Margaret Chong & Ors, R (on the application of) v Financial Services Compensation Scheme Ltd

A compensation authority may adopt a bright-line policy governing whether earlier decisions are reconsidered after a change in the law, provided the policy is rational and lawfully exercised. A compensation payment made in final settlement remains final merely because the claimant may pursue an internal review or appeal. However, an appeal procedure must be administered consistently and fairly, and any discretion to waive a full-and-final-settlement term must be exercised in a principled manner.

A judicial review claim cannot ordinarily challenge an earlier policy indirectly by seeking to challenge later decisions that merely apply it. A legitimate expectation requires a representation that is clear, unambiguous and suitably unqualified. A holding letter stating that an appeal will be considered in light of a later judgment does not promise that the claim will be reopened or that a particular result will follow.

The claimants transferred occupational pension funds into SIPPs and invested in a high-risk fund following advice allegedly given by an unregulated intermediary. The Financial Services Compensation Scheme Ltd accepted their claims and paid compensation in February 2021 on a monies-in, monies-out basis, treating the payments as full and final settlement.

After the Court of Appeal’s decision in Adams, the FSCS adopted a policy concerning the treatment of pre-1 April 2021 decisions and appeals seeking additional compensation under section 27 of the Financial Services and Markets Act 2000. The claimants appealed on 15 April 2021. In June and July 2023 the FSCS refused to decide the appeals and treated the claims as closed.

The issues were whether the payments were final, whether the decisions were an impermissible collateral challenge to an earlier policy, and whether the FSCS had frustrated a legitimate expectation.

1. Finality of compensation decisions. The payments were not interim payments on account. Under section 214(1)(i) of the Financial Services and Markets Act 2000 and COMP 11.2.4R and 11.2.5R, the scheme distinguished between interim payments and payments made in final settlement. The application forms and decision letters confirmed that the payments were accepted in full and final discharge and settlement. The claimants could not retrospectively designate them as interim payments.
2. Internal appeals. The existence of a review or appeal procedure did not prevent the original decisions from being final. Nevertheless, the FSCS had established and published a fair appeal procedure under COMP 2.2.8R. If an extant appeal might lead to additional compensation, the FSCS had to consider, consistently and in a principled manner, whether to waive reliance on the full-and-final-settlement term.
3. Time for appeal and policy. No express time limit applied in 2021, but an appeal had to be lodged within a reasonable time. The FSCS was entitled in principle to adopt a bright-line policy after the clarification of the law by Adams, having regard to efficiency, economy, legal certainty and the proper administration of the compensation scheme. The judge nevertheless expressed reservations about restricting the benefit of the policy to appeals extant on 1 April 2021, describing that distinction as potentially arbitrary. It was unnecessary to decide the policy’s lawfulness.
4. Collateral challenge. The determinative decision was the policy communicated by no later than 26 October 2022. The June and July 2023 letters merely applied that policy to the claimants. The claim was therefore an out-of-time collateral challenge, and allowing it to proceed would be an abuse of process.
5. Legitimate expectation. The April 2021 letters represented only that the issues raised would be considered in light of Adams. They did not promise that the earlier decisions would be reopened, that section 27 claims would be accepted, or that any particular outcome would follow. The FSCS had considered the appeals by applying its policy. There was no breach of legitimate expectation.
6. The claims for judicial review were dismissed.