The Financial Ombudsman Service had no jurisdiction to entertain a company director's complaint relating to an insurance broker who had obtained a directors' and officers' insurance policy in respect of the company. The director was not an eligible complainant within the meaning of the Financial Services and Markets Act 2000 s.226: the fact that his complaint related to his personal loss did not cause him to fall within the relevant definition of a "consumer" because he had incurred the liability in the course of his trade business or profession.
The claimant (B) sought judicial review of a decision of the defendant Financial Ombudsman Service (FOS) that the interested party (L) was eligible to bring a complaint against him to the FOS.
B was authorised to provide insurance broking services under the Financial Services and Markets Act 2000 and was therefore subject to the jurisdiction of the FOS. L was a company director and B had acted for L in obtaining a directors' and officers' insurance policy in respect of the company. The policy provided cover in respect of any "insured person", which included a company director. L alleged that he had notified B of a potential legal claim to be made against him personally for dishonest misrepresentations and breach of personal covenants. He claimed that his liability should have been covered by way of indemnity under the policy, but that the insurer had rejected cover because B had neglected his responsibility to alert the insurer to the potential claim. The claim had been compromised on terms which resulted in a loss to L, from which he claimed he ought to have been protected by the policy. L complained to the FOS about B's failure to act properly in its capacity as a broker. The FOS determined that it had jurisdiction to investigate his complaint. It found that L satisfied a category of "eligible" complainant for the purposes of s.226 of the Act because he was a "consumer" within the meaning of r.2.7.3(1), contained in the "Dispute Resolution: Complaints" (DISP) section of the Financial Services Handbook. The glossary to those rules defined a consumer as "any natural person acting for purposes outside his trade, business or profession". The FOS determined that L's complaint concerned a loss of policy benefits which would go to him as an individual rather than the company. Consequently, it found that he was complaining on his own behalf and was acting outside his trade, business or profession. The issues were whether (i) the decision about whether L was a consumer was for the court, rather than the FOS, to determine; (ii) the FOS had misdirected itself in law by assessing L's eligibility to bring a complaint at the time when he made the complaint rather than at the point when the insurance policy was agreed; (iii) the FOS had incorrectly concluded that L was a consumer.
HELD: (1) The terms of the definition of "consumer" in the glossary to the rules required a specific finding of objective fact. In various decisions, the European Court of Justice had regarded the question of whether an individual satisfied that definition as being an objective decision based upon a series of known facts. In the context of the statutory scheme concerned, access to the compulsory jurisdiction of the FOS was determined by reference to limiting conditions stated in objective terms. The FOS decision was one of "precedent fact" and where it was challenged in judicial review proceedings, it was a decision which the court had to take. The court was not limited to reviewing the decision on conventional judicial review grounds, R. (on the application of A) v Croydon LBC  UKSC 8,  1 W.L.R. 2557 followed, R. (on the application of Bankole) v Financial Ombudsman Service  EWHC 3555 (Admin) considered (see paras 60-64, 67-70, 72 of judgment). (2) The clear meaning of the words of s.226(2) of the Act was that a complainant had to be eligible at the time a complaint was brought. It was therefore clear that a complainant was only eligible if, at the time the complaint was brought, he fell within the definition of a consumer (paras 81-84). (3) The claim against L was in respect of his allegedly wrongful acts when acting as a director. The policy benefited him as an insured person in relation to his acting in the capacity of a company director. Those acts were therefore in the course of his trade, business or profession. There had been no proper basis on which the FOS could have concluded that L's purposes were outside his trade, business or profession. The fact that he made his complaint to the FOS in his personal capacity, in respect of his personal loss, was not sufficient to cause him to fall within the definition of a consumer. As a matter of precedent fact, L was not an eligible complainant and did not fall within the compulsory jurisdiction of the FOS. The FOS had therefore misdirected itself in law. The FOS's decision to entertain the complaint would be quashed (paras 121-125, 128-130).
For the claimant: Charles Bear QC, James McClelland
For the defendant: James Strachan QC
For the claimant: DAC Beachcroft LLP
For the defendant: In-house solicitor
Link to full judgment here.