iDealing.com Limited, R (on the application of) v Financial Ombudsman Service Limited

This case concerns the challenge to the lawfulness of three related decisions of the defendant, the Financial Ombudsman Service, following service complaints submitted by the claimant iDealing.com Ltd, a securities brokerage, via their solicitors Pinsent Masons LLP, on 18 January and 11 July 2022. The majority of the complaints were upheld leading to the decisions under challenge offering compensation of £500, later increased to £750.

The complaints related to the defendant’s poor handling of an earlier consumer complaint against the claimant and another, namely Suffolk Life Pensions Ltd (the ‘consumer complaint’). Amongst other things the claimant complained that the defendant “wrongly threatened” to bring a complaint against the claimant on behalf of the consumer, Mr Henrick, encouraged Mr Henrick to make such a complaint and “doggedly and unreasonably” maintained that the defendant had jurisdiction to deal with the complaint (the ‘service complaint’). By way of redress, the claimant requested payment of their legal costs in the sum of £74,864.52 plus VAT. That request was refused leading to the claimant’s pre-action protocol letter on 10 November 2022, with the claim for judicial review issued on 5 December 2022.

Following the order of Lang J on 3 November 2023, a rolled up hearing was held over two days on 5 and 6 March 2024, when the issue of amenability to judicial review also fell to be determined.

The defendant’s impugned decisions are as follows:

Decision 3 was originally particularised as the decision of Mr Charlie Sweeney, Lead Ombudsman and Director of Casework, dated 17 October 2022, which had “noted” the IA’s recommendation. However, following the service of Ms Abby Thomas’ email on 8 December 2023, the claimant no longer seeks to challenge the acceptance of the IA’s recommendation based on Mr Sweeney’s involvement. Instead, the claimant now seeks to challenge the acceptance of the IA’s recommendation on the basis of Ms Thomas’ email of 23 December 2022. No objection was taken by Mr Strachan KC for the defendant. I am satisfied that it is possible to fairly deal with the challenge to this later decision and therefore grant leave to amend as necessary.

Mr Strachan KC did object to the introduction of two new lines of argument. First, in respect of whether the claimant’s legal costs should have been paid as compensation for “distress or inconvenience” (and not just “damage”), in accordance with the defendant’s non-statutory service complaint scheme. Second, whether there was procedural unfairness from an apparent failure to take account of the defendant’s guidance on its non-statutory service complaint scheme and from relevant material having been withheld.

In R (Dolan) v Secretary of State for Health and Social Care [2020] EWCA Civ 1605; [2021] 1 WLR 2326, Lord Burnett CJ re-emphasised the need for procedural rigor in proceedings for judicial review where arguments have not been pleaded. In respect of whether the claimant’s legal costs should have been paid as compensation for “distress or inconvenience”, ultimately the claimant did not pursue this new line of argument. In respect of the procedural unfairness arguments, as the claimant did not seek leave to amend, I am not required to consider the matter further.

The claimant submits that the decisions are unlawful on the following five grounds:

Decision 1 involved the application of unpublished guidance.

Decisions 2 and 3 failed to apply the IA’s Terms of Reference.

Decisions 2 and 3 involved a fetter of the exercise of discretion.

Decisions 2 and 3 were procedurally unfair.

The decisions were Wednesbury unreasonable.

By way of a preliminary matter the issue of amenability to judicial review must first be determined. It was common ground between the parties that the correct legal test to the question of amenability was summarised by Dyson LJ in R (Beer) v Hampshire Farmers’ Market Ltd [2003] EWCA Civ 1056; [2004] 1 WLR 233 at [16], as approved by the CA in R (Holmcroft Properties Ltd) v KPMG LLP [2018] EWCA Civ 2093; [2020] Bus LR 203 at [47]:

The conflict between parties was over whether the “nature of the power and function” exercised in the three challenged decisions had “sufficient public element, flavour or character” to bring them within the purview of public law.

The claimant submits that the defendant is established by statute to determine complaints by consumers against firms authorised by the FCA.. It is therefore a public body exercising public law functions meaning it is generally amenable to judicial review. However, at the outset it is important to recognise that the three challenged decisions offering compensation were not exercised under any statutory power and the compensation offered were ex gratia payments. The claimant submits this does not matter for two reasons. First, the claimant submits ex gratia payment schemes are or can nevertheless be reviewable on familiar judicial review grounds, relying upon R (Mullen) v Secretary of State of the Home Department [2004] UKHL 18; [2005] 1 AC 1 and specifically R (Moore) v Skipton Fund Ltd [2010] EWHC 3070 (Admin); [2010] 12 WLUK 5 at [30]:

Second, the claimant submits that the three challenged decisions have sufficient public element, flavour or character to fall within the purview of public law because they related to a complaint (the service complaint) about the exercise of the defendant’s statutory functions (the consumer complaint). As the consumer complaint was subject to a statutory scheme, it follows, says the claimant, that the service complaint relating to it is afforded sufficient public element, flavour or character to bring it within the purview of public law. In short, the non-statutory service complaint is said to fall within the purview of public law because of its nexus with the earlier statutory consumer complaint.

The defendant accepts that it is amenable to judicial review in respect of the statutory discharge of its public law functions under the Financial Services and Markets Act 2000 (“FSMA”). However, it submits that this does not cover its ex gratia voluntary non-statutory service complaint scheme, which does not deal with the substantive complaints under the FSMA. Rather, as the name suggests, the service complaint scheme deals with service issues relating to how the defendant’s public law functions were carried out when deciding the substantive complaints under the FSMA. Hence, the IA’s Terms of Reference provides that the scope of any review is to “consider complaints about the standard of service and practical handling of a case provided by the Financial Ombudsman Service but not about its outcome, the merits of the complaint, or its commercial and legal obligations.”

It is common ground that the defendant’s non-statutory service complaint scheme involves a three-stage process:

Given that the claimant additionally submits that the non-statutory service complaint falls within the purview of public law because of its nexus with the earlier statutory consumer complaint, it is necessary to consider the statutory framework for consumer complaints under the FSMA. At this stage, it suffices to say that the defendant is established under section 225 of the FSMA to resolve disputes “quickly and with minimum formality by an independent person.” By virtue of section 226, the defendant only has jurisdiction over a consumer complaint if a number of criteria are satisfied, including whether the complainant is an “eligible” complainant. If a complaint meets the jurisdictional requirements, it must be determined under section 228. Section 229 provides for a power to make “a money award” against the respondent of a consumer complaint, such as the claimant. In respect of the claimant, this was subject to a monetary limit of £375,000.

In its dealings with the defendant, the claimant repeatedly maintained that Mr Henrick, who made the original consumer complaint, was not an eligible complainant. Notwithstanding this, under section 230 and the subordinate ‘Dispute resolution: Complaints’ rules’ (DISP), a respondent firm does not have any costs entitlement to recover legal fees in dealing with such complaints. Whilst a respondent firm is at liberty to instruct lawyers if it chooses in responding to such complaints, it is not required to do so and it would not be entitled to recover its costs of doing so. DISP 3.7.1.R provides:

There is no provision for an award of a respondent’s costs. Further, paragraph 10 of Schedule 17 of FSMA sets out a fundamental statutory immunity for the defendant in the performance of its statutory functions under the compulsory jurisdiction, save for bad faith or an unlawful breach of a human right (neither of which is engaged here):

I am not persuaded that either R (Mullen) v Secretary of State of the Home Department or R (Moore) v Skipton Fund Ltd assist the claimant. R (Mullen) v Secretary of State of the Home Department concerned payment of ex-gratia compensation payments by the Home Secretary where there had been a miscarriage of justice or a wrongful conviction. Moreover, the issue of amenability did not arise there. R (Moore) v Skipton Fund Ltd was a case that challenged the lawfulness of an ex gratia compensation scheme established by the Secretary of State for Health to compensate those who received blood or blood products that were contaminated, in particular, with Hepatitis C, when undergoing treatment by the NHS. Three examples provided therein at [30] of schemes found to be susceptible to judicial review were as follows:

Thus the cases relied upon by the claimant as support for the amenability of judicial review of ex gratia payment schemes concerned Government introduced prerogative compensation schemes. Such schemes were considered in R (Sidhpura) v Post Office [2021] EWHC 866 (Admin), where Holgate J said at [30]:

Such prerogative schemes are in stark contrast with the nature and function of the compensation scheme operated by the defendant in the instant case, namely a voluntary non-statutory scheme designed to improve its service, following the exercise of what might properly be described as quasi-judicial (and at least not governmental) statutory functions when deciding upon consumer complaints under the FSMA. In those circumstances, in my judgment the claimant is not assisted by the authorities relied upon. Indeed, as confirmed in R (The Liberal Democrats & the Scottish National Party) v ITV [2019] EWHC 3282 (Admin); | [2020] 4 WLR 4 at [70], “Functions of a public character are essentially functions which are governmental in nature.”

Statutory immunity is commonplace in relation to the exercise of judicial or quasi-judicial functions. It is a logical legislative objective that those who perform such roles should not be subject to satellite litigation regarding acts or omissions, absent some issue of bad faith or a breach of a human right. Whilst the claimant submits that this is not a claim for damages, and so paragraph 10, Schedule 17 of FSMA is not relevant, by that logic none of the legislative framework is applicable to the non-statutory decisions under challenge, which undermines the claimant’s case that those decisions fall within the purview of public law because of their nexus with the statutory service complaint.

The correct legal test summarised by Dyson LJ in Beer “requires a careful consideration of the nature of the power and function that has been exercised.” As a matter of logic it does not follow that the nature of the power and function of the decisions relating to the non-statutory service complaint changes because of its nexus with the earlier statutory consumer complaint. I am not therefore persuaded that the nature of the power and function exercised in the three challenged decisions have sufficient public element, flavour or character to bring them within the purview of public law simply because they relate to the earlier statutory consumer complaint.

If my reasoning is incorrect and the statutory consumer complaint’s framework is determinative to whether the non-statutory service complaint scheme falls within the purview of public law, in my judgment it is unjust for the claimant to receive the benefit of that statutory framework without its burden, namely the statutory enshrined prohibition to recover damages relating to compulsory jurisdiction when responding to such a complaint (and the absence of provision for a respondent’s costs in DISP 3.7.1.R). In those circumstances, I would refuse permission under section 31(3D) of the Senior Courts Act 1981 on the basis that it is highly likely the outcome would not have been substantially different if the conduct complained of had not occurred. As was stated by Davis and Warby LJJ in R (The Liberal Democrats & the Scottish National Party) v ITV at [86], even where “aggrieved persons thus may have no direct private law remedy…it does not follow at all that that must mean that aggrieved persons must have a direct public law remedy...”

For the above reasons I conclude that the nature of the power and function exercised in the decisions under challenge do not have sufficient public element, flavour or character to bring them within the purview of public law. I find that the claimant’s voluntary non-statutory service complaint scheme, and the three decisions under challenge, are not amenable to judicial review.

Under ground 1, the claimant contends that the decision of the Ombudsman Manager, Mr Gary Lane, dated 19 August 2022, which offered the claimant compensation of £500 “for any inconvenience”, involved the application of unpublished guidance. I do not find this ground to be academic as maintained by the defendant. Whilst decisions 2 and 3, and the offer of £750 compensation, effectively supersede decision 1 (the offer of £500), it is possible as a matter of law that decisions 2 and 3 could be quashed whilst decision 1 is untouched. In those circumstances, the defendant may choose to recommence stages 2 and 3 of its service complaint scheme. However, given that the scheme is voluntary and considered by the claimant to be non-amenable to judicial review, that is not necessarily a given.

The unpublished policy which the claimant points to is a document titled, “Service complaints – what to do (managers and senior managers)”, at page C209 of the core bundle. By way of authority, the claimant relies upon paragraph 48.1.12 of the Judicial Review Handbook (7th edn), which in turn cites Lewis J in R (Lupepe) v SSHD [2017] EWHC 2690 (Admin); 10 WLUK 688:

Mr Strachan KC for the defendant submits that the document is a guidance document for staff rather than a policy document. In R (Overton) v Secretary of State for Justice [2023] EWHC 3071 (Admin); [2023] 12 WLUK 65, Eyre J stated at [51]:

The table referred to in the above passage appears at page 3 of the document. It requires managers to consider the “impact” of the poor service. Further, it envisages the possibility of payments in excess of £10,000, but only details who must sign-off such a payment without stipulating any eligibility criteria for payments. Mr Lane says nothing in his statement dated 8 December 2023 that indicates he was aware of the possibility of compensation payments being upwards of £10,000. Indeed, it is clear from his statement that Mr Lane was unaware of, and therefore did not rely upon, this document. At paragraph 2.5, Mr Lane states:

Therefore, I do not find it to be arguable that Mr Lane’s decision involved the application of unpublished policy. The fact that he had a discussion with a Senior Advisor about the service complaint does not undermine this. However, it is clear that the document in question is a guidance document for managers and senior managers, which Mr Lane should have been aware of and taken into account. Notwithstanding this, I am satisfied that it is highly likely the outcome would not have been substantially different even if Mr Lane had been aware of the guidance document. First, in his emailed decision of 19 August 2022 (decision 1), Mr Lane demonstrates that he took into account the “inconvenience” and “frustration” (and therefore the “impact”) caused to the claimant from the poor handling of the consumer complaint:

Second, for reasons I have already detailed above, the claimant would never be entitled to recover its costs, or damages relating to compulsory jurisdiction, when responding to a statutory consumer complaint. In those circumstances, it is unrealistic to expect that the defendant’s voluntary non-statutory complaint scheme would provide compensation to cover such legal costs. I address this in greater detail below, under ground 2, where I reject the claimant’s submission that the IA’s Terms of Reference provided for a discretion to pay for legal costs. Consequently, I would refuse permission under section 31(3D) of the Senior Courts Act 1981 on the basis that the outcome would not have been substantially different if the conduct complained of had not occurred.

The fact that the claimant contends that they received a threatening email from the defendant that led to their instruction of solicitors and consequential legal costs does not change this position. The email in question was from the Adjudicator, Mr James Malcolm, dated 3 October 2019, in the following terms:

This email was sent just six days after the date of the first communication between the claimant and defendant on 27 September 2019. The claimant contends that the email was threatening and led to their instruction of solicitors, who began correspondence with the defendant on 4 October 2019, the day after Mr Malcolm’s email. Whilst the defendant concedes that Mr Malcolm should not have expressed himself in the way that he did, there is no dispute between the parties that the legislative framework, and subordinate DISP, entitled Mr Malcolm to request a contact name and direct telephone number from the defendant. Indeed, DISP 1.3.8.G states:

In respect of a complaint being “chargeable”, the claimant’s own Statement of Facts and Grounds, at footnote 9, provides:

Whilst Mr Malcolm’s email was inelegant, his email was sent in the knowledge that Mr Henrick had originally submitted a complaint to the claimant (on 4 April 2017). Further, in an email to Mr Malcolm dated 18 April 2019, Mr Henrick stated:

Consequently, with that factual background, I am not satisfied that this was a “threat [that] was unfair and unreasonable, an abuse of the FOS’s position and an exercise in high-handedness”, as asserted in the skeleton argument for the claimant (page 7, footnote 8). My assessment is unaffected by Mr Malcolm’s 16 January 2019 suggestion to Mr Henrick to bring a complaint against the defendant. That suggestion was consistent with DISP 3.5.2.G. Further, it was only made after Mr Henrick had already called the defendant on 25 July 2018 to complain about Suffolk Life Pensions Ltd.

On 20 October 2019, Mr Henrick completed a complaint form against the claimant, although in his accompanying comments focused his complaint against Suffolk Life Pensions Ltd. On 10 December 2019, Mr Malcolm replied as follows:

More than a year later, on 8 February 2021, a different Adjudicator, Claire Poyntz, wrote to the claimant to state that she considered Mr Henrick to be an eligible complainant. She ended her email explaining that if this was not agreed then an “ombudsman here can look at everything again and make a decision.” Following further correspondence, including a letter from the claimant’s solicitors dated 2 December 2021 repeating earlier requests for “a copy of the documents upon which this complaint is apparently based”, on 18 January 2022, the claimant submitted its first of two service complaints (the second was sent to the IA on 11 July 2022). Between 8 October 2019 and 21 March 2022, the claimant made a total of eight similar disclosure requests.

On 20 January 2022, the Ombudsman, Roy Kuku, decided that the defendant had jurisdiction to deal with Mr Henrick’s complaint. Detailed reasons were provided. The claimant’s solicitors responded on 22 March 2022 with a pre-action protocol letter, leading the defendant to agree on 1 April 2022 to re-consider the issue, whilst citing Ouseley J in Chancery (UK) LLP) v Financial Ombudsman Service Ltd [2015] EWHC 407 (Admin); | [2015] 2 WLUK 689 at [75]:

Further correspondence followed including assurances given by the defendant not to take issue over time limits for commencing judicial review proceedings (strictly speaking this is a matter for the Court although such an agreement may be relevant to the exercise of discretion; CPR 54.5(2) and R (Zahid) v The University Of Manchester [2017] EWHC 188 (Admin); 2018] P.T.S.R. 1728 at [73]-[78]). On 25 May 2022, the Ombudsman Manager, Mr Tim Wilkes, provided further detailed reasoning in light of the submissions from the claimant’s solicitors, concluding that Mr Henrick was not in fact an eligible complainant (and therefore the defendant did not have jurisdiction). A similar email was sent to Mr Henrick, who accepted the conclusions in an email reply on 10 June 2022. Thus, on the issue of jurisdiction of Mr Henrick’s complaint against the claimant, ultimately the defendant decided in favour of the claimant, although this took more than two and half years from the date of when Mr Henrick completed his complaint form (on 20 October 2019).

On 19 August 2022 (the date of decision 1), the Ombudsman Manager, Mr Lane, responded to the 18 January 2022 service complaint (having earlier explained that it had been misunderstood that the correspondence regarding judicial review proceedings had superseded the complaint). He concluded that Mr Malcolm ought to have been clearer in establishing that Mr Henrick wanted to complain before suggesting that might be the case; that the basis for the complaint ought to have been made clearer to the claimant; that there were failures to share information; the investigation was not timely; and it was an error to send correspondence direct to the claimant rather than to their solicitors as had been requested. By way of apology for the inconvenience caused, Mr Lane offered £500 compensation. In the service complaint letter to the IA dated 11 July 2022, the claimant’s solicitors requested payment of £74,864.52 plus VAT (consisting of £22,048.41 plus VAT for the period to the first complaint letter dated 18 January 2022 and £52,816.12 plus VAT from that date to the date when jurisdiction was decided in favour of the claimant, namely 25 May 2022).

At paragraph 7 of his statement dated 22 December 2023, the claimant’s Chief Executive officer, Mr Lee Foster Bowman, explains the reason for their swift instruction of solicitors, as early as 4 October 2019, upon receipt of Mr Malcolm’s 3 October 2019 email:

However, the claimant’s early decision to instruct solicitors to deal with the consumer complaint was entirely their choice. As a matter of law, such a decision has no bearing on the statutory bar on damages relating to the issue of compulsory jurisdiction and the absence of provision for a respondent’s costs under DISP 3.7.1.R. Moreover, given the content of Mr Bowman’s statement, it appears that the decision to instruct solicitors was motivated by the claimant’s experience with the defendant from a previous unrelated consumer complaint. Mr Bowman’s statement reads:

A copy of the order made by Sir Wyn Williams dated 19 June 2018 is included in the supplementary bundle. The relevant section of the order provides:

For the above reasons, I am not persuaded that it is arguable that Mr Lane’s decision (decision 1) involved the application of unpublished policy. Consequently, even if the decision was amenable to judicial review, I would still refuse permission on this first ground. Moreover, I am satisfied that it is highly likely the outcome would not have been substantially different even if Mr Lane had been aware of the guidance document, meaning I would also refuse permission under section 31(3D) of the Senior Courts Act 1981. The legal costs incurred by the claimant following its early instruction of solicitors were always unrecoverable and remain so.

In respect of decision 2, the claimant contends that the IA was employed by the defendant meaning they were not “independent from the Chief Executive and Chief Ombudsman”, as required by the Terms of Reference (ToR) for the appointment. They also point to the IA’s own description of her appointment which states: “I am impartial. This means that I am independent of the service and form my own view without influence.”

I am not persuaded that the IA’s ToR arguably require that they must not be an employee of the defendant. The complete passage that is relied upon by the claimant reads:

In respect of decision 3, the claimant contends that the IA misconstrued the ToR when making her recommendation dated 6 October 2022 by first, failing to consider the impact of the defendant’s errors upon the claimant and second, by failing to consider that she had a discretion to pay for legal costs under ToR 12, which reads:

Dealing first with compensation for legal costs, the claimant submits that the ToR must cater for the possibility of recommending a payment to reimburse such costs which have been unnecessarily incurred by the defendant’s poor service given use of the word “damage”, relying upon chapter 21 of McGregor on Damages (21^st edition) and Playboy Club London Ltd v Banca Nazionale Del Lavora Spa [2019] EWHC 303 (Comm); [2019] 2 WLUK 290 at [27]-[42].

Whilst the principle that damages can encompass legal costs is uncontroversial, by way of observation I do note that this ground is inconsistent with the claimant’s position that it was not seeking damages (given the statutory prohibition provided by paragraph 10, Schedule 17 of the FSMA). In any event, the ToR only refers to compensation for any “damage, distress or inconvenience caused by the poor service.” There is no mention of “damages.” An interpretation that “damage” actually means “damages, including legal costs” is inconsistent with the plain reading of the ToR. It is also inconsistent with paragraph 2 of the ToR that states that the non-statutory complaint scheme is concerned with “the standard of service and practical handling of a case” and not with the “outcome, the merits of the complaint, or its commercial and legal obligations.” Paragraph 6 of the ToR further clarifies that this includes “whether a complaint is within the Financial Ombudsman Service’s jurisdiction.” Thus if the outcome or merits of a consumer complaint fall outside the service complaint scheme, it is unlikely that compensation for the legal costs of dealing with the outcome or merit of a consumer complaint fall within the service complaint scheme.

Notwithstanding the limitation on the parameters of a service complaint, the claimant’s service complaint related to both how the defendant dealt with Mr Henrick’s original consumer complaint and the merits of the jurisdiction issue. The claimant’s complaint letter from its solicitors to the IA dated 11 July 2022 stated at paragraph 8.1.4, that the defendant:

I recognise however that it might be said that there is a statutory bar on the recovery of damages relating to the compulsory jurisdiction process, yet “damage”, including damage to property, in principle is recoverable under the non-statutory complaint scheme. By that logic it could be argued that legal costs ought to be equally recoverable under the non-statutory complaint scheme, despite the inability to do so under the statutory complaint scheme. However, the difficulty with such an argument is that whilst “damage” is provided for in the ToR, “legal costs” are not. Given that the defendant is established under section 225 of the FSMA to resolve disputes “quickly and with minimum formality”, this is unsurprising.

Turning now to whether the IA considered the impact of the defendant’s errors upon the claimant; at page 2 of her recommendation letter dated 6 October 2022, the IA stated:

This ground is unarguable. It is clear from the IA’s 6 October 2022 letter that whilst not delving into detail, in broad terms the IA did consider the impact of the “poor service” on the claimant as being the expenditure of “unnecessary effort.” There is no requirement that the degree of independence for the IA is such that they must not be employed by the defendant. Further, for the above reasons, I reject the submission that “damage” included compensation for legal costs. Consequently, even if the decisions were amenable to judicial review, I would still refuse permission on this second ground. I would also refuse permission under section 31(3D) of the Senior Courts Act 1981 on the basis that it is highly likely the outcome would not have been substantially different, given my reasons above over why legal costs were never recoverable.

In respect of ground 2, my findings were first, that the IA did consider the impact of the defendant’s errors upon the claimant and second, that the ToR did not provide for damages including legal costs. It follows therefore that there was no fetter of discretion by the IA in recommending compensation of £750 for the unnecessary effort (in other words inconvenience) caused to the claimant by the defendant’s poor service.

In respect of ground 3, the claimant contends that the defendant fettered its discretion alleging that the Chief Ombudsman, Ms Abby Thomas, effectively rubber stamped the IA’s recommendation without considering whether it was correct. By way of authority, the claimant relies upon R v Secretary of State for the Home Department ex parte Garner (unreported, 19 April 1999), where Rose LJ said at [28]:

The claimant further relies on the fact that none of the IA’s recommendations (some 741 in total) have ever have been rejected by the Chief Executive and Chief Ombudsman in the last five years. Without further detail or analysis it is unknown how many of those cases were recommendations that favoured the complainant and how many favoured the defendant as the respondent of the complaints. Nevertheless, the statistic is a piece of evidence that tends to suggest that the Chief Executive and Chief Ombudsman may not be conducting an evaluative judgment.

In response, Mr Strachan KC submits that it would be unusual for a recommendation to be rejected following an independent review. Indeed, the IA’s ToR demonstrates that a rejection would have to be justified with reasons:

However, paragraph 13 of the ToR might be said to give the Chief Executive and Chief Ombudsman an incentive to take the path of least resistance; in other words to accept the IA’s recommendation at face value without carrying out an evaluative judgment:

In any event, in a brief email dated 23 December 2022 from the Chief Executive and Chief Ombudsman, Ms Abby Thomas, to her Senior Legal Counsel, Rebecca Thomas, Ms Thomas confirmed:

Given the 23 December 2022 email and my aforementioned reasons, I am not persuaded that it is arguable that Ms Thomas effectively rubber stamped the IA’s recommendation without considering whether it was correct. Further, I find that the IA did consider the impact of the defendant’s errors upon the claimant. It follows therefore that there was no fetter of discretion. Given also my finding in respect of ground 2 that the IA’s ToR did not provide for damages including legal costs, even if there was a failing, I would refuse permission under section 31(3D) of the Senior Courts Act 1981 on the basis that it is highly likely the outcome would not have been substantially different. Therefore, notwithstanding the issue of amenability, I would still refuse permission on this third ground.

The claimant submits that the defendant’s entire decision-making process was procedurally unfair in that it lacked transparency (decision 1), lacked independence (decision 2) and ultimately lacked any objective assessment in the final decision (decision 3). In respect of all three decisions, it is said that no proper reasons, or clear and rational reasons, were provided: in respect of decision 1 for rejecting the request for a payment of legal costs; in respect of decision 2 for the refusal by the IA to exercise her discretion to pay legal costs; and in respect of decision 3 for accepting the IA’s recommendation.

Additional lines of arguments emerged in the claimant’s skeleton argument over whether there was procedural unfairness from an apparent failure to take account of the defendant’s guidance on its non-statutory service complaint scheme and from relevant material having been withheld. I have dealt with this at the outset but in short following objection from Mr Strachan KC, leave to amend was not sought and consequently I am not required to consider those matters further.

Decision 1 was not specifically mentioned as being challenged under ground 4. However, it was included at paragraph 104 of the claimant’s Statement of Facts and Grounds and no issue was taken by Mr Strachan KC. In those circumstances, I am satisfied I can fairly deal with it. I do not find that decision 1 lacked transparency given my finding above that it did not involve the application of unpublished policy. However, it is clear from Mr Lane’s emailed decision of 19 August 2022 that no reasons were provided for rejecting the request for payment of legal costs. Indeed, Mr Lane concedes as much within the final three paragraphs of his memo to the IA dated 21 September 2022:

In respect of decision 1, it is not clear to me that there was any procedural obligation for the defendant to provide reasons for non-payment of legal costs. However, even if this did amount to a procedural failing, as I have already explained I am satisfied that it is highly likely the outcome would not have been substantially different as the legal costs incurred by the claimant following its early instruction of solicitors were always unrecoverable.

In respect of decision 2, I have already found under ground 2 that there is no requirement that the IA’s independence means that they must not be employed by the defendant. My conclusion under ground 2 also addresses the reasons given by the IA in respect of the compensation she offered, namely for the poor service leading to extra effort expended by the claimant. Unlike Mr Lane’s decision of 19 August 2022, the IA’s 6 October 2022 recommendation does address legal costs, which she intertwines with her finding of poor service as follows:

In respect of ground 3, it is artificial to suggest that no proper reasons were provided by the Chief Ombudsman, Ms Thomas, for accepting the IA’s recommendation. The ToR understandably required reasons to be provided if the IA’s recommendation was not accepted, but if it was otherwise they only required notification of the acceptance. In those circumstances, it is understood that the Chief Ombudsman’s reasons are in essence the IA’s reasons for the recommendation to her.

In respect of decision 1 (Mr Lane’s decision of 19 August 2022), I find that it is arguable that the absence of any reasons for rejecting the request for payment of legal costs is a procedural failing. However, I still refuse permission under section 31(3D) of the Senior Courts Act 1981 on the basis that it is highly likely the outcome would not have been substantially different. I find no procedural failings in respect of decisions 2 and 3. Therefore, even if the decisions were amenable to judicial review, I would still refuse permission on this fourth ground.

Under ground 5, the claimant submits all three decisions were Wednesbury unreasonable as this was “plainly an appropriate case” for deciding that the defendant should pay some or all of the claimant’s reasonable costs.

Given the findings I have made above, it will come as no surprise that notwithstanding the issue of amenability, I would still refuse permission for this fifth ground. Whilst the claimant made errors, apologised and offered compensation for the inconvenience caused from its poor service, as I have explained above the claimant’s legal costs were never recoverable for its engagement in the statutory consumer complaint scheme. Similarly, there was no provision to recover legal costs as “damage” under the non-statutory service complaint scheme. Mr Malcolm’s 3 October 2019 email was clumsy and inappropriate, but I do not find that it was a “threat [that] was unfair and unreasonable, an abuse of the FOS’s position and an exercise in high-handedness.” The evidence does not support the claimant’s assertion that the defendant “doggedly, and without reason, pursued an entirely meritless complaint against the claimant.” The fact that the IA was employed by the defendant does not mean that she is not independent from the Chief Executive and Chief Ombudsman. Given my findings, in my judgment there is no justifiable basis to conclude that any of the three decisions was Wednesbury unreasonable in the circumstances. I would also refuse permission under section 31(3D) of the Senior Courts Act 1981 on the basis that it is highly likely the outcome would not have been substantially different, for reasons I have already explained.

I find this claim is not amenable to judicial review. Even if it was so amenable, I would refuse permission on all five grounds for the reasons I have explained. I would also refuse permission under section 31(3D) of the Senior Courts Act 1981 on the basis that it is highly likely the outcome would not have been substantially different.