The Financial Ombudsman Service (the “FOS”) has broad powers to determine whether a complaint is within its jurisdiction. Judicial reviews which challenge its findings are notoriously difficult. In R (Assurant General Insurance Ltd) v Financial Ombudsman Service Limited [2023] EWCA Civ 1049 the Court of Appeal considered for the first time the approach to take where the compulsory jurisdiction of the FOS is challenged by judicial review. It provided rare guidance on the distinction between questions of fact, questions of mixed law and fact, and pure questions of law. Although the claim ultimately failed, the decision serves as a reminder of the advantages in articulating challenges to FOS decisions as questions of law. 

Customers complained they were mis-sold PPI. The FOS concluded it had jurisdiction. This case is an appeal against a High Court decision which dismissed an application for judicial review in November 2022. Assurant General Insurance (“Assurant”) challenged a decision by the FOS that it had jurisdiction under section 226 of the Financial Services and Markets Act 2000 (the “FSMA”) to consider the complaints against Assurant. 

The complaints were brought by several customers claiming that they had been mis-sold Payment Protection Insurance (“PPI”) policies sold by home shopping retailers and underwritten by Assurant. When the PPI policies were sold, the retailers were not subject to the financial services regulations related to selling insurance. The FOS would therefore only have jurisdiction if the retailers were acting as an agent of Assurant (in accordance with section 226 FSMA and the Dispute Resolution Sourcebook of the FCA Handbook, DISP).  The FOS found that the agreements entered into between the retailers and Assurant were implied agency agreements, and therefore the complaints fell within its compulsory jurisdiction.

The High Court dismissed Assurant’s jurisdictional challenge. At first instance, Mrs Justice Collins Rice dismissed Assurant’s application for judicial review and applied conventional judicial review grounds (such as error of law and irrationality). The judge regarded the existence of an agency relationship as a “mixed question of fact and law” and it was therefore open for her to consider “whether these decisions disclose error of law or irrationality on the facts”.  On this basis the judge held that the FOS had not erred, and had only taken into account matters to which it was entitled.  Crucially, in coming to this decision, the judge did not construe the contracts for herself.

Assurant appealed this decision on the grounds that Collins Rice J erred by:

• adopting a traditional judicial review approach to determining the lawfulness of the FOS’s decision that it had jurisdiction. Instead, the issue of agency gave rise to a question of law, requiring courts to construe the contracts (“Ground 1”); and
• concluding that the there was no fault in the FOS’s decision, having erroneously wrongly determined that the Court should approach the matter on traditional judicial review grounds (“Ground 2”).

The Court of Appeal dismissed the appeal, but for reasons that differed to the High Court. Lord Justice Singh, with whom Lord Justices Warby and Peter Jackson agreed, held that whether the retailers acted as agents for Assurant was a question of law that a court must determine, rather than a mixed question of fact and law. Consequently, the High Court had erred in failing to engage in the construction of the agreements. Nevertheless, the Court found no fault with the decision of FOS that the complaints fell within its jurisdiction, finding an implied agency relationship through the construction of the agreements.

Ground 1 – The approach to be adopted by the Court

Singh LJ stated that the issue of jurisdiction “turns on the correct interpretation of the statute which confers the jurisdiction on the relevant public body”.  S.226 FSMA provides that a complaint which relates to an act or omission of a person (the respondent) in carrying on an activity to which the compulsory jurisdiction rules apply is to be dealt with by the FOS if the complainant is eligible, the respondent was an authorised person, and the compulsory jurisdiction rules applied to the activity in question. 

Singh LJ noted that many questions arising in the context of statutory interpretation are not necessarily “hard-edged” and call for evaluation by the decision-maker on matters of degree and opinion,  and that some disputes involving the terms of an agreement may give rise to a question of fact which is for the FOS to decide,  subject to review on conventional public law grounds. 

However, the construction of an agreement is a “well-established” question of law, which must be determined by the court. In this case, there was no relevant dispute of fact. While the first instance Judge recognised that the construction of the agreement was a question of law, she erred by failing to engage in the construction of the agreements herself. 

Accordingly, the Court had to turn to the contracts to determine the existence of an agency relationship between the retailer and Assurant, and on that basis, decide whether the FOS had jurisdiction. 

Ground 2 – Was there a relationship of agency? 

Singh LJ held that there was a relationship of agency between the retailers and Assurant. While there was no express agency clause within the agreements, he considered that such a relationship was created through implication, with all the main indicators of such a relationship being present. These indicators include: 

• Assurant exercising a large degree of control over the retailers;
• The retailers owing fiduciary duties to Assurant, by having to account for the money owed to Assurant after taking their agreed share of the premium paid; and
• The retailers being bound to market only Assurant’s insurance policies.

In coming to this decision, Singh LJ regarded the existence of an agency relationship as a question of what the parties had agreed in substance. For the reasons above, he was unable to accept Assurant’s argument that the relationship was “specific and limited”, allowing only the retailers to create a binding agreement between the consumer and Assurant.  Therefore, while Assurant was successful in its argument that the High Court had applied the incorrect standard of review, it was unsuccessful in challenging the decision of FOS itself.

Comment: The court tends to be more interested in questions of law. Challenges to the FOS’s compulsory jurisdiction are relatively unusual. However, the case is of broader relevance. Despite Assurant being unsuccessful in its challenge, this case offers insight and a potential pathway forward for those seeking to challenge a FOS decision of other types. The breadth of the FOS’s “fair and reasonable” jurisdiction means that factual challenges tend to succeed only rarely, as courts tend to be more interested in questions of law. The case is a useful guide for future claims where it is unclear whether a particular issue is a question of fact or law. Given the increase in FOS compensation limits, increased complaints being instigated by claims management companies and the FOS’s apparent willingness to go beyond established legal principle to secure customer compensation, we have seen increased client interest in routes of challenge to FOS decisions. This decision will be of relevance to those assessing their options in response to future FOS decisions. 

Alexander Fawke (Managing Associate) and Jakob Cobby (Legal Advisor (Victoria Qualified)), London