On 19 April 2024, the High Court dismissed an application by iDealing.com Ltd for judicial review of three non-statutory decisions made by the Financial Ombudsman Service (the “FOS“). The decisions were made in response to service complaints by iDealing.com (“the Claimant“) regarding the FOS’s poor handling of a consumer complaint against the Claimant.
The High Court found that the FOS decisions were not amenable to judicial review as they did not have a sufficient public element, and that even if they were amenable, the High Court would have refused permission on all grounds. This decision does not affect the amenability to judicial review of Ombudsman decisions on customer complaints referred to the FOS.
Background
In January and July 2022 the Claimant made two complaints against the FOS, alleging the FOS had “wrongly threatened” to bring a consumer complaint against the Claimant on behalf of the consumer, encouraged the consumer to make a complaint and unreasonably maintained that it had jurisdiction to deal with the complaint. The Claimant requested payment of their legal costs of £74,864.52 plus VAT by way of redress.
In response to the Claimant’s service complaint, the FOS made the following decisions under its non-statutory service complaint scheme:
- the Ombudsman Manager’s decision, which offered the claimant compensation of £500 for any inconvenience but which did not offer compensation in respect of legal fees (“Decision 1”);
- the Independent Assessor’s decision recommending the FOS pay £750 for its poor service (“Decision 2”); and
- the Chief Ombudsman’s decision, accepting the Independent Assessor’s recommendation without apparently considering whether it was correct (“Decision 3”).
Decision
The Court held that the FOS’s decisions in respect of the service complaints were not amenable to judicial review:
- The Claimant argued that, because the FOS is established by statute to determine complaints by consumers against firms authorised by the Financial Conduct Authority, it is a public body exercising public law functions. It submitted that this satisfies the test for amenability to judicial review. Further, the Claimant argued that the three challenged decisions have a sufficient public element, flavour or character because they related to a complaint (the service complaint) about the exercise of the defendant’s statutory functions (the consumer complaint).
- The Court rejected this. It found that the three FOS decisions did not have a “sufficient public element, flavour or character” to bring them within the purview of public law and therefore the decisions were not amenable to judicial review. Siddique J found that, as a matter of logic, the nexus between the non-statutory service complaint and the earlier statutory consumer complaint does not itself change the nature of the power and function of the non-statutory service decisions. Decisions are not rendered public in nature or function simply because they relate to an earlier exercise of public statutory functions which is properly a target of judicial review.
- The Claimant argued that it did not matter that the three decisions offering compensation were not exercised under any specific statutory power. Nor did it matter that the compensation offered consisted of ex gratia payments, because ex gratia payment schemes are or can be reviewable on judicial review grounds. Siddique J found that the cases relied upon by the Claimant to support its argument all concerned Government-introduced prerogative compensation schemes, such as ex gratia payments to NHS patients treated with contaminated blood. These authorities were therefore of no assistance to the Claimant as they were “in stark contrast with the nature and function of the compensation scheme operated by the defendant in the instant case, namely a voluntary non-statutory scheme designed to improve its service“. In addition, the Court observed that the statutory consumer complaint scheme does not entitle a respondent firm to recover legal fees incurred in response to a consumer complaint. The FOS has a fundamental statutory immunity in the performance of its statutory functions under the compulsory jurisdiction, except in cases of bad faith or unlawful breach of a human right (neither of which were alleged in this case). Even if, contrary to the above, the statutory consumer complaint framework is determinative of whether the non-statutory service complaint scheme falls within the purview of public law, Siddique J concluded it would be unjust for the Claimant to receive the benefit of that framework without its burden.
Siddique J went on to find that, even if the decisions were amenable to judicial review, he would refuse permission on all five grounds.
Ground 1 – Application of unpublished guidance
The Court did not find it arguable that the Ombudsman Manager’s decision involved the application of unpublished policy as he was not aware of the relevant guidance document. Even if the Ombudsman Manager had been aware of the guidance document, the Court found it was highly likely the outcome would not have been substantially different.
Ground 2 – Failure to apply the Independent Assessor’s Terms of Reference
The Claimant contended that the Independent Assessor’s employment by the FOS meant she was not independent from the Chief Executive and Chief Ombudsman as required by the Terms of Reference (the “Terms“) for the appointment. Siddique J was not persuaded that the Terms mean the Independent Assessor could not be employed by the FOS, as the independence required by the Terms is independence from the Chief Executive and Chief Ombudsman, not from the Board, which was the employer.
The Claimant further contended that the Independent Assessor misconstrued the Terms in making her recommendation because she failed to consider (a) the impact of the FOS’s errors on the Claimant and (b) that she had a discretion to pay for legal costs. In respect of (a), the Court found it was clear from her recommendation letter that the Independent Assessor considered in broad terms the impact of the poor service on the Claimant. In respect of (b), the Court found that the Terms do not provide for legal costs and refer only to compensation for “damage, distress or inconvenience cause by the poor service”, not “damages” in a broader sense.
Ground 3 – Fetter of the exercise of discretion
Given the Court’s findings regarding Ground 2, it rejected the Claimant’s argument that Decision 2 involved a fetter of the exercise of discretion. The Claimant further contended that Decision 3 involved a fetter of the exercise of discretion as the Chief Ombudsman effectively rubber stamped the Independent Assessor’s recommendation. The Court found the evidence did not support this claim, as it is rare for a recommendation to be rejected following independent review, and the Chief Ombudsman’s correspondence in respect of the complaint indicated she had read and agreed with the recommendation.
Ground 4 – Procedural unfairness
The Court found a possibility of procedural failing in Decision 1 due to the absence of reasons for rejecting the claim for legal costs, but it was highly likely the outcome would not have been substantially different as the legal costs were never recoverable. In light of its conclusions regarding Grounds 2 and 3, the Court rejected the argument that decisions 2 and 3 lacked procedural fairness.
Ground 5 – Wednesbury unreasonableness
The Claimant argued the three decisions were Wednesbury unreasonable as this was “plainly an appropriate case” for the FOS to pay some or all of the Claimant’s legal costs. The Court concluded that none of the three decisions to refuse to pay compensation for legal costs was Wednesbury unreasonable as there is no provision to recover legal costs for engaging in the statutory consumer complaint scheme.
Discussion
It is often difficult to draw the line between decisions which are amenable to judicial review and those which are not. The topic was, for a long time, a source of controversy among public law practitioners and scholars in the UK. It is not possible to draw the distinction based solely on who makes the decision – it would otherwise be impossible to judicially review the many private bodies exercising important public functions, such as private industry regulators and private providers of public services. Nor is it straightforward to base the distinction on whether the decision-maker’s power has a strictly public source – that would also be too restrictive. Instead, courts look to the function which the decision-maker is carrying out, and whether the relevant decision has a sufficient public element. That is, necessarily, a flexible test, which can lead to unexpected results.
This decision illustrates that decisions made by statutory bodies may not always be genuine targets for judicial review, even when the decisions are related to aspects of their public functions. It is particularly interesting as it concerns a body whose decisions are frequently subject to judicial review. This indicates that proximity to the exercise of a public function is not itself sufficient to bring a decision-making process within the bounds of public law such that it is amenable to judicial review.
For further information, please contact:
Alison Wilson, Partner, Linklaters
alison.wilson@linklaters.com
