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In iDealing.com Ltd, R (On the Application Of) v Financial Ombudsman Service Ltd [2024] EWHC 847 (Admin), the High Court considered three related decisions (the "Decisions") made by the Financial Ombudsman Service (the "FOS"), following various complaints (the "Complaints") about the standard of its service. The High Court held that the Decisions were not amenable to judicial review.

Key points

  • The correct legal test to determine whether a decision is amenable to judicial review, if the source of the power does not provide a clear answer, is whether the nature of the power and function being exercised has, "a sufficient public law element, flavour or character to bring it within the purview of public law" (R (Beer) v Hampshire Farmers Market Ltd [2004] 1 WLR 233).
  • The fact that the Complaints related to the standard of service provided by the FOS when it was exercising its statutory functions under FSMA was insufficient to persuade the court that the Decisions had a sufficient public law element, flavour or character to be amenable to judicial review.
  • Even where a decision is amenable to judicial review and the grounds of challenge are arguable, the courts must usually refuse to grant permission if it appears highly likely that the outcome for the claimant would not have been substantially different if the conduct complained of had not occurred (section 31 (3D) of the Senior Courts Act 1981 ("SCA 1981")).

Background

The parties

The claimant ("iDealing") is a securities brokerage. The FOS is an independent public body that resolves disputes between consumers and businesses that provide financial services. The FOS was established under the Financial Services and Markets Act 2000 ("FSMA"), from which it derives its statutory powers to resolve disputes.

The Decisions

The Complaints submitted by the claimant related to the FOS' alleged poor handling of an earlier consumer complaint, including that the FOS had: "wrongly threatened" to bring a complaint against iDealing on behalf of the consumer; encouraged the consumer to bring the complaint; and "doggedly and unreasonably" maintained that it had jurisdiction to deal with the complaint.

The FOS handled the Complaints via its non-statutory service complaints scheme. The majority of the Complaints were upheld, with the following Decisions being made:

  • The Ombudsman Manager offered iDealing an ex gratia payment of £500 "for any inconvenience" (Decision 1);
  • The Independent Assessor recommended that the FOS make an ex gratia payment of £750, noting that its service had fallen "well below a reasonable level" (Decision 2); and
  • The Chief Ombudsman accepted the Independent Assessor's recommendation without, iDealing claimed, considering whether it was correct (Decision 3).

iDealing requested compensation from the FOS for the legal costs that it had incurred in defending the consumer complaint, in the sum of approximately £75,000 plus VAT. The FOS refused to pay these costs. iDealing sought to bring a claim for judicial review.

The claim

The claim was heard at a rolled-up hearing in which the court considered the question of amenability, as well as five grounds of challenge.

On amenability, iDealing argued that as a public body exercising public law functions under FSMA, the FOS was generally amenable to judicial review. The fact that the Decisions were not made in the exercise of any statutory power did not matter because:

  1. the courts have recognised that ex gratia payment schemes are or can be reviewable on judicial review grounds (citing R (Moore)v Skipton Fund Ltd [2010] EWHC 3070 (Admin; [2020] 12 WLUK 5); and
  2. the Decisions had a sufficient public law element, flavour or character to fall within the scope of public law because they related to the Complaints, which themselves concerned the FOS' exercise of its statutory functions under FSMA (i.e. the consumer complaint). The nexus between the Decisions and the statutory consumer complaint was sufficient to bring the Decisions within the scope of public law.

The FOS accepted that the exercise of its statutory functions under FSMA was amenable to judicial review but argued that this did not extend to its ex-gratia voluntary non-statutory service complaints scheme, which focussed on the FOS' practical handling of consumer complaints under FSMA, rather than substantive aspects such as the merits of the consumer complaint or its outcome.

The substantive grounds of challenge advanced by iDealing alleged the application of an unpublished policy, failure to apply the FOS' Independent Assessor's Terms of Reference, fettering of discretion, procedural unfairness, and Wednesbury unreasonableness.

Judgment

Amenability

The court noted that the Government-introduced prerogative compensation schemes in the authorities relied upon by iDealing were in "stark contrast" with the voluntary non-statutory scheme operated by the FOS in the present case, which was designed to improve its service.

As a matter of logic, it did not follow that the nature of the power and function of the Decisions changed because of their nexus with the earlier statutory consumer complaint. The court was not persuaded that there was a sufficient public element, flavour or character to the Decisions to bring them within the scope of public law.

Even if the Decisions had been within the scope of public law, it would be unjust for iDealing to receive the benefit of the statutory framework under FSMA (i.e. amenability to judicial review) without its burden, in light of the fact that iDealing would not have been entitled to recover any costs or damages under the relevant regimes. In any event, therefore, the court would have refused permission under s. 31 (3D) SCA 1981, on the basis that it was highly likely that the outcome for iDealing would not have been substantially different if the conduct complained of had not occurred.

Grounds of challenge

On the facts, the court did not consider the majority of iDealing's grounds of challenge to be arguable, with one exception where it was said to be arguable that a failure to provide reasons for rejecting iDealing's request for payment of legal costs was procedurally unfair. However, the court still refused permission on that ground and indicated that it would have refused permission on all other grounds had they been arguable, applying s. 31 (3D) SCA 1981: "The legal costs incurred by the claimant following its early instruction of solicitors were always unrecoverable and remain so."

Comment

This judgment is a helpful reminder to potential claimants and public bodies of the rules on amenability to judicial review, including the requirement for there to be a sufficient public element, flavour or character to decisions made in the exercise of powers or functions. The fact that some decisions of a public body are amenable to judicial review or that a body is created by statute and has statutory functions does not mean that all its decisions are amenable. Even a link between a non-statutory decision and other statutory decisions will not necessarily be enough for the non-statutory decision to be rendered amenable.

Parties should be alert to the "no substantial difference" test under s. 31 (3D) SCA 1981 which can be a knock-out blow for judicial review claims: claimants should factor it into their analysis of any actual or potential claims, and public bodies defending a claim should raise it at the permission and substantive hearing stages it if it appears relevant.

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Andrew Lidbetter

Partner, London

Andrew Lidbetter
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Nusrat Zar

Partner, London

Nusrat Zar
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James Wood

Partner, London

James Wood
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Jasveer Randhawa

Professional Support Consultant, London

Jasveer Randhawa
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Antonia Smith

Senior Associate, London

Antonia Smith

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Andrew Lidbetter photo

Andrew Lidbetter

Partner, London

Andrew Lidbetter
Nusrat Zar photo

Nusrat Zar

Partner, London

Nusrat Zar
James Wood photo

James Wood

Partner, London

James Wood
Jasveer Randhawa photo

Jasveer Randhawa

Professional Support Consultant, London

Jasveer Randhawa
Antonia Smith photo

Antonia Smith

Senior Associate, London

Antonia Smith
Andrew Lidbetter Nusrat Zar James Wood Jasveer Randhawa Antonia Smith