Clients drop proper to sue after taking ombudsman compensation
Financial solutions customers who have accepted compensation from the ombudsman can no longer sue for even more redress in court following a landmark Court of Appeal ruling. 
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Consumers who have suffered a reduction induced by a fiscal providers company can no longer accept compensation from the ombudsman and then sue the organization for added redress in court.
The financial ombudsman can award greatest compensation of £150,000 to a client who has misplaced cash due to problems such as negligence, poor fiscal tips or mis-offering. Final yr the ombudsman obtained in excess of 500,000 complaints and upheld half of them, although this number is increased than standard thanks to the deluge of payment protection insurance complaints.
There has been legal uncertainty about whether or not clients who have misplaced more than this sum can accept compensation from the ombudsman and then sue for the balance in court.
Previously some consumers have utilized ombudsman awards as a fighting fund to bring court proceedings. But the Court of Appeal right now ruled that when a complainant has accepted an ombudsman award, they cannot take legal action more than the exact same complaint.
This implies individuals and small companies that have a grievance towards a economic solutions company can take their complaint to the ombudsman but they should very carefully pick no matter whether to accept a ultimate award or not. If they do, they drop the right to pursue more compensation in court.
If they do not accept an ombudsman award, they can look for complete compensation for any loss suffered via a civil situation, irrespective of the volume, but should accept that the method is much more expensive and can be complex.
The law has been unclear on the matter for some time. In November 2010, the Substantial Court ruled that a claimant who accepts a final selection from the ombudsman is bound by it and can not pursue a legal case in excess of the identical matter.
But in December 2012, yet another Large Court judge disagreed with the ruling and discovered complainants can seek out extra compensation in court.
This ruling concerned Barry Clark, 70, and his wife Julie, 68, of Portsmouth, who were consumers of In Target Asset Management and Tax Options. The firm advised them to invest the proceeds of the sale of a family company in a geared traded endowment prepare. This lead to losses of £500,000 and the couple complained to the ombudsman that the firm gave them unsuitable investment advice.
The ombudsman upheld the complaint and awarded the maximum compensation, which was £100,000 at the time. Mr and Mrs Clark, who are the two retired, then issued proceedings in the county court for further losses.
The judge ordered the claims to be struck out. They appealed and the Large Court ruled clients are permitted to declare further damages in court right after accepting an FOS award. In Target Asset Management and Tax Options referred the determination to the Court of Appeal.
In her judgment, handed down nowadays, Lady Justice Arden stated: “If the Clarks be successful, a complainant may possibly be capable to use an award as a fighting fund for legal proceedings. On the encounter of it this outcome would be for consumers’ interests, but that is not always so.
“If they get rid of court proceedings, it may lead to them shedding all that they have acquired by means of the FOS. It might also lead to the development of a claims sector in this field that increases the costs of obtaining monetary advice: there are already 210 ombudsmen and many a lot more may well be required if a larger group of complainants can apply.”
Alex Denslow of law company CMS who acted for In Focus, mentioned giving consumers the potential to sue for additional redress in court would have pushed up the cost of fiscal tips and been observed by consumers as a “risk-totally free two-way bet”.
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