The claimant (F) applied for judicial review of the defendant FOS' decision that an insurance company (U) had acted reasonably in refusing to fund the costs of legal proceedings brought by F.
A dispute had arisen between F and a bicycle retailer about a contract for the purchase of a bicycle. F brought proceedings against the retailer and, having entered into a house insurance policy, she notified U that she wanted to claim under the policy for her legal costs. One of U's claims litigators concluded that F's claim did not have a real prospect of success, and accordingly that U could not assist her. F was successful in the legal proceedings. She complained to U about its rejection of her claim. U sought internal legal advice from a solicitor (Z), who informed F that it had been reasonable for the claims litigator to conclude that she had no real prospect of success. F complained to the FOS. The FOS' final decision stated that U had used an appropriate test when refusing to meet F's legal costs, and that the test had been applied fairly. It found that it had been reasonable for U to rely on Z's advice; the fact that Z was not from an external solicitors' firm did not make it unreasonable for U to rely on his advice. The FOS also disputed F's contention that U's decision had to be wrong as she had later succeeded in the proceedings.
F submitted that the final decision was irrational because U and the FOS should have obtained independent legal advice rather than relying on the advice of Z, who had a vested interest, and that, had U applied the law correctly, it would have known that F's prospects of success were 100 per cent. The FOS contended that it was not required to obtain its own legal advice, and there were alternative remedies open to F such as arbitration or taking her case to the Legal Ombudsman.
HELD: (1) It was not appropriate to consider whether U's decision not to fund F's legal action was correct or unlawful; the scope for judicial review was limited and the focus had to be on the final decision. The question was whether the FOS' conclusion that U did not have to seek independent legal advice from an independent lawyer was irrational. Complaints to the FOS were to be determined, under FSMA s228(2). by reference to what was, in the FOS's opinion, fair and reasonable in all the circumstances of the case. The FOS could not act perversely, or merely subjectively, and would be subject to judicial review if it did, R. (on the application of Williams) v Financial Ombudsman Service  EWHC 2142 (Admin), (2008) 152(38) S.J.L.B. 31 and R. (on the application of IFG Financial Services Ltd) v Financial Ombudsman Service Ltd  EWHC 1153 (Admin),  1 B.C.L.C. 534 applied. There was nothing requiring the FOS to seek independent legal advice, or to take steps to investigate a matter on its own behalf; its remit was to determine disputes on the basis of evidence presented to it. That underpinned its conclusion that U had made its decision on the basis of legal advice which it was justified in accepting. That conclusion was not irrational bearing in mind the basis on which the FOS had been charged with resolving disputes; it was not an alternative to legal courts. There was also no basis on which to regard as irrational the FOS' conclusion that U had applied an appropriate test when refusing to meet F's legal costs. The fact that F had succeeded in her legal proceedings could not affect U's prior assessment of her claim. (2) It would not be appropriate to refuse the judicial review claim on the basis of the FOS' contention that F had had alternative remedies open to her. However, it might be that alternative remedies would allow F to argue the merits of U's decision, which was not a matter that could be reviewed on a judicial review application.
For the claimant: In person
For the defendant: Stephen Kosmin
For the defendant: In-house solicitor
No transcript of judgment available as yet.