Bunney v Burns Anderson plc & Financial Ombudsman Service

The court considered whether firms may raise jurisdictional challenges to determinations of the Financial Services Ombudsman in proceedings to enforce those determinations and whether the Ombudsman can issue directions which, in substance, require payment in excess of the statutory monetary cap. The judge held that a respondent is not confined to judicial review and may, in proceedings to enforce an Ombudsman determination, challenge its formal validity (for example, that it was made without jurisdiction). The court further held that where a determination requires payment to a complainant or for the complainant’s benefit it is, in substance, a money award and is subject to the statutory cap set under the Financial Services and Markets Act 2000 and the DISP rules. Where an Ombudsman’s direction, in substance, requires payment in excess of that cap it is invalid to that extent.

This is a first instance judgment concerning two consolidated enforcement actions arising from determinations of the Financial Services Ombudsman. The claimants (consumers) sought injunctions to compel two financial firms to comply with Ombudsman directions which, once loss assessments were performed, would have required payments significantly in excess of the Ombudsman’s stated maximum money award of £100,000 in DISP.

Background and parties

• Roger Bunney: Ombudsman directed a loss assessment under regulatory guidance; firm’s loss assessment produced an obligation of £228,055 while the firm was willing to pay £100,000.
• Jeremiah Cahill: Ombudsman directed the firm to set up an annuity and compensate past shortfalls; actuary valued replacement annuity at over £1.8 million while the firm was willing to pay £100,000.

Nature of the applications

• Both claimants applied for mandatory injunctions to enforce the Ombudsman’s determinations after they had been accepted and thereby became binding on the respondents under section 228(5) of the Financial Services and Markets Act 2000 (FSMA).

Issues framed

1. Whether a firm resisting enforcement may raise, in the enforcement proceedings, a challenge that the Ombudsman exceeded his statutory powers, or whether judicial review is the exclusive remedy.
2. Whether the Ombudsman’s power under section 229(2)(b) to give directions can, in substance, require the payment of money and whether any such direction is subject to the statutory monetary limit (the DISP cap of £100,000).

Court’s reasoning

• On procedure, the court reviewed the authorities on the exclusivity of judicial review (notably O’Reilly v Mackman and subsequent cases) and concluded that a defendant in civil proceedings may, as a matter of right, raise a challenge to the formal validity of a public-law decision as a defence unless the raising of that defence would be an abuse of process or have no reasonable prospect of success. The Civil Procedure Rules and subsequent case law had reduced the original rationale for absolute procedural exclusivity. The judge emphasised the strong presumption in favour of allowing a person to defend themselves against an unfounded claim unless Parliament’s words clearly preclude that defence.
• On statutory construction, the court held that whether a determination is a money award or a direction depends on substance not form. If a direction, in effect, requires the payment of money to the complainant or for his benefit, it is a money award and therefore subject to the monetary limit. The statutory cap cannot be circumvented by labelling a payment order a "direction."
• Applying these principles, the Bunney direction (ordering a loss assessment and redress in accordance with guidance) was not, at that stage, a money award and could be referred back to the Ombudsman to resolve quantum within the cap. The Cahill determination, which expressly required monetary compensation and an annuity purchase, was a money award and, to the extent it required payments in excess of the statutory cap, was invalid.

Decision

The judge refused both injunctions because (i) the Bunney award did not presently require payment and left unresolved issues to the Ombudsman and (ii) the Cahill award, insofar as it required payment above the statutory cap, was invalid. The claims were dismissed and permission to appeal was invited.

This was a first instance decision dismissing the claimants’ applications for injunctions. The court held that respondents may challenge, in enforcement proceedings, the formal validity of an Ombudsman determination (they are not confined to judicial review) and that the Ombudsman cannot, by way of a direction, require payment which in substance amounts to a money award exceeding the statutory monetary cap. Applying those principles, the Bunney direction did not presently require a money payment and could be referred back to the Ombudsman; the Cahill determination was, in substance, a money award and invalid to the extent it exceeded the cap; injunctions were refused and both claims dismissed.