Collegiate News

Court says FOS must keep to £100k limit

31 May 2007


Money Marketing-31-May-2007

The High Court has ruled that the Financial Ombudsman Service does not have the power to make binding "directional" awards requiring redress payment of over £100,000.

The FOS has the power to make two types of binding awards, a monetary award capped at £100,000 and a directional award, in which a firm takes such steps as the FOS considers "just and appropriate", which is not subject to a financial limit.


However, the ruling was brought on two separate cases where a complainant had obtained an FOS award in his favour, which appeared to require a redress payment of over £100,000 and, in one, well over £1m.

The complainants - Roger Bunney and Jeremiah James Cahill - brought the case to the High Court after Burns-Anderson and Timothy James and Partners refused to pay more than £100,000.


The two firms, represented by law firm CMS Cameron McKenna, argued that if an award requires the payment of money to, or for the benefit of, the complainant, it is a monetary award and therefore subject to the £100,000 limit.

The court held that it is not necessary for an award to be quantified in monetary terms in order to be classed as a monetary award and so the £100,000 payment cap is applicable to any directional award that requires payment.


CMS say this ruling prevents the FOS circumventing the £100,000 cap by using formulae to calculate redress rather than stating specific figures.


Financial Ombudsman Service spokesman David Cresswell says: "We have always pointed out that it is for the courts to decide how much money can be awarded in the event that a consumer pursued an ombudsman award through the legal system and up to the courts to enforce. This is welcome clarification."


Collegiate legal director Martin Archer says: "Insurers derive real comfort from the £100k FOS limit when assessing premiums and this judgement is an important victory”.