Westscott Financial Services Ltd CBHC Llp & Anor v Financial Ombudsman Service

Judicial review of an ombudsman’s decision is governed by ordinary judicial review principles. The Financial Ombudsman Service may determine an eligible complaint even where related litigation involving other parties is pending. Its statutory function is to resolve disputes quickly and informally by deciding what is fair and reasonable in all the circumstances. The possibility that later court proceedings may produce relevant factual findings, inconsistent outcomes or prejudice does not automatically require a stay. The weight given to those matters is for the ombudsman, provided the relevant circumstances are understood and the decision is rational. Decision letters are read sensibly and need only state the decision and clear reasons.

The claimants were independent financial advisers who had advised investors to purchase Keydata investment products. The investors complained to the Financial Ombudsman Service, which upheld the complaints and directed compensation.

The claimants sought judicial review of five decisions refusing to stay the complaints pending the outcome of Financial Services Compensation Scheme litigation against other advisers. They accepted that the substantive decisions were unimpeachable on the information before the ombudsmen. The issues were whether the ombudsmen misunderstood the relevance and progress of the court proceedings, failed to investigate their likely timetable, gave excessive weight to speedy resolution, relied on an irrelevant consideration, or failed to give adequate reasons.

1. The claims were dismissed. The decisions refusing stays were neither unlawful nor irrational.
2. The ombudsman scheme established under Part XVI of the Financial Services and Markets Act 2000 is an alternative to court proceedings. It is intended to resolve eligible disputes quickly and with minimum formality. There is no requirement that its processes or decisions mirror those of a court.
3. Under section 228(2) of FSMA and DISP 3.6.1R and 3.6.4R, the ombudsman must decide what is fair and reasonable in all the circumstances, taking account of relevant law and other specified matters. The ombudsman is not required to await related litigation merely because it may address the same products or some similar issues.
4. The ombudsmen understood that the FSCS litigation had begun and concerned the risk of Keydata products. The fact that the individual complaints were not themselves before the court was relevant to the practical effect of a stay. The court proceedings would determine factual matters, not a new question of law, and any factual findings could later be considered by an ombudsman if appropriate.
5. The uncertain timetable of the FSCS litigation, the risk of inconsistent decisions and possible future prejudice did not legally outweigh the statutory objective of speedy resolution. The weight given to those considerations was for the ombudsmen. There was no duty to investigate further where the claimants’ own advisers had stated that the timetable was uncertain.
6. The references in the decision letters to complaints not being before the court did not show a misunderstanding. The letters were to be read in a common-sense way. Their reasons were clear and adequate. The proposed heightened standard of anxious scrutiny was not applicable.

The judgment was a first-instance determination of five judicial review claims concerning decisions of the Financial Ombudsman Service. No appeal or lower court decision is stated.