14, 2014 at 10:21

What about acceptance of FSCS payouts?

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Feb 14, 2014 at 11:00

Shame FOS are such a shower of ***t who's motto should be Guilty until proven innocent. Unqualified, No industry experience & unrealistic employees

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sol trader

Feb 14, 2014 at 11:03

sounds dangerous to me. It seems to imply unilateral, unaccountable and possibly incomprehensible decisions from (unqualified?) Ombudsmen are viewed as having been through a proper legal process.

I don't know the details of the case, but I do remember a solicitor commenting it goes against all normal legal principles that anyone should receive compensation on a 25 year contractual endowment before the 25 years is up...

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Chris Miller

Feb 14, 2014 at 11:17

Thank heavens for Mary Arden. She has applied a proper interpretation of the law, using her head, not her heart.

I feel sorry for the losers, but they should have either taken the FOS money and walked away, or declined the FOS money and gambled with an outcome in the courts.....as per the rules!!! Instead they seemed to have tried to have their cake and eat it.

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Feb 14, 2014 at 11:26

Whatever the rights and wrongs of FOS (and I think everyone agrees there are more wrongs than rights) the judgement is to be welcomed, we need certainty.

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Man in Black

Feb 14, 2014 at 11:30

@Chris Miller

Whilst you're right about what the losers should have done, there's no need to feel sorry for them: they received a meaningful settlement in excess of that £100k, and the remaining case has focused on determining the actual point of law (for everyone else's benefit).

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Alex Steger @ Citywire

Feb 14, 2014 at 11:35

I can't see the judgement on Baillii yet either and we don't have a soft copy yet to link to. Michelle was in court and has a paper copy. I will try and get the full judgement up as soon as possible.

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Let Common Sense Prevail

Feb 14, 2014 at 11:49

The basic concept that complainants can use the free service of the FOS seek a judgement, receive compensation and then use this compensation to fund court litigation to persue a case where the outcome is compromised by the FOS ruling cannot be justfied.

We should all be very pleased that unusually common sense has prevailed

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Michelle Abrego

Feb 14, 2014 at 12:13

For those looking for a copy of the judgement, it's now been posted online:


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Simon Mansell

Feb 14, 2014 at 12:23

Of course an acceptance of a FOS award should close down future claims. The client had the option to appeal to the courts after rejecting the award.

I would like to add that not only should the claimant have this right of appeal but so should the adviser. FOS should be subjected to judicial scrutiny. This would improve its decisions and ensure compliance with Article 6of the Human Rights Act reads as follows.

“ .In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law".

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Feb 14, 2014 at 12:35

Simon Mansell,

Small point of clarification, this was a civil matter, not a criminal one, but I do agree that the thread of the Human Rights Aact should apply.

Well done Focus and the judge, a little bit of sanity at last

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John Frink

Feb 14, 2014 at 13:28

Excellent - people should not be using the FOS as 'the court on the cheap'. Large claims are for the Courts to hear.

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Simon Mansell

Feb 14, 2014 at 13:40


Thanks for your comments.

Human Rights Act actually refers to civil rights : "civil rights and obligations or of any criminal charge against him."

Any quasi judicial authority without oversight or subjugation to the rule of law is bound to abuse the rights of citizens who are otherwise governed under the rule of law.

It suits whatever government to allow regulation of financial services by dictatorship i.e. unrestricted by law, constitutions, or other social and political factors within the state.

In constitutional law the executive is the part of government but separate with responsibility for the administration of the state, in our case the regulation of the state and its financial services.

The government claims the FCA is independent because they have an eye to preserving the myth of the “separation of powers”, a constitutional issue because if the government, executive & judiciary are one and the same you risk dictatorships where the different powers of government are assumed by one body i.e. no separation of powers, a regulatory judge, jury and executioner that even legislates on what constitutes a crime.

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