The High Court has refused John Caffrey’s appeal against a Financial Services Ombudsman finding that his complaint about a bond investment was not substantiated.
Mr Justice Hedigan, in a judgment delivered on 12 July 2011, held that the Ombudsman acted within his discretion in deciding the complaint without an oral hearing. The court also found it would have been futile to order production of a recording of the disputed sales call because it was clear no recording existed. The relief Mr Caffrey sought was refused.
Mr Caffrey bought the investment for €50,000 in April 2005 after learning about what Bloxham Securities called the “Dresdner Bond” in a newsletter. He said Bloxham had not explained the investment’s true nature and risks, including that the notes were issued by Saturn Investments Europe plc and involved a swap agreement with Morgan Stanley. Bloxham said it explained the bond and that the investment could result in a total loss, though that was unlikely.
In June 2009, Bloxham told Mr Caffrey that Morgan Stanley had terminated the swap agreement and that he would receive €0.03 for each €1 originally invested. Mr Caffrey complained to the Ombudsman in February 2010. The Ombudsman found the complaint was not substantiated, concluding that the investment had been sold in good faith and that Mr Caffrey had been advised of, and knew about, the possibility that its value could fluctuate.
On appeal, Mr Caffrey argued that the Ombudsman had accepted Bloxham’s account of the telephone conversation without properly investigating the conflict in evidence. He said an oral hearing was needed and challenged the weight given to his investment experience. The Ombudsman submitted that he had discretion to decide whether a hearing was necessary and that the court should assess the process as a whole for a serious and significant error.
The judge accepted that the parties’ recollections of a short call made about five years earlier might not have been accurate or detailed. He considered the absence of a request for an oral hearing as one factor and found it reasonable for the Ombudsman to decide that a hearing was unnecessary. Bloxham had said it no longer had recordings from 2005, and the judge found it clear to all that no recording existed.
The judge also distinguished the Ombudsman’s description of Mr Caffrey as an “experienced investor” from the “sophisticated investor” characterisation challenged on appeal. The Ombudsman had relied on his long-standing client relationship and account types, and was entitled to weigh that experience. The court was not satisfied there was a sufficient basis to intervene.