The Supreme Court allowed part of an appeal by the Financial Services Ombudsman over a decision concerning a complaint by Enfield Credit Union against stockbroker J & E Davy, while upholding challenges to how important evidence and disputed facts were handled.
The judgment, delivered by Mr Justice Finnegan on 12 May 2010, concerned judicial review of the Ombudsman’s process. The court did not consider whether the underlying complaint was correct or whether compensation was warranted; those merits were outside the scope of the judicial review.
The Credit Union complained in August 2007 about its investment in three perpetual bonds issued by Nordea Bank, Jyske Bank and Oko Bank. In January 2008, the Ombudsman found the complaint substantiated and directed Davy to pay €500,000 in exchange for the bonds, refund fees and commissions, and complete the transactions by 22 February 2008. The Credit Union took no part in the court proceedings.
The High Court quashed the Ombudsman’s decision and remitted the complaint for investigation and adjudication. On appeal, the Supreme Court accepted that the Ombudsman could have a deputy investigate and report, then make the final decision after considering the report and further submissions. The deputy’s report was not itself a decision, so the Ombudsman was not hearing an appeal from his own decision. The court also rejected Davy’s challenges based on the Ombudsman’s use of his knowledge and experience of credit unions, and his failure to identify expressly which statutory ground supported the finding. It found no prejudice from that omission in this case.
The Supreme Court dismissed the Ombudsman’s appeal on fair procedures. Given the seriousness of the complaint and its potential reputational and financial consequences, Davy should have received the appendices to the original complaint and factual material, including witness statements and a further expert report, later submitted by the Credit Union. The court said the Ombudsman should assess requests for other documents by whether they are needed for a fair response; court-style discovery was not required.
The court also agreed that an oral hearing was appropriate to address conflicts over what advice Davy gave and expert evidence about the bonds. The hearing could be limited to the disputed issues, with cross-examination where appropriate.
On mediation, the court held that the Ombudsman should offer or explore mediation with the parties before moving to investigation and adjudication. But because the process had already advanced substantially, and Davy had not sought mediation earlier, the court exercised its discretion to refuse relief on that ground. It also rejected the argument that regulations were a prerequisite to the Ombudsman’s jurisdiction. The Supreme Court’s judgment records that the Ombudsman’s costs appeal was not addressed in submissions; it does not state a final costs order.