Consumers will not be permitted to sue their financial advisers for additional compensation after accepting a Financial Ombudsman Service (FOS) award.
The landmark Court of Appeal ruling is good news for financial advisers and their insurers who now have certainty that an FOS ruling is the end of the matter.
The long-running case, reported in Brunel News in January 2014 and March 2013, concerns Mr and Mrs Clark. They had sued their financial adviser, In Focus Asset Management & Tax Solutions, for additional compensation having already accepted an award from the FOS. It had previously been accepted that a FOS award prevented claimants from seeking additional compensation, but the High Court ruling had allowed the Clark’s case to proceed.
The Court of Appeal ruled that the legal principal of ‘res judicata’ applied to FOS rulings which prevent a party from being sued for the same claim twice. The decision means that consumers have a clear choice if they take a case to the Financial Ombudsman. They may accept any compensation awarded as a full and final settlement, or reject the award and sue for compensation in the courts.
“This is great news for financial advisers and their insurers”, said James Burgoyne, Director, Brunel Professional Risks. “Had the decision gone the other way we would have faced a situation where an FOS award could be used as a fighting fund to finance a court case for additional compensation. This would have meant that insurers faced new and substantial risks. It would have made a difficult professional indemnity insurance market for IFAs to be virtually untenable.”