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FOS - Court of Appeal decides you can't have two bites of the cherry

    • Financial services disputes and investigations
    • Financial institutions


    The Court of Appeal decision on Clark & Anor v In Focus Asset Management & Tax Solutions Ltd [2014] EWCA Civ 118 has been handed down.  It unanimously overrules the first instance decision of Mr Justice Cranston.

    As a result, the position is now that where a complainant accepts a FOS decision or award concerning its complaint, the complainant cannot then sue for the remaining balance in Court (if the complaint to the FOS constitutes the same set of facts as the cause of action for the claim in Court).  The complainant’s recovery will be limited to the accepted FOS award.

    Reminder of First Instance Decisions

    The Court of Appeal judgment resolves the two conflicting decisions of Andrews v SBJ Benefit Consultants [2010] EWHC 2875 (Ch) and the High Court decision in this case.

    At first instance in Clark, the High Court held that a complainant could sue for the outstanding damages over and above the award by the FOS.  The issue arises because the FOS cannot award payment of more than £150,000.  Claimants may have wanted to bring a FOS claim first, accept this if successful and then use the sum awarded to help fund a Court action on the same case, to recover the rest of the claim over the £150,000 cap.

    The legal issue concerns the doctrine of merger – where a claimant cannot bring a claim that has already been the subject of a decision by a tribunal or judgment.  The High Court considered that the doctrine of merger only applied to extinguish causes of action and that a complaint could not act to extinguish the Court claim.  It was also held that the FOS did not constitute a tribunal under the doctrine of merger and the FOS decision was only final and binding in relation to the complaints process.

    In contrast, the earlier High Court decision in Andrews held that the doctrine of merger applied.  For that reason, the complainant could not sue for the balance upon accepting the FOS’ decision. 

    Court of Appeal Decision in Clark

    The Court of Appeal unanimously found in favour of the decision in Andrews.

    The Court of Appeal decided that the FOS was a tribunal for these purposes.  If the respondent can show that the complainant is relying on the same set of facts (and cause of action) in both the complaint and the Court claim, then upon the complainant accepting a decision by the FOS “a Court or tribunal has already adjudicated on the matter.”  The complainant is therefore prevented from bringing another claim and a further Court claim would be struck out.  The complainant can only recover the amount awarded under the FOS decision.

    Also in Clark, the complainant had attempted to accept the award/decision and simultaneously reserve the right to pursue the matter further in Court.  The Court found that this did not change the position - upon acceptance of the FOS’ decision, the right to sue in Court no longer exists and cannot be reserved.

    The Court held that it did not matter whether the complainant accepted an award for the statutory maximum or for a lesser amount, the restriction would still apply.

    In any of these situations, it is open to the complainant to reject the FOS decision and bring Court proceedings to recover a higher amount.

    Impact of decision

    There was concern that if the High Court decision in Clark was upheld, this would encourage claimants to bring FOS claims and then subsequent Court proceedings, leading to financial institutions having to handle the same claims twice.  This particularly applies to interest rate hedging product claims where claimants may have quite speculative and substantial claims for alleged consequential losses.  This decision therefore brings welcome certainty and gives claimants a clear choice between FOS and the Courts as alternative routes to pursue claims.