FML Timeline: R (on the application of Mazarona Properties Ltd & 2 Ors) v Financial Ombudsman Service
Court clarifies that FOS does not have jurisdiction to consider a firm’s complaints handling procedure but can only consider complaints that are about “the provision of or failure to provide a financial service or a redress determination”.
| Parties |
R (on the application of Mazarona Properties Ltd & 2 Ors) (Appellant) -v- Financial Ombudsman Service (Respondent) |
| Date | 26 April 2017 |
| Citation number | [2017] EWHC 1135 (Admin) |
| Court | High Court of Justice (Queen’s Bench Division) |
| Category | Judicial review |
The Claimants, being three associated companies, applied for judicial review of a decision by the Financial Ombudsman Service (the FOS) not to adjudicate on the companies’ complaint against Allied Irish Bank Great Britain (Allied).
In 2008, the Claimants entered into loan agreements with Allied that contained a requirement that the Claimants hedge the full amount of each loan. The Claimants and Allied also agreed to an interest rate swap. After the financial crisis, and following an agreement with the Financial Services Authority, Allied carried out a review of the sales of interest rate swaps that may have been sold in breach of regulatory requirements. As a result of this review, Allied found that the interest rate swap sold to the Claimants had not been compliant and offered the Claimants redress of £388,000. Allied later withdrew this offer upon finding out in a second review that the Claimants would have entered into the swap despite the regulatory breach.
In 2015, the Claimants made a complaint to the FOS in relation to: (i) the sale of the interest rate swap; and (ii) Allied’s withdrawal of the offer of redress. In relation to the sale of the swap, the FOS agreed with Allied that the Claimants would have entered into the agreement in any event. The FOS declined from considering Allied’s review process and the withdrawal of the redress offer on the basis that this did not fall within its jurisdiction. The Claimants were permitted to apply for judicial review of this second decision only.
Decision
The court found that the FOS’s decision was correct and dismissed the claim.
In reaching the decision, the court considered the scope of the compulsory jurisdiction rules under the Financial Services and Markets Act 2000 (the Act). Section 226 of the Act provides that the FOS can only consider a complaint as defined in the Glossary of the FCA’s ‘General Provisions’ document. A complaint must be about "the provision of or failure to provide a financial service or a redress determination”. The court found that: i) the complaint was not about a redress determination as defined under section 404 of the Act; and ii) the complaint was not about the provision of a financial service (which was undefined in the Act) and instead concerned dispute resolution. The court considered a financial service to be “the provision of a service of a financial nature to a customer in connection with his or her personal or business affairs not the payment of compensation for the manner in which that service was provided”. The court also noted that the FOS can only consider a complaint under the compulsory jurisdiction rules if it relates to an act or omission by a firm in carrying out a regulated activity. In this case, the selling of the swap was a regulated activity but the resolution of the dispute about it was not.
Therefore the Court held that Allied’s withdrawal of the redress offer was outside of the compulsory jurisdiction of the FOS and it was right not to reach a determination upon the offer of redress.
Noteworthy/ Novel points
A complaint about a firm’s complaints handling process does not fall within the scope of the FOS’s jurisdiction, which will be confined to complaints about the failure to provide financial services or a redress determination.
