Litigation Focus: Update On Recent Cases - March 2014

Smith & Anor v. Financial Services Ombudsman & Anor [2014] IEHC 40

This case relates to an appeal from the decision of the Financial Services Ombudsman ("FSO") to the High Court whereby the High Court found that the FSO had failed to offer the appellants a fair hearing and remitted the complaint back to the FSO.

The facts of the case were as follows:- the appellants were property investors who, on 7 March 2005, upon the alleged recommendation of Ulster Bank Ireland Limited (the "Bank"), participated in the Jubilee Consortium, a speculative group investment. The appellants subsequently suffered significant financial losses when the investments performed poorly.

The appellants' complaint to the FSO related to the advice and recommendation of the Bank in respect of the investment. A key issue in the complaint was the conflict between the evidence of the Bank and the appellants regarding the advice received from the Bank.

The FSO held that the conflicting evidence could be resolved by reference to the documentation included in the evidence put before him by the respective parties and found that the complaint was not substantiated and that no oral hearing was necessary.

In the appeal of the FSO's decision to the High Court, Mr Justice Barrett held that the decision of the FSO not to hold an oral hearing when investigating a complaint was an error of such significance as to vitiate the finding of the FSO. He cited with approval the decision in Ulster Bank Investment Funds Limited -v-Financial Services Ombudsman & Ors wherein it was held that, in an appeal of the decision of the FSO, "the Plaintiff must establish as a matter of probability that, taking the adjudicative process as a whole, the decision reached was vitiated by a serious and significant error or a series of such errors. In applying the test the Court will have regard to the degree of expertise and specialist knowledge of the Defendant."

Mr Justice Barrett was satisfied that the deference envisaged by the Court extends to the FSO's expertise in financial services matters and does not extend to matters of procedural fairness. He held that in declining to hold an oral hearing, the FSO had denied the appellants an opportunity to cross-examine the Bank in relation to the conflicting factual issues which was necessary to enable the appellants to establish the merits of their case and ordered that the complaint be remitted back to the FSO for fresh consideration.

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