Andrews v SBJ Benefit Consultants

The claimant sought damages under section 150 of the Financial Services and Markets Act 2000 for losses said to arise from the respondent's failure to carry out a pensions review in accordance with the applicable rules. The Financial Ombudsman Service had issued a final determination in the claimant's favour, awarding sums including the maximum enforceable award of £100,000, and the claimant accepted that determination. The defendant argued that acceptance of the Ombudsman’s award operated to merge and extinguish the cause of action (the merger doctrine) or, alternatively, that the claim was an abuse of process.

The court held that the question whether an accepted Ombudsman determination can give rise to merger is a matter of general principle and concluded that the Financial Ombudsman Service is a tribunal for these purposes. Applying the authorities and the statutory scheme (including FSMA Parts XVI, sections 228 and 229 and Schedule 17 and the DISP rules), the court found that an accepted final determination of the Ombudsman becomes binding and, where the subject matter and facts are the same, operates to extinguish the cause of action. Because the present court claim relied on the same factual subject matter as the Ombudsman determination, the claim was extinguished and was dismissed.

Background and parties: The claimant, a retired former member of an occupational pension scheme, transferred benefits to a personal pension in 1989 following the defendant's advice. The defendant later accepted liability following an industry pensions review and engaged in correspondence about redress calculations. The claimant complained to the Financial Ombudsman Service (FOS) about the method of loss calculation. FOS issued a final determination on 28 March 2008 awarding sums totalling £103,860.93 (including the £100,000 maximum award). The claimant accepted that determination.

Nature of the claim / relief sought: The claimant commenced proceedings in the Chancery Division claiming damages under section 150 FSMA for breach of statutory duties to carry out pension reviews in accordance with the designated provisions, provisionally quantified at over £400,000 (seeking the balance above the FOS award).

Procedural posture: Master Bragge directed a preliminary issue as to whether the claim had been extinguished by the merger doctrine, was estopped by cause of action estoppel, or was an abuse of process. The defendant pursued the merger and abuse of process points before HHJ Pelling QC.

Issues framed:

• Whether the FOS is a court or tribunal such that an accepted final determination can operate to merge and extinguish the claimant's cause of action.
• Whether the subject matter decided by FOS was the same as the cause of action advanced in the High Court.
• Whether the commencement of the High Court claim was an abuse of process (addressed only if necessary).

Court’s reasoning and findings: The court distinguished juridical basis from factual foundation and held that the relevant test is whether the facts giving rise to liability before the Ombudsman were the same as those relied upon in the court claim. It found that the FOS complaint and the High Court claim concerned the same facts and the same type of loss (the method of assessment of redress under the pensions review). On the nature of FOS, the court relied on R (Heather Moor & Edgecomb Ltd) v Financial Ombudsman Service Ltd and other authorities to hold that FOS is a tribunal for the purposes of merger and that Article 6 and A1P1 apply to FOS activities. The procedural informality of FOS and its power to decide what is fair and reasonable did not prevent it from being treated as a tribunal for these purposes; any departure from law is subject to judicial review. The court rejected the claimant's arguments that the availability of non-binding recommendations, the complainant's option to accept or reject, or the lack of immediate binding effect, indicate that accepted determinations should not merge. The court concluded that an accepted final determination of FOS becomes binding between the parties and that the merger doctrine extinguished the cause of action. The claim was therefore dismissed.

Other matters: The court awarded costs to the defendant, ordered an interim payment on account of costs of £24,000, and refused permission to appeal on the question of principle.

First instance: The claim is dismissed. The court held that the Financial Ombudsman Service is a tribunal for the purposes of the merger (res judicata) doctrine and that, because the facts and subject matter before the Ombudsman were the same as those alleged in the High Court claim and the claimant accepted the Ombudsman’s final determination, the cause of action was extinguished by merger. Consequently the High Court claim was not maintainable.