In this case report, Sarah Hitchins, an associate in Allen & Overy LLP’s Banking, Finance and Regulatory Litigation Group, considers the High Court’s decision to allow an application for permission to bring judicial review proceedings relating to the jurisdiction of the Financial Ombudsman Service (FOS). The application turned on the eligibility of the complainant to have his complaint considered by the FOS.
Background
Bluefin Insurance Services Ltd (Claimant) is an insurance broker. The Claimant applied for permission to bring judicial review proceedings to challenge a decision made by the Financial Ombudsman Service (FOS) to accept jurisdiction over a complaint made against it (Complaint). The Complaint was made by an individual (Complainant) and related to the Claimant’s alleged failure to notify the Complainant’s claim under a directors and officers liability policy.
The Claimant argued that the FOS did not have jurisdiction to consider the Complaint on the basis that the Complainant did not fall within the definition of "eligible complainant" in part 2.7 of the FCA's Dispute Resolution: Complaints sourcebook (DISP).
Eligible complainant
A complaint may only be dealt with by the FOS if it is brought by or on behalf of an "eligible complainant" (DISP 2.7.1R).
An eligible complainant is defined in DISP 2.7.3R and must be a person that is:
(1) A consumer.
(2) A micro-enterprise;
• in relation to a complaint relating wholly or partly to payment services, either at the time of the conclusion of the payment service contract or at the time the complainant refers the complaint to the respondent; or
• otherwise, at the time the complainant refers the complaint to the respondent;
(3) A charity that has an annual income of less than £1 million at the time the complainant refers the complaint to the respondent.
(4) A trustee of a trust that has a net asset value of less than £1 million at the time the complainant refers the complaint to the respondent.
The Claimant’s case was that the Complainant did not fall within the definition of "consumer" (DISP 2.7.3R(1)) as he was not a natural person acting for purposes outside his trade, business or profession. This is because the Complaint was made in relation to a directors and officers liability insurance policy that related to the Complainant’s former company (of which he was a director).
Application for judicial review
The Claimant’s application for permission to bring judicial review proceedings was initially refused by Lang J on the papers on 16 September 2013. In refusing the application, Lang J held that the FOS had correctly applied the relevant rules and guidance in concluding that the Complainant was a consumer for the purposes of DISP and therefore eligible to have a complaint considered by the FOS.
The Claimant’s application was re-heard by Blair J on 12 February 2014.
Blair J allowed the application for permission to bring judicial review proceedings on the basis that the Claimant’s case was sufficiently arguable for permission to be given. In particular, Blair J held that there were three key issues that needed to be determined:
• The test to be applied by the Administrative Court when considering the jurisdiction of the FOS. Blair J held that the Administrative Court may decide to adopt one of the following two approaches when considering the jurisdiction of the FOS:
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the Administrative Court could consider the jurisdiction of the FOS as a matter of law, construing the relevant material which includes statutory and regulatory material (including the relevant provisions of the FCA Handbook); or
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the Administrative Court could consider whether the decision taken by the FOS relating to jurisdiction satisfied the Wednesbury test (that is, was it so unreasonable or irrational that no reasonable person acting reasonably could have taken such a decision).
• The point at which the Administrative Court should assess whether the Complainant was acting as a consumer for the purposes of DISP. There was a considerable amount of dispute between the parties on this point. The Claimant argued that the Administrative Court should consider the status of the Complainant as at the time when he referred the Complaint to the FOS. The FOS argued that this issue should be determined as at the point at which the FOS took its final decision regarding its jurisdiction over the Complaint.
• Whether a directors and officers liability policy can be considered to be a consumer transaction. The Claimant argued that a directors and officers liability policy cannot be considered to be a consumer transaction on the basis that such transactions are entered into in the course of a person’s trade, business or profession. The Claimant added that this issue was "ultimately determinative" of the issue that needed to be decided in this case, as if a directors and officers liability policy cannot be considered to be a consumer transaction then it follows that the FOS does not have jurisdiction over the Complaint. Blair J commented that he had some doubts about this aspect of the Claimant’s case but declined to provide reasons for his view.
Comment
When the Administrative Court hears the Claimant’s application for judicial review in full, it is likely that it will be required to consider in detail issues that may have broader implications for regulated firms. For example, it is likely that the Administrative Court will be required to analyse the definition of "consumer" for the purposes of DISP as well as what constitutes a natural person acting for purposes outside his trade, business or profession.
A date for the Administrative Court to hear the Claimant’s judicial review application in full is yet to be scheduled but we understand that it is due to take place later in 2014.
