Out-Law / Your Daily Need-To-Know

A claimant who had accepted an FOS award could not bring a court action for the balance of his losses. The ombudsman's decision became final and binding when the claimant chose to accept it.

Andrews v SBJ Benefit Consultants

  • [2010] HC 09 C 02160

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Mr Andrews was a member of an occupational pension scheme. In 1988/9, SBJ wrongly advised him to transfer his pension benefits into a personal pension policy.

From 1995, SBJ was required to comply with an industry-wide review of pension transfer business transacted between 1988 and 1994. In 2002 the firm advised Mr Andrews it was likely he would have been better off had he remained in the occupational scheme. 

The parties, however, could not agree on the proper calculation of compensation so, in 2005, Mr Andrews initiated a complaint to the Financial Ombudsman Service (FOS).

In his covering letter, he said he was aware that the FOS was unable to enforce an award in excess of £100,000 "but a recommendation in my favour establishing the principle on which [SBJ] should have based their compensation offer would, I believe, greatly increase the chances of my reaching a satisfactory settlement with them without resorting to litigation." 

In March 2008, the ombudsman held that SBJ's calculation of redress was clearly not in accordance with the relevant regulatory guidance. He directed that Mr Andrews should recover £100,000 plus costs – the maximum sum the FOS can award. In addition, however, he recommended the firm pay Mr Andrews the difference between this and his total loss (provisionally quantified at over £400,000).

"This recommendation is not part of my determination or award," the ombudsman stated. "It does not bind the firm. If it does not pay the recommended balance and if Mr Andrews decides to sue for the balance in court, the court would make its own decision as to whether or not to award anything."

Mr Andrews was given a period of one month in which to decide whether or not to accept the award and he accepted it. SBJ, however, did not act on the ombudsman's recommendation.

In June 2009, Mr Andrews began court proceedings claiming damages for breach of SBJ's statutory obligation to carry out the review and compensate him in accordance with the relevant rules. 

SBJ, however, argued that Mr Andrews had lost the right to pursue a court claim when he accepted the ombudsman's final determination. At that point, his cause of action "merged" with the award and was extinguished.


The judge agreed with SBJ that Mr Andrews was bound by the award and could not sue for the balance.

It was not disputed that, under section 404 of the Financial Services & Markets Act (FSMA), a failure to comply with the provisions of an authorised consumer redress scheme is treated as a failure to comply with a rule. Under section 150 of the Act, contravention of a rule gives a right of action to a private person who suffers loss as a result.

There is, however, a general principle that parties who have had a dispute heard by a tribunal of competent jurisdiction should not be allowed to litigate the same issues in another tribunal. 

The judge was satisfied that the basis of the FOS complaint and the court proceedings were the same – that SBJ had failed to assess Mr Andrew's compensation by reference to the applicable rules. But was the FOS a tribunal of competent jurisdiction? The judge had no doubt it was.

Section 228 of FSMA provides that the ombudsman must determine a case by what is fair and reasonable in all the circumstances. The DISP section of the FSA Handbook adds that, in deciding what is fair and reasonable, the ombudsman will take into account any relevant law and regulations.

The scheme's procedural rules are set out in DISP. The FOS can hear evidence and argument and, if the ombudsman's decision is perverse or irrational, it can be challenged by judicial review. In the judge's view, all this pointed to the FOS being a proper tribunal.

FSMA also clearly states that the ombudsman's decision must be set out in a written statement that requires the complainant to notify him within a given time limit whether it is accepted or rejected. "If the complainant notifies the ombudsman that he accepts the determination, it is binding on the respondent and the complainant and final". 

If the decision is not accepted, it becomes a nullity and there is nothing to prevent the complainant going to court. But if, as here, it is accepted it becomes binding. The judge was satisfied that this did not bar access to justice or breach the complainant's right to a fair trial because he had a free choice whether or not to accept the determination. 


For financial services firms, the judgment brings welcome confirmation that a claimant cannot have two bites at the cherry.

But in high value cases where the FOS has made a non-binding recommendation, firms may find proceedings issued against them rather more promptly in future, unless they intend to comply with the recommendation and make this clear before the complainant has to decide whether or not to accept the award.

The decision is the latest in a series of cases testing FOS boundaries. In R v FOS, the Court of Appeal upheld the ombudsman's jurisdiction to decide cases on the basis of what is fair and reasonable in the circumstances, and in the related case of FOS v Heather Moor, it confirmed the right of the FOS to charge a firm the standard case fee, even when the case against the firm had been unsuccessful.

In 2007, the High Court confirmed that the FOS did not have the power to make a binding award over the statutory limit of £100,000 (Bunney v Burns [2007].

About 0.1% of FOS cases are believed to be affected by the £100,000 limit. The FSA is currently consulting on raising it to £150,000 (see: FSA in drive to improve complaints handling, OUT-LAW News 06/10/2010).

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