If consumers' complaints cannot be resolved to their satisfaction by the body complained of, they have the right to complain to the Financial Ombudsman Service (FOS) under the Financial Services and Markets Act 2000. While voluntary for the consumer, the scheme is compulsory (within the limit of £100,000) for the body complained about.

Section 228 (2) provides that a complaint has to be determined by reference to what is, in the opinion of the Ombudsman, fair and reasonable in all the circumstances of the case, taking into account the relevant law, regulators' rules and guidance and good industry practice.

Court of Appeal case

A recent Court of Appeal case of R (on the application of Heather Moor & Edgecomb Ltd) v Financial Ombudsman & Lodge confirmed that the financial Ombudsman's opinion as to what is fair and reasonable in all the circumstances of the case outweighs the relevant law.

Mr Lodge complained to the FOS about pension advice given to him by independent financial advisers Heather Moor & Edgecomb Ltd (HME). The Ombudsman upheld the complaint.

HME sought judicial review on the basis that the Ombudsman had failed to determine the complaint in accordance with the rules of English law. As a result, it was argued, his decision was one that no reasonable Ombudsman could have reached.

The decision

The Court of Appeal disagreed. The provision in the Act of the words "by reference to what is, in the opinion of the Ombudsman fair and reasonable in all the circumstances of the case" made it clear that Parliament had not intended the Ombudsman to be bound to determine the complaint in accordance with the common law. The Ombudsman should take the relevant law into account but was free to depart from it and be subjective in arriving at his decision. The Court found that the Ombudsman had not, in any event, departed from the relevant law.

Comment

The scheme applies to most personal financial matters and allows the Ombudsman to look beyond the law and the small print, to take into account good industry practice and to adopt a fair and modern approach. Although not bound by the common law, any perversity, irrationality and arbitrariness on the part of the Ombudsman, including an unreasoned and unjustified failure to treat like cases alike, will be grounds for seeking judicial review.

The Ombudsman's subjective decision making should perhaps be borne in mind when attempting to resolve consumers' complaints in advance of the Ombudsman becoming involved.

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For further information about this published aticle, contact Kathryn Hobbs on +44 (0)121 213 2397, Alexa Highfield on +44 (0)121 213 2396 or Amie Ryalls on +44 (0)121 213 2360

This published article may contain information of general interest about current legal issues, but does not give legal advice.