The High Court has examined the extent of the powers of the Financial Services Ombudsman (the "Ombudsman") on a number of occasions in the past year. These decisions demonstrate a deference to decisions taken by the Ombudsman in relation to matters within its jurisdiction and a continued reluctance by the High Court to interfere with decisions taken by the Ombudsman. The High Court's power to hear an appeal of a decision of the Ombudsman under section 57CL of the Central Bank Act 1942 should not be regarded as a new hearing of the complaint, but rather a review of the Ombudsman's decision making process and procedure.
This approach is in keeping with the precedent set by the landmark 2006 decision in Ulster Bank v Financial Services Ombudsman and Others1 in which it was held that decisions of the Ombudsman would only be successfully challenged where the complainant can show that the decision reached was "vitiated by a serious and significant error or a series of such errors."
Caffrey v Financial Services Ombudsman2 - 12 July 2011
- This case arose from an investment made by the appellant in a product offered by Bloxhams described as the "Dresdner Bond". The appellant claimed that in a telephone conversation with a Bloxham's employee, he was given to understand that the investment would be in a fund which would guarantee a given return and that he was not informed that there was a swap agreement in place with Morgan Stanley in respect of the Bond. The content of this call was disputed by Bloxhams.
- The appellant argued that at the hearing before the Ombudsman that there was a "blanket acceptance" of Bloxham's evidence and that this constituted a "serious and significant error". In particular, the appellant contested the fact that the Ombudsman did not seek a recording of the telephone conversation, nor was written evidence from the Bloxham's employee sought.
- The High Court held that the Ombudsman's decision not to require Bloxhams to produce a telephone recording or written evidence was not a "serious and significant error" because (i) no such telephone recording was in existence, and (ii) any account by the employee of the conversation would be unreliable given the delay between the facts and hearing date (five years). Furthermore, the High Court held that the failure by the appellant to request that an oral hearing take place at the time of the decision was of relevance in assessing whether the Ombudsman had on unreasonable grounds decided not to hold an oral hearing. Finally, the High Court held that the Ombudsman correctly placed reliance on the fact that the appellant was an "experienced investor" who understood the risks associated with investments of this nature.
FBD Insurance plc v Financial Services Ombudsman3 - 29 July 2011
- The facts of this case arose from a successful application by an insured individual to the Ombudsman relating to the failure by FBD Insurance to pay out under a claim made under his motor insurance policy. The refusal arose because, FBD claimed, the insured had failed to properly disclose details of his criminal convictions. This resulted in FBD's decision to void the policy.
- The convictions related to crimes such as theft and intoxication in a public place, and there were no convictions for road traffic offences. The Ombudsman ruled that FBD had inappropriately refused to pay out under the policy and found that the criminal convictions in question did not constitute a sufficient reason for the decision to void the insurance policy. »» Before the High Court, FBD argued that the existence of the undisclosed convictions would have affected the insured's premium. Further, it was argued that the ruling was inconsistent with previous rulings of the Ombudsman.
- The High Court held that the Ombudsman's decision was not vitiated by serious or significant error. Hedigan J. quoted from the relevant legislation which enjoins the Ombudsman to proceed in an "informal manner" and "without regard to technicality or legal form." The High Court noted that case law on administrative tribunals requires a lesser standard of reasons to be given from administrative tribunals than from the ordinary courts. The High Court stated that the Ombudsman, in reaching its determination, had relied heavily on the limited nature of the disclosure which was sought by the insurers. The duty of disclosure is a matter which falls within the jurisdiction of the Ombudsman and therefore the courts would allow the Ombudsman a greater degree of leeway in deciding how cases are to be conducted.
O'Hara v ACC Bank plc4 - 7 October 2011
- The plaintiff in this case made a number of investments in ACC Bank products in 2003 and 2004 which suffered substantial losses due to unfavourable market performance. The plaintiff sought to recover damages from the defendant bank on the grounds that, it was claimed, the nature of the products invested in differed from what was agreed between the parties at the time of the investments. The plaintiff's complaint was considered and dismissed by the Ombudsman on 30 November 2009 and an appeal was brought before Charleton J. in the High Court.
- It was held that the plaintiff's appeal could not succeed owing to the rule of "issue estoppel" which Charleton J. found to be applicable in this case. Issue estoppel prevents a party from re-litigating a matter before a higher court on the grounds that the matter has already been determined. The High Court held that there was a trend in the UK of recognising that issue estoppel was applicable in relation to decision of quasijudicial tribunals and that this broad approach was also appropriate in Ireland. Issue estoppel would embrace not only matters which have already been litigated, but would also concern matters which should have been litigated before a different court or tribunal.
- Further, in relation to the substance of the decision reached by the Ombudsman, it was held that the High Court would only overturn decisions of the Ombudsman in circumstances where the decision reached was "vitiated by a serious and significant error or a series of errors" (this was a reiteration of the position of the High Court in Ulster Bank v Financial Services Ombudsman and Others).
Hyde v Financial Services Ombudsman5 - 16 November 2011
- The plaintiff was an architect who, in March 2007, reached an agreement with her Bank for a loan facility to be provided to her. The plaintiff claims that the agreed amount was for €965,000, representing a €715,000 portion for the purchase of a property and a further €250,000 to complete renovation works upon it. The €715,000 portion was drawn down in April 2007 and is documented. However, the further sum was not provided. There was a delay in the initial repayments being made in respect of the €715,000 mortgage.
- The plaintiff argued that there was an informal understanding with the Bank that she would be afforded some "breathing space" before repayments would commence in order to discharge her legal fees and stamp duty. The Bank refused to provide the further facility of €250,000 on the same favourable terms which had been agreed in respect of the €715,000 facility. The Ombudsman ruled in favour of the Bank based on an assessment of the documentary evidence provided to him. Held
- It was held that, although the Ombudsman enjoys a broad discretion to decide whether or not an oral hearing should take place, the failure to direct an oral hearing take place in this case constituted a "serious and significant error". The High Court held that on the facts, the plaintiff's case rested on the veracity of competing accounts of an alleged oral conversation between the parties. In such circumstances it would have been impossible to achieve a fair and proper conclusion based on documentary evidence alone.
Lyons v Financial Services Ombudsman6 – 14 December 2011
- This dispute related to the interest to be paid by the two plaintiff businessmen on loans of about €17 million, made between 1999 and 2008 for the purposes of acquiring property. The plaintiffs claimed a verbal agreement existed with their lender to pay interestonly on the loans at rates ranging from 1.25 per cent to 1.8 per cent. The existence of this verbal agreement was strongly contested by the lender. The plaintiffs complained to the Ombudsman and on 12 January 2011, the Ombudsman determined that the complaint was not substantiated. The plaintiffs then appealed to the High Court, largely on the grounds that the Ombudsman failed to hold an oral hearing in respect of their complaint.
- The judgment of Hogan J. in this case contained, amongst other things, an interesting consideration of how the Ombudsman's jurisdiction reaches far beyond those customers that might traditionally be considered non-business 'consumers'. Hogan J. went on to hold that the Ombudman's decision was vitiated by a serious error, negating the plaintiff's constitutional right to fair procedures. Hogan J. further stated that the case was not properly evaluated in the absence of an oral hearing and remitted the plaintiff's complaint to the Ombudsman for re-hearing.
These cases demonstrate that a litigant seeking to challenge a decision of the Ombudsman in the High Court faces a difficult assignment. The "serious and significant error" test is now firmly embedded in the case law of the High Court and has been applied in a range of circumstances. Where questions of procedure have arisen on appeal, the High Court has held, for example, that the decision to direct that an oral hearing should take place is a discretion of the Ombudsman (although on the facts the High Court held in both Hyde v FSO and Lyons v FSO that an oral hearing was a necessary requirement).
In relation to evidentiary matters, in Caffrey v FSO the High Court accepted that it was not improper for the Ombudsman to decide a case on the basis of affidavit evidence of an officer who was not party to a telephone conversation on which the case turned.
Deference is also shown to the Ombudsman in terms of the subject matter which may be presented before it. In O'Hara v ACC Bank, the High Court confirmed that issue estoppel (discussed above) applies to quasi-judicial tribunals as it does to the ordinary courts. This principle would operate not only to prevent litigants from seeking to have the matters re-heard before the High Court but also to prevent cases being brought before the ordinary courts in the first instance where those matters fall within the remit of the Ombudsman's jurisdiction.
On the evidence of the recent case law, those intending to bring a matter before the Ombudsman should be aware that any right of appeal which they may enjoy will be limited by the recent case law. Potential applicants should make every effort to ensure that procedural steps are taken to protect their position at Ombudsman stage as, for example, the failure to request an oral hearing at the Ombudsman stage may prejudice a litigant in the event that the case is the subject of an appeal.
1 Ulster Bank -v- Financial Services Ombudsman and Others  IEHC 323
2 Caffrey –v- Financial Services Ombudsman  IEHC 285
3 FBD Insurance PLC –v- Financial Services Ombudsman  IEHC 315
4 O'Hara & Anor –v- ACC Bank Plc  IEHC 367
5 Hyde –v- Financial Services Ombudsman  IEHC 422
6 Lyons -v- Financial Services Ombudsman  IEHC 454
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.