Marie-Claire di Mambro outlines how claimants with a high value dispute with a financial service provider will be able to accept a statutory award and also sue for the balance in court.

The Financial Ombudsman Service was set up to sort out individual complaints that consumers and micro enterprises have not been able to resolve directly with financial services businesses. The service considers complaints about a wide range of financial matters, from insurance and mortgages to savings and credit, handling more than 250,000 disputes each year.

Where the ombudsman upholds a complaint, they can tell the financial business to compensate their customer for losses of up to a limit of £150,000 (£100,000 for complaints received before 1 January 2012).

Until a recent case, claimants who had lost more than the relevant limit were unable to pursue the balance of their losses. This was the result of a previous court decision in the case of Andrews v SBJ Consultants [2010] EWHC 2875 (Ch) which held that, having accepted an award at the maximum limit as determined by the Financial Ombudsman Service, the claimant was barred by the “doctrine of merger” from recovering anything further in the courts.

However, in December 2012 the High Court opened the door for claimants to pursue the balance of their losses through the courts, following the judgement in Clark v In Focus Asset Management & Tax Solutions Ltd [2012] EWHC 3669 (QB).

Case notes

The case of Clark v In Focus Asset Management concerned an issue of allegedly negligent financial advice given to Mr and Mrs Clark regarding the sale of a family business in which they sustained losses in excess of £500,000.

They complained to the Financial Ombudsman Service and accepted a determination of £100,000, the maximum award at the time.

After acceptance of the ombudsman’s decision they issued proceedings in the county court for damages for what they alleged were the greater losses flowing from the negligent advice received from the respondent.

The county court judge ordered that the claim should be struck out, on the basis of the court decision of Andrews v SBJ Consultants regarding the doctrine of merger.

Mr and Mrs Clark appealed to the High Court which handed down a judgment which allows a successful claimant to accept an award from a determination by the Financial Ombudsman Service and then claim additional damages from the financial services provider for an amount in excess of the ombudsman’s determination.

The doctrine of merger

The doctrine of merger means that a person who has obtained a final judgment in a tribunal of competent jurisdiction is precluded from later recovering in court a second judgment for the same relief in respect of the same subject matter.Effectively, the cause of action which the claimant first advanced merges with the judgment so that there is no cause of action to pursue on the second occasion.

The judgment

Mr Justice Cranston held that the doctrine of merger does not apply to these determinations, as the Financial Ombudsman Service is not a tribunal. He gave various reasons for this, including that:

  • the Financial Ombudsman can resolve a case by means such as mediation, whereas the typical tribunal does not itself engage in mediation;
  • the Financial Ombudsman makes non-binding recommendations, which tribunals do not typically do;
  • determinations are not binding unless the complainant accepts them, which is not the case in tribunals; and
  • the Financial Ombudsman Service deals with complaints, not causes of action as tribunals do.

In summing up, he stated that the correct approach was to consider the Financial Ombudsman Service as a whole and that he did not see that subsequently seeking redress in the courts for an amount over and above the statutory limit would be inconsistent with its statutory aims.

It is interesting that Mr Justice Cranston goes as far as to say:

“It seems to me that for a complainant to use an award of £100,000 to finance the legal costs of bringing court proceedings for a greater amount is not inconsistent with the statutory aims”


Lord Jackson’s reforms to litigation funding will prevent the recoverability of after-the-event insurance premiums and success fees under conditional fee arrangements from unsuccessful defendants from 1st April 2013 onwards. This approach could therefore provide a very attractive means for impecunious claimants who are faced with claims in excess of the Financial Ombudsman Service limit (currently £150,000), to seek recovery of the full amount with money in their back pocket to do so.

This case is, not surprisingly, being appealed. In the interim, until the Court of Appeal has determined the point as both the Andrews and Clark cases are High Court decisions, neither judgment takes precedence although Clark(as the most recent decision) will be assumed to apply.

Therefore, until there is a Court of Appeal decision on the point, claimants with disputes of over £150,000 will be able to accept an award determined by the Financial Ombudsman Service and sue for the balance in court by using the funds received from the ombudsman’s determination. Some caution will need to be exercised however since, if the Court of Appeal reverses the Clark decision mid-way through the claim process, this could leave a claimant exposed. Nonetheless, there is likely to be capital to be made in the pre action negotiation phase with financial service providers whilst this uncertainty exists.

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.