Financial adviser victory

Financial advisers have triumphed in an eagerly awaited Court of Appeal case concerning Ombudsman’s awards.

Ruling unanimously in Clark v In Focus Asset Management & Tax Solutions Ltd [2014] EWCA Civ 118, the court held that a complainant to the Financial Ombudsman Service (FOS) who accepts an award may not take further proceedings in court to claim additional compensation over the same complaint.

The case had raised concerns that it could lead to open-ended financial claims being brought against financial advisers, which would send their professional indemnity insurance premiums skyward.

The Clarks received the maximum £100,000 award from the FOS over unwise investment advice that caused them to lose more than £300,000, and then issued proceedings against their financial adviser to recoup the balance of their loss.

The Court of Appeal overturned the High Court’s decision that the Clarks could seek additional redress through the courts. This contradicted an earlier ruling, Andrews v SBJ Benefit Consultants [2011] PNLR 577.

Sarah Naylor, partner, Hill Dickinson, says the decision is “welcome news for hard pressed financial advisers and their professional indemnity insurers”. 

“The carefully reasoned judgment of Lady Justice Arden reaches what I would suggest is the logical conclusion that if the Ombudsman’s decision is accepted, it is final and binding on both parties, and the complainant should not be entitled to a second bite of the cherry through the courts. 

“PI insurers who have been forced to review closed claims in view of the risk of them being re-opened following the first instance decision in Clark will be breathing a sigh of relief. It is to be hoped the decision will have a favourable impact on PI premiums, and the appetite for PI insurers to participate in what has been a challenging market.”

Adam Edwards, solicitor at Browne Jacobson, says: “Had the appeal not been allowed, FOS complaints could have been used to seek to build a litigation fighting fund.”