Mazarona Properties Ltd v Financial Ombudsman Service

The Financial Ombudsman Service’s compulsory jurisdiction extends only to complaints relating to a regulated activity, or an ancillary activity connected with one. A bank’s internal review of redress following the mis-selling of a regulated interest-rate product is not itself a financial service merely because it arose from that sale. Nor is compensation itself a financial service. Where the review is not conducted under a statutory consumer redress scheme, a complaint about its handling falls outside the Ombudsman’s compulsory jurisdiction.

Three associated companies complained about the withdrawal of an offer of redress made after AIB reviewed its sale of interest-rate swaps under an arrangement with the FSA. The Financial Ombudsman Service’s adjudicator initially considered that the withdrawn offer should be reinstated. On reconsideration, the Ombudsman declined to uphold the complaints, holding that the review was outside her jurisdiction and that the claimants would have entered into the swaps in any event.

Judicial review was granted on the jurisdiction issue only. The central question was whether the handling of AIB’s review constituted, or related to, an activity falling within the compulsory jurisdiction established by the Financial Services and Markets Act 2000.

The claim was dismissed. The Ombudsman was entitled to conclude that she could not investigate or determine the conduct of AIB’s review.

1. Under section 226 of the Financial Services and Markets Act 2000, compulsory jurisdiction applies to complaints relating to acts or omissions in carrying on activities to which compulsory-jurisdiction rules apply. Those rules can specify only regulated activities, or activities capable of being made regulated activities under section 22.

2. The sale of the swaps was a specified regulated activity because the swaps were contracts for differences and AIB sold them as principal. That did not make every subsequent activity connected with the sale a regulated activity.

3. The complaint was not about a statutory redress determination under section 404. The review was conducted under an agreement between the FSA and AIB and was not a consumer redress scheme within section 404. The specific statutory extension in section 404B therefore had no direct application.

4. Dispute resolution may arise from the provision of a financial service and may relate to it in ordinary language, but it is not itself a financial service. Similarly, providing recompense for an alleged wrong is not itself a financial service. The review was not a specified activity under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, so it fell outside compulsory jurisdiction.

5. The claimants were ordered to pay the defendant’s costs assessed at £23,005. No order was made as to the interested party’s costs. Permission to appeal was refused.

First-instance judicial review in the Administrative Court. Permission to appeal was refused, with any application to be made to the Court of Appeal.