News that the Financial Ombudsman Service’s (FOS) award limit is increasing from £100,000 to £150,000 from January 2012 is largely irrelevant for the majority of claims, most of which are under £1000. However, those claimants with high value claims would do well to heed the experience of Mr Andrews, the value of whose claim exceeded the FOS award limit by a considerable sum.
In a dispute over bad advice regarding the transfer of pension payments from an occupational scheme to a personal plan, Mr Andrews accepted the FOS maximum award and then tried to pursue the defendant company for the balance of compensation recommended by the ombudsman. However, in Andrews v SBJ Benefits (2010) the court ruled that once you have accepted an ombudsman's decision, it is binding and you cannot then go to the courts to top up the recovery above and in addition to the FOS payment.
In 1988/9 SBJ Benefits wrongly advised Mr Andrews, a member of an occupational pension scheme, to transfer his pension benefits into a personal pension policy. The company reversed its advice in 2002 after complying with an industry-wide review of pension transfer business transacted between 1988 and 1994 and told Mr Andrews that he would have been better off had he stayed in the occupational scheme.
However, SBJ and Mr Andrews could not reach agreement on the compensation owed so Mr Andrews took his claim to the FOS in 2005 on the basis that an FOS recommendation in his favour would increase the chances of SBJ agreeing to a higher settlement without resorting to the courts. The FOS agreed with Mr Andrews that SBJ had underestimated the amount of compensation due and awarded him the maximum amount allowed, namely £100,000. In addition, the Ombudsman recommended that SBJ pay Mr Andrews a further £300,000, the difference between the award and his total loss (provisionally calculated at £400,000). However, the ombudsman made it clear that the recommendation was not binding on SBJ. Mr Andrews was given a month to decide whether or not to accept the award, which he did.
SBJ chose not to act on the ombudsman’s recommendation so, in 2009, Mr Andrews issued a claim for breach of SBJ’s statutory obligation to carry out the review and compensate him in accordance with the relevant rules. SBJ argued that, by accepting the FOS award, Mr Andrews had lost the right to pursue a court claim. The judge agreed, determining that Mr Andrews was bound by the award he had accepted and could not sue for the balance according to the general principle that his dispute had already been heard by a ‘tribunal of competent jurisdiction’ i.e. the FOS, and the same issues could not be litigated in another tribunal i.e. the court.
If Mr Andrews had not accepted that award, he would have been able to go to court. But, the fact that he could not pursue his claim for additional compensation through the courts did not represent a breach of his right to a fair trial or access to justice because his choice to accept the award was freely made.
Although this judgment will have come as a welcome relief to financial services companies in that claimants cannot claim twice, once through the FOS and again through the courts, they may find that proceedings are issued promptly against them if they do not accept the FOS recommendation to award a higher level of compensation over and above the maximum FOS award. By the same token, in high value cases claimants would do well not accept the FOS award but to pursue a higher level of compensation through the courts, armed with the FOS recommendation.
For more information on any of the points raised in this article, please contact
Susan Hopcraft.
