Clark & Anor v In Focus Asset Management & Tax Solutions Ltd

An accepted determination by the Financial Ombudsman does not, without more, merge the complainant’s cause of action so as to prevent a subsequent court claim for losses exceeding the Ombudsman’s monetary limit. The Ombudsman determines complaints by what is fair and reasonable, rather than necessarily determining legal causes of action. Its statutory scheme is neutral on whether an accepted award may be followed by court proceedings for additional loss. Acceptance remains binding and final as regards the Ombudsman’s process, but does not necessarily extinguish wider civil claims. A reservation added to an acceptance does not prevent acceptance where the complainant accepts the determination and takes the payment.

Mr and Mrs Clark complained to the Financial Ombudsman about negligent investment advice. The Ombudsman upheld the complaint and awarded the statutory maximum of £100,000, while recommending payment of any larger sum produced by its compensation formula. The appellants accepted the determination, adding a handwritten reservation of their right to pursue the matter in the civil courts, and received the £100,000.

They then brought proceedings for their alleged greater losses, pleading contractual, fiduciary, statutory and tortious duties. The county court struck out the claim, holding that acceptance of the determination caused the causes of action to merge and barred further proceedings. The central issue on appeal was whether that conclusion was correct.

1. Appeal allowed. The order striking out the claim was set aside. The accepted Ombudsman determination did not engage the doctrine of merger.
2. The doctrine of merger ordinarily prevents a claimant who has obtained a final judgment from recovering a second judgment for the same relief and subject matter. It depends on the relevant cause of action being extinguished in the judgment. The Ombudsman, however, deals with complaints rather than legal causes of action. Its functions include mediation, informal investigation and non-binding recommendations. It is therefore materially different from the tribunals in Wright v London General Omnibus Authority and Fraser v HLMAD Ltd.
3. The reasoning in R (on the application of Heather Moor & Edgecomb Ltd) v Financial Ombudsman Services, including the observation that the Ombudsman deals with complaints rather than causes of action, supported that conclusion. The Ombudsman’s ability to be treated as a tribunal for Convention purposes did not make it a tribunal for the doctrine of merger.
4. The statutory scheme under Part XVI of the Financial Services and Markets Act 2000 was neutral. “Binding” and “final” in section 228(5) made an accepted determination binding and final within the Ombudsman’s process. They did not show that Parliament intended to bar a subsequent court claim for loss beyond the statutory monetary limit. Such proceedings were not inconsistent with the scheme’s purposes, particularly where the Ombudsman could only recommend payment above the limit.
5. On the alternative assumption that merger applied, the appellants’ acceptance was effective despite their handwritten reservation and despite any mistake about its legal consequences. Their receipt and banking of the award confirmed acceptance. The approach in Fraser v HLMAD Ltd was applicable to the reservation.
6. The pleaded fiduciary and other claims raised further particulars of the causes of action previously pursued before the Ombudsman. Different descriptions of the same underlying facts did not create a separate cause of action. The observations on mistake and unjust enrichment were conditional on merger applying and were not necessary to the result.

• High Court (Queen's Bench Division): Allowed the appeal from the county court’s strike-out order and held that the accepted Ombudsman determination did not bar the appellants’ civil claim.