Finance Litigation: The Latest Cases And Issues - June 2017

This month we consider the court's view on the extent to which firms' activities in handling complaints are themselves subject to adjudication by the Financial Ombudsman Service; the exercise of the court's discretion in refusing an unopposed application to annul a bankruptcy order; and more cases and issues affecting the industry:

The High Court considers the remit of the FOS's jurisdiction Court refuses unopposed application to annul a bankruptcy order No real prospects of defending appointed representative's actions In case you missed them Insolvency Litigation: recent cases and issues - June 2017 Contra proferentem - another Latin principle bites the dust Court orders litigation funder to give security for costs The High Court considers the remit of the FOS's jurisdiction

In the recent decision in Mazarona Properties Ltd v Financial Ombudsman Service, the court considered the extent to which firms' activities in handling complaints are themselves subject to adjudication by the Financial Ombudsman Service (FOS). It found that they were not within the FOS's compulsory jurisdiction.

Mazarona Properties Ltd (MPL) had brought a claim against Allied Irish Bank Great Britain (AIB) for alleged misselling of interest rate swaps. Pursuant to an agreement with the Financial Services Authority (the FSA), the statutory predecessor to the Financial Conduct Authority and Prudential Regulation Authority, AIB conducted a review and notified MPL that the swaps had been sold in a non-compliant way. It made an offer of redress to MPL. MPL rejected the offer and made a counter offer. AIB withdrew its offer.

MPL made a complaint to the FOS about AIB's withdrawal of its offer and an adjudicator concluded that it would be fair and reasonable for the withdrawn offer to be remade. AIB asked the FOS to reconsider that decision. The FOS did so and declined to uphold MPL's complaint as it considered that AIB's review process was not a regulated activity, or an ancillary activity connected with a regulatory activity, and so fell outside the scope of its compulsory jurisdiction. MPL challenged that decision.

The High Court dismissed MPL's challenge. The judge considered ss 226 and 404 of the Financial Services and Markets Act 2000 (s404), the glossary of the Financial Conduct Authority's General Provisions and the FCA's Dispute Resolution: Complaints Sourcebook (DISP). Together, these provide that the FOS can only consider a complaint as defined in the glossary which provides that a complaint has to be about the provision of, or failure to provide, a financial service or a redress determination (as defined).

The court distinguished between:

AIB's selling of the swaps - which was a specified regulated activity in respect of which a complaint would fall within the compulsory jurisdiction of the FOS; and AIB's resolving of the subsequent dispute between it and MPL. MPL's complaint...