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Challenging FOS decisions

  • United Kingdom
  • Financial services disputes and investigations
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Will judicial review cases so far in 2017 further embolden FOS?

Due to the limited grounds available and high threshold test, judicial review proceedings of decisions made by the Financial Ombudsman Service are relatively rare. Yet two decisions have reached the Administrative Court already this year.

In this briefing, we review what these decisions reveal about the decision making process at the Financial Ombudsman Service and the implications for financial institutions.

If a financial institution wishes to challenge a Financial Ombudsman Service (FOS) decision, it may consider making an application for judicial review. The purpose of judicial review is to ensure that public bodies, including FOS, act lawfully. However, a claim for judicial review can only be brought if  permission of the Court is obtained pursuant to Civil Procedure Rule 54.4. There are limited available grounds for judicial review.   

The grounds

The grounds for seeking judicial review can be grouped under the following main headings:

  • Error of Law – an error of law by a Court or public body in exercising its powers
  • Procedural Impropriety – breach of common law rules of natural justice or procedural fairness (eg right to a fair hearing, bias)
  • Irrationality/Wednesbury unreasonableness -  no person properly directing itself as to the relevant law could have possibly reached the decision made
  • Abuse of power generally – a public body has not used its powers in order to further the relevant statutory purpose but rather an improper or ulterior purpose

To give permission for a judicial review to progress, the Court must be satisfied the claim gives rise to an arguable case under one or more of the above grounds, which merits full investigation at an oral hearing. In reality, this is a high threshold and many applications are refused at the permission stage. 

The remedies

Available remedies from judicial review are limited:

  • a mandatory order (requiring a public body to make a decision it is refusing to make)
  • a prohibiting order (preventing a public body from acting outside its jurisdiction or otherwise abusing its power)
  • an injunction under s.30 of the Supreme Court Act 1981 (restraining someone from holding a public office)
  • a quashing order (setting aside an existing order/decision)

It is the final remedy that is most commonly sought against FOS – an order to quash an Ombudsman decision under one of the above grounds.

2017 judicial review decisions involving FOS

Due to the limited grounds available and high threshold test, judicial review proceedings of FOS decisions are relatively rare. However, there have been two decisions of note in the early part of this year, which we deal with below (along with a case from 2015 which helps explain how the land lies when judicially reviewing FOS decisions).

1. R (Kingswood Financial Adviser) v Financial Ombudsman Service

This case helps put into context the difficulty of judicially reviewing FOS decisions. It is from 2015. Permission to obtain judicial review was declined - so this case fell at the first hurdle. 

This complaint involved consumers who had transferred their existing pension into a Self-Invested Personal Pension (“SIPP”). The claimant set up the SIPP (and applied the SIPP wrapper) but the consumers had made the decision to invest in an overseas property investment before the claimant was consulted. The claimant gave no advice to the customers regarding the suitability of the property investment (only regarding the adequacy of the SIPP to hold the investment) and the contractual documents were clear that in respect of suitability, the claimant acted on an execution only (i.e.  non-advised) basis. The customers complained to FOS about the claimant when they ultimately lost money from making the investment. 

FOS upheld the complaint on the basis that the claimant was under a duty to advise on the suitability of the investment – that this was fair and reasonable in the circumstances. The uphold was particularly noteworthy because another third party had apparently given previous advice to the customers on suitability before any contact with the Claimant. However, unknown to the claimant at the time, the earlier ‘advice’ had been given by an entity that was not authorised by the FCA to give investment advice. 

On the face of it, the decision appeared harsh and the claimant made an application for permission to judicially review the decision. Permission was denied on paper as the Court did not consider there as an arguable case. The Court emphasised that FOS’s discretion is very wide under s.228(2) FSMA to determine what is fair and reasonable in the circumstances.

2. R (Aviva Life & Pensions (UK) Ltd) v Financial Ombudsman Service (February 2017)

The High Court upheld an application for judicial review by Aviva challenging a FOS decision. The decision was quashed. 

The complaint involved an individual who held an Aviva joint life policy (with his wife). He cancelled the joint policy following the couple separating. He was later referred to his GP by his family as they had concerns regarding significant behavioural changes. Although not formally diagnosed, his GP had sufficient concerns to refer him for a brain scan. Before the scan, the customer reverted to Aviva and was accepted for a single person life policy.

The customer was later diagnosed with a form of dementia. He claimed under the policy and Aviva avoided cover on the basis of non-disclosure. The customer complained to FOS and an Ombudsman upheld the complaint, despite the contractual position between the parties being clear that Aviva was entitled to act as it did.   

Aviva judicially reviewed the decision and successfully had the decision quashed. However, FOS had accepted in advance of the hearing that the decision should be quashed on the basis that it did not sufficiently set out in the body of the decision the Ombudsman’s reasons for upholding the complaint.

Aviva also made the case strongly that the decision was wrong in law. The Court agreed that the outcome in the complaint would have been different had a Court considered the position. It also considered the fact that FOS is obliged to ‘take into account’ relevant law and regulations under DISP 3.6.4R when considering what is fair and reasonable.

However, this was not the basis of the Court’s decision to quash the FOS decision. In fact, the Court made it very clear that FOS departing from even settled positions in law would not, in itself, be grounds for judicial review. An Ombudsman departing from an obviously correct legal position does not itself make a decision ‘Wednesbury unreasonable’.

The Court reiterated the wide discretion of FOS under s.228(2) FSMA. However, it did conclude that if FOS decides to depart from settled legal principles or makes a finding clearly different than the outcome would be in law, its reasoning for the overall decision should be sufficiently clear for the parties to understand why. The Court therefore quashed the decision but only on the grounds already conceded by FOS. 

The parties were at odds as to what should happen to the complaint in circumstances where the final decision of FOS had been quashed. The Court made it clear that in such circumstances, the customer’s complaint had not been finally dealt with and therefore the complaint would revert to FOS to produce another Ombudsman decision. 

Interestingly, the decision also dealt with the point that the Ombudsman decision to reinstate the policy would result in the insured being eligible to claim up to £500,000 under the policy (which exceeds the £150,000 limit of the FOS’s powers). The Court held that FOS cannot circumvent its financial statutory limit by giving directions rather than a monetary award, but that it should be implied into the FOS decision that the financial limit should apply. 

The judge was clearly concerned by the breadth of FOS’s powers and added towards the end of his judgment:

By way of postscript, I do have personal concerns about a jurisdiction such as this which occupies an uncertain space outside the common law and statute. The relationship between what is fair and reasonable, and what the law lays down, is not altogether clear.”

However, the judge recognised that Parliament has set out in statute these powers, captured in section 228(2) FMSA, and that he was also bound by Court of Appeal authority to come to the conclusion he did.

3. R (Full Circle Asset Management Ltd) v Financial Ombudsman Service (February 2017)

In this complaint, the customer was unhappy with investments made in a portfolio that had been described to her as ‘medium risk’ by the claimant. The customer had described her own risk appetite as being ‘medium’. An Ombudsman upheld the complaint on the basis that the investment portfolio was not suitable for the complainant. 

Full Circle had argued that the portfolio matched her risk profile as a skilled persons report had previously been prepared which described the particular portfolio as being medium risk and the FCA had accepted the findings in the report. The risk appetite of the customer therefore matched the portfolio.    

Full Circle judicially reviewed the decision and argued that the FOS had gone too wide in its decision-making and had found that the portfolio was unsuitable for the investor for reasons outside of those complained of by the customer herself. 

The Court allowed the decision to stand and held that FOS was permitted to take into account factors much wider than those complained of by the customer. FOS was allowed to assess the overall ‘advice’ given and make a finding that other failures (not specifically complained of) could form the basis of its decision.


The above decisions make it clear that judicially reviewing FOS decisions can be challenging. It can be difficult to overcome the initial hurdle of obtaining permission. Then the legal arguments regarding the grounds for judicial review, in the context of FOS’s remit under FSMA, need to be very carefully considered.   

Although all of the above examples are of respondents challenging FOS decisions, they are also regularly challenged by complainants.

These decisions highlight that FOS can depart from clear and settled legal principles and in such circumstances even a judge is not necessarily going to say the outcome is sufficiently unreasonable to mean FOS should revisit its decision. Also, FOS need not stick to assessing only factors complained of and can make a decision against a firm based upon issues not strictly complained of at all.      

It is no coincidence that in the adviser sector, the Association of Professional Financial Advisers (“APFA”) is currently trying to tackle what it perceives to be unjust FOS decisions. We understand APFA intends to probe upheld FOS decisions against advisers and build up a body of evidence to fight unfair rulings. They have asked advisers to send examples of cases FOS has found against them where the firm thought the ruling was perverse or unjust.   

FOS may consider, following these decisions, that its very wide discretion to make findings against firms has been upheld in a way that allows it to further probe and investigate into wider areas with financial institutions. It is increasingly important that FOS complaints are fully and properly assessed by firms, particularly at Ombudsman level where decisions are published, to ensure a consistent and acceptable approach is taken when dealing with consumers and the FOS.

We have extensive experience in assisting clients to manage their relationships with FOS; with their complaints handling processes; advising on strategic (often sector-wide) complaints issues; and dealing with judicial review applications.