Davis v Lloyds Bank Plc (Rev 1)

This Court of Appeal considered whether communications by the claimant during a bank-initiated past business review amounted to a "complaint" as defined in the FCA Handbook chapter DISP and therefore whether DISP 1.4.1R and related DISP provisions were engaged. The court applied the statutory and handbook definitions against the factual context of the voluntary review agreement between the bank and the FCA (including the role of an independent Skilled Person) and concluded the claimant had not made a complaint that would trigger DISP.

The court emphasised three legal principles: (1) the definition of "complaint" in DISP requires an expression of dissatisfaction communicated to the service provider about the provision of, or failure to provide, a financial service or a redress determination that comes within the Financial Ombudsman Service's jurisdiction; (2) a complaint must allege that the complainant "has suffered (or may suffer)" financial loss, material distress or material inconvenience, and that allegation may be contained in one or more communications; and (3) the context of a proactive review (which does not require the customer to make a complaint for review eligibility) is central to interpreting communications made during the review.

The claimant's communications were held to be enquiring and investigatory in character, aimed at determining whether loss had occurred and whether it was worth pursuing a review; they did not amount to a complaint about the original sale of the swaps nor did they assert past or likely future loss in the sense required by DISP. Consequently the preliminary issue of whether DISP duties in the review context applied did not arise.

Background and parties: The appellant (Mr Davis) had entered into two interest rate swaps with Lloyds Bank plc in 2002 and 2005. Lloyds undertook a past business review under a voluntary review agreement with the FCA, involving an independent Skilled Person and a methodology for determining basic redress and consequential loss. Following the review process the bank made redress determinations; the claimant accepted the basic redress for the 2002 swap but not for the 2005 swap and commenced proceedings alleging breach of statutory duties arising from the bank's conduct of the review.

Nature of the claim: The claimant sought to bring an action for breach of statutory duty under rules in the FCA Handbook chapter "Dispute Resolution: Complaints" (DISP), not for mis‑selling per se, but on the basis that his exchanges with the bank in the course of the review amounted to a DISP "complaint" triggering DISP obligations including DISP 1.4.1R.

Procedural posture and issues: The appeal was from a Chancery Division judgment ([2020] EWHC 1758 (Ch)) which decided two preliminary issues against the claimant: (1) whether the claimant had made a complaint for the purposes of DISP in relation to the swaps; and (2) if so, whether the bank was bound to assess that complaint in accordance with the review procedure agreed with the FCA. The Court of Appeal heard the appeal and, after the first day, indicated it was not persuaded the judge was wrong on the first issue and dismissed the appeal.

Issues framed by the court:

• Issue 1: Did the claimant make a "complaint" as defined in DISP about the sale of the swaps?
• Issue 2: If so, did DISP 1.4.1R require the bank to assess the complaint in accordance with the bank/FCA review agreement?

Court's reasoning: The court analysed the DISP definition, stressing that a "complaint" requires (i) an expression of dissatisfaction communicated to the provider, (ii) that the expression be about the provision of, or failure to provide, a financial service or a redress determination within FOS jurisdiction, and (iii) an allegation that the complainant "has suffered (or may suffer)" financial loss, material distress or material inconvenience. The court placed central importance on context: communications made in response to a proactive invitation to participate in a review (where participation did not require the making of a complaint) are to be interpreted against that background.

The court examined the claimant's relevant emails and correspondence and concluded they were investigatory and exploratory, seeking information and analysis to determine whether a loss had occurred and whether it was worth pursuing a claim. They did not assert that loss had been suffered nor did they amount to a complaint about the provision of the financial service at the time they were sent. The court rejected the proposition that uncertainty about quantification of loss prevents the formation of a complaint because the DISP definition only requires an allegation of loss, not proof or precise quantification. The court also held that a complaint about the review process itself is outside FOS compulsory jurisdiction and therefore does not meet the DISP definition where that is decisive.

Subsidiary findings and context: The court noted earlier authorities addressing legal rights arising from the review agreements (including that such agreements are voluntary compromises with the FCA and do not create contractual or common law duties to customers, and that decisions of the Skilled Person are not amenable to judicial review). The court found the claimant's communications did not transform into a DISP complaint even when read together and that the second preliminary issue therefore did not arise.

Appeal dismissed. The Court of Appeal agreed with the High Court that the claimant's communications during and about the voluntary review did not amount to a "complaint" as defined in DISP because they were investigatory and did not allege that the claimant "has suffered (or may suffer)" loss in the sense required, and because complaints about the review process fall outside the Financial Ombudsman Service's compulsory jurisdiction. Consequently DISP 1.4.1R was not engaged and there was no basis to proceed with the claim in respect of breach of DISP duties.

Appeal from the High Court of Justice (Chancery Division, Financial Services & Regulatory Sub-List), Deputy High Court Judge Sarah Worthington DBE QC (Hon), judgment [2020] EWHC 1758 (Ch). This Court of Appeal ([2021] EWCA Civ 557) dismissed the appeal.