Options UK Personal Pensions LLP v Financial Ombudsman Service Limited
[2024] EWCA Civ 541
Linear Investments Limited, R (on the application of) v Financial Ombudsman Service Limited
13 June 2024
[2024] EWHC 1428 (Admin)
High Court
A company challenged an Ombudsman's ruling that a client could complain about their investment advice, even though the client had previously signed documents indicating expertise. The court sided with the Ombudsman, saying the company hadn't properly checked the client's actual experience. The court also upheld the way the Ombudsman calculated compensation.
Key Facts
- •Linear Investments Ltd (Linear) sought judicial review of a Financial Ombudsman Service Ltd (FOS) decision upholding a complaint by Professor Leslie Willcocks.
- •Willcocks complained about Linear's investment management, alleging misleading information and mismanagement.
- •Linear argued Willcocks was an 'elective professional client,' ineligible for FOS complaint resolution; Willcocks did not directly challenge his classification.
- •The FOS found Linear had not adequately assessed Willcocks' expertise and experience, concluding he was a consumer and eligible for the scheme.
- •The FOS ordered Linear to compensate Willcocks based on a benchmark index performance comparison, without deduction for contributory negligence.
Legal Principles
Jurisdictional facts are for the Ombudsman to determine, subject to judicial review on grounds like irrationality or procedural unfairness.
Assurant General Insurance Limited v Financial Ombudsman Service Ltd [2023] EWCA Civ 1049
The court decides whether the Ombudsman's application of the law to facts was wrong, not its reasonableness.
Assurant General Insurance Limited v Financial Ombudsman Service Ltd [2023] EWCA Civ 1049
DISP rules are read as a whole, each provision construed in light of its overall purpose.
Official Receiver v Shop Direct Finance Co Ltd [2023] EWCA Civ 367
The Ombudsman isn't required to determine complaints according to common law, but must consider relevant common law principles.
R (on the application of IFG Financial Services Ltd) v Financial Ombudsman Service Ltd [2005] EWHC 1153 (Admin) and Options UK Personal Pensions LLP v Financial Ombudsman Service Ltd [2024] EWCA Civ 541
To succeed in a challenge, an error of law or irrationality is required.
Garrison Investment Analysis v Financial Ombudsman Service [2006] EWHC 2466 (Admin)
A firm must undertake an adequate assessment of client expertise, experience, and knowledge to classify them as an elective professional client.
COBS 3.5.3R(1)
The Ombudsman's jurisdiction is inquisitorial, not adversarial.
R (Williams) v Financial Services Ombudsman [2008] EWHC 2142 (Admin)
Outcomes
Grounds 1 and 3 failed: the Ombudsman correctly found Willcocks was an eligible complainant and did not wrongly interfere with Linear's client classification.
The Ombudsman correctly applied DISP 2.7.9AR, finding Willcocks a consumer despite being a professional client for investment purposes. Linear failed to conduct an adequate assessment of Willcocks' expertise as required by COBS 3.5.3R(1).
Grounds 4 and 5 failed: the Ombudsman's redress calculation and decision on contributory negligence were not irrational.
The benchmark used for compensation was rationally explained. The Ombudsman's refusal to consider post-relationship investment decisions was also rational, as it was irrelevant to the earlier failings. The Ombudsman correctly considered contributory negligence and reasoned why it was not applicable.
All grounds for judicial review were dismissed.
The Ombudsman's decisions were neither irrational nor erroneous in law.
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