The High Court has quashed a Financial Services Ombudsman ruling that required stockbroker J. & E. Davy to buy back three perpetual bonds from Enfield Credit Union for €500,000 and refund related fees and commissions. The complaint has been remitted to the Ombudsman for investigation and adjudication again.
In a judgment delivered on 30 July 2008, Mr Justice Charleton said the Ombudsman’s January ruling followed a process that did not give Davy access to material submitted by the credit union. That material included three witness statements disputing Davy’s account of what its representatives had explained about the bonds. The judge said a party must be able to respond to factual material that may influence a decision.
The dispute concerned whether Davy had adequately explained that the bonds had no fixed maturity date, that repayment depended on the issuing banks exercising call options, and that the bonds carried investment risks. The credit union had complained that these features were not adequately explained. Davy maintained that its representatives had explained them, including in meetings with credit union officials.
The Ombudsman had directed Davy to pay €500,000 in exchange for the bonds and refund fees and commissions. The credit union was allowed to keep the interest it had earned. The High Court did not decide whether the bonds were suitable or whether Davy had given adequate advice. The judgment expressly said judicial review was not a reconsideration of the merits of the underlying complaint.
The judge held that a limited oral hearing was required to resolve the central factual dispute. It should hear only the Davy representatives who said they explained the bonds and the credit union officials who received the explanation. He also ruled that relevant credit union documents and the witness statements had to be made available to Davy. The fresh process must remain consistent with the statutory requirements of informality and expedition.
The judgment also addressed other procedural arguments. It said the Ombudsman should consider mediation as a first step, while recognising that mediation need not proceed where it has no reasonable prospect of success. It found that an appeal from a deputy Ombudsman to the Ombudsman himself was impermissible. It did not find that regulations governing the conduct of hearings were necessary.
The order quashed the 21 January 2008 decision and remitted the complaint for renewed investigation and adjudication. It did not determine the complaint’s merits or direct what the Ombudsman’s new decision should be.