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In two recent decisions, the High Court has considered the first appeals against decisions of the Financial Services and Pensions Ombudsman (“FSPO”), under the new statutory structure being the Financial Services and Pensions Ombudsman Act 2017 (“the FSPO Act 2017”):
- O'Connell v. the Financial Services and Pensions Ombudsman [2020] IEHC 559; and
- Utmost Pan Europe DAC v. the Financial Services and Pensions Ombudsman and W [2020] IEHC 538
In both decisions the High Court has re-affirmed the test for a successful statutory appeal, which had previously been considered in the context of the FSPO’s predecessor, the Financial Services Ombudsman.
However, in the latter case the High Court also considered the FSPO’s “hybrid” jurisdiction, where the FSPO can uphold a complaint not only because the provider’s conduct was unlawful or in breach of contract, but also where the FSPO decides that the provider’s conduct was unreasonable or unjust in some way. The High Court has articulated what appears to be a new requirement, that the FSPO must measure the provider’s conduct as against the relevant code of conduct, when exercising its jurisdiction to consider non-contractual or non-legal issues, relating to whether the provider’s conduct was just or fair.
O'Connell v the Financial Services and Pensions Ombudsman [2020] IEHC 559
Judgment in the first case of O'Connell v the Financial Services and Pensions Ombudsman [2020] IEHC 559 was given on 5 November 2020. The case concerned the complainant/appellant’s appeal of the FSPO’s legally binding decision to partially uphold his complaint that a life assurance provider had wrongfully cancelled his two life assurance policies. The FSPO in partially upholding the complaint, directed the life assurance provider to make six options available to the complainant, including an option of the complainant returning the encashment value of one the policies to the provider in return for reinstatement of that policy.
O’Connor J. stated that the test for an appeal of this nature was long established, since the judgment of Finnegan J. in Ulster Bank v. Financial Services Ombudsman [2006] IEHC 323, and outlined the test as follows:
However, in the latter case the High Court also considered the FSPO’s “hybrid” jurisdiction, where the FSPO can uphold a complaint not only because the provider’s conduct was unlawful or in breach of contract, but also where the FSPO decides that the provider’s conduct was unreasonable or unjust in some way. The High Court has articulated what appears to be a new requirement, that the FSPO must measure the provider’s conduct as against the relevant code of conduct, when exercising its jurisdiction to consider non-contractual or non-legal issues, relating to whether the provider’s conduct was just or fair.
O'Connell v the Financial Services and Pensions Ombudsman [2020] IEHC 559
Judgment in the first case of O'Connell v the Financial Services and Pensions Ombudsman [2020] IEHC 559 was given on 5 November 2020. The case concerned the complainant/appellant’s appeal of the FSPO’s legally binding decision to partially uphold his complaint that a life assurance provider had wrongfully cancelled his two life assurance policies. The FSPO in partially upholding the complaint, directed the life assurance provider to make six options available to the complainant, including an option of the complainant returning the encashment value of one the policies to the provider in return for reinstatement of that policy.
O’Connor J. stated that the test for an appeal of this nature was long established, since the judgment of Finnegan J. in Ulster Bank v. Financial Services Ombudsman [2006] IEHC 323, and outlined the test as follows:
- The burden of proof is on the appellant.
- The onus of proof is the civil standard.
- The court should not consider complaints about process or merits in isolation, but rather should consider the adjudicative process as a whole.
- The onus is on the appellant to show that the decision reached was vitiated by a serious and significant error or a series of such errors.
- The court will adopt a deferential stance having regard to the degree of expertise and specialist knowledge of the Ombudsman.
O’Connor J. found that the appellant had failed to comply with the Rules of the Superior Courts in formulating his appeal, describing his approach as “scattergun”, and accepted that this failure was sufficient reason of itself for the reliefs sough to be refused.
O’Connor J. also commented that even if the appellant had properly formulated an appeal, he had displayed an underlying misunderstanding about the reliefs the Court could award and was unable to articulate what he wanted the appeal to achieve. O’Connor J. stated that while the appellant had sought and received the full encashment value of his two life assurance polices, he then contended that he only wanted partial encashment, and that on the day of the hearing of the appeal, the appellant was unable to explain what he ultimately wanted which was not granted by one of the six options already made available to him by the FSPO.
In dismissing the appeal, O’Connor J. stated that there is a “high threshold” which must be overcome, in order to set aside the decision of the FSPO, and that the appellant had “singularly failed to persuade this Court of any serious and significant error made by the Ombudsman”.
Utmost Pan Europe DAC v. the Financial Services and Pensions Ombudsman and W [2020] IEHC 538
Judgment in the second case of Utmost Pan Europe DAC v. the Financial Services and Pensions Ombudsman and W [2020] IEHC 538 was given on 10 November 2020. Here the insurance provider appealed the decision of the FSPO to the High Court.
The complainant made a complaint to the FSPO that the insurance provider had wrongfully declined her income protection claim, in circumstances where she was unable to work due to disability. The complainant had been diagnosed with two conditions; fybromyalgia and rheumatoid arthritis.
One of these conditions, fybromyalgia, was excluded from cover by the complainant’s income protection policy. The complainant’s claim was declined by the insurance provider on the basis that the complainant’s inability to work was attributable to this excluded illness, rather than being attributable to rheumatoid arthritis, which was covered by the policy.
The FSPO concluded that “there was an over emphasis by the Provider” on quantifying the impact of each of the two separate medical conditions on the complainant’s ability to work. The FSPO took the view that the provider had unreasonably and unfairly found that the condition excluded by the policy was the predominant condition, as a result of which the claim had been wrongfully declined. The FSPO upheld the complaint and directed the insurer to admit the claim, pending further assessment of the Complainant’s condition.
Simons J. re-affirmed that the leading authority with respect to the High Court’s appellant jurisdiction is Ulster Bank Investment Funds Ltd v. Financial Services Ombudsman [2006] IEHC 323; The applicable test is whether the decision reached was vitiated by a serious and significant error or a series of such errors, and the High Court will adopt a deferential stance having regard to the expertise and specialist knowledge of the FSPO . However, Simons J. also identified two decisions which qualified this deferential standard of review:
O’Connor J. also commented that even if the appellant had properly formulated an appeal, he had displayed an underlying misunderstanding about the reliefs the Court could award and was unable to articulate what he wanted the appeal to achieve. O’Connor J. stated that while the appellant had sought and received the full encashment value of his two life assurance polices, he then contended that he only wanted partial encashment, and that on the day of the hearing of the appeal, the appellant was unable to explain what he ultimately wanted which was not granted by one of the six options already made available to him by the FSPO.
In dismissing the appeal, O’Connor J. stated that there is a “high threshold” which must be overcome, in order to set aside the decision of the FSPO, and that the appellant had “singularly failed to persuade this Court of any serious and significant error made by the Ombudsman”.
Utmost Pan Europe DAC v. the Financial Services and Pensions Ombudsman and W [2020] IEHC 538
Judgment in the second case of Utmost Pan Europe DAC v. the Financial Services and Pensions Ombudsman and W [2020] IEHC 538 was given on 10 November 2020. Here the insurance provider appealed the decision of the FSPO to the High Court.
The complainant made a complaint to the FSPO that the insurance provider had wrongfully declined her income protection claim, in circumstances where she was unable to work due to disability. The complainant had been diagnosed with two conditions; fybromyalgia and rheumatoid arthritis.
One of these conditions, fybromyalgia, was excluded from cover by the complainant’s income protection policy. The complainant’s claim was declined by the insurance provider on the basis that the complainant’s inability to work was attributable to this excluded illness, rather than being attributable to rheumatoid arthritis, which was covered by the policy.
The FSPO concluded that “there was an over emphasis by the Provider” on quantifying the impact of each of the two separate medical conditions on the complainant’s ability to work. The FSPO took the view that the provider had unreasonably and unfairly found that the condition excluded by the policy was the predominant condition, as a result of which the claim had been wrongfully declined. The FSPO upheld the complaint and directed the insurer to admit the claim, pending further assessment of the Complainant’s condition.
Simons J. re-affirmed that the leading authority with respect to the High Court’s appellant jurisdiction is Ulster Bank Investment Funds Ltd v. Financial Services Ombudsman [2006] IEHC 323; The applicable test is whether the decision reached was vitiated by a serious and significant error or a series of such errors, and the High Court will adopt a deferential stance having regard to the expertise and specialist knowledge of the FSPO . However, Simons J. also identified two decisions which qualified this deferential standard of review:
- in the Court of Appeal decision in Millar v. Financial Services Ombudsman [2015] IECA 126 and 127; [2015] 2 I.R. 456; [2015] 2 I.L.R.M. 337, it was held that the High Court, in hearing an appeal, should not adopt a deferential stance to a decision or determination by the FSPO on a “pure” question of law because the FSPO does not have expertise or specialised knowledge , relative to the High Court in deciding pure questions of law; and
- in Baskaran v. Financial Services and Pensions Ombudsman [2019] IEHC 167, it was held that the High Court’s deference to the expertise of the FSPO is confined to matters which fall within the FSPO’s area of expertise, and will not extend to FSPO’s assessment of medical evidence.
However, Simons J. found that the FSPO’ s decision was vitiated by a serious and significant error because the FSPO
“purports to make a finding that the conduct of the insurance provider was unreasonable without any attempt to measure that conduct against the relevant code of conduct; and then draws unsubstantiated inferences from certain correspondence”.
The High Court acknowledged that the FSPO enjoys what it termed as a “hybrid” jurisdiction, where it can adjudicate not only on the basis of whether the conduct complained of was contrary to law, but also in respect of whether the conduct complained of was unreasonable or unjust.
However, Simons J. stated that the starting point for the assessment of the reasonableness of the conduct complained of should have been the terms of the relevant code of conduct applicable to the insurance provider, which in this case was the Consumer Protection Code 2012 (“CPC”), this being
“…the objective standard against which the “reasonableness” of the conduct falls to be considered in the first instance”
and that it would also be appropriate for the FSPO to have some regard to the underlying contract of insurance itself.
The decision suggests that there is some degree of overlap between the different grounds upon which the FSPO can uphold a complaint. It would appear that the FSPO, when exercising its jurisdiction to consider whether conduct is unreasonable or unjust, cannot consider this in isolation and instead must also consider legal and contractual issues, and in particular the provider’s conduct as against the relevant code of conduct.
This raises questions as to the circumstances in which it may be appropriate for the FSPO to uphold a complaint under section 60(2)(c) of the FSPO Act 2017, which provides that a complaint may be upheld where , although the conduct complained of was in accordance with a law, practice or regulatory standard , that law, practice or standard is unreasonable or unjust in its application to the complainant. It is also unclear whether the requirement for the FSPO to measure the provider’s conduct as against the relevant code of conduct when assessing the fairness and reasonableness of the conduct, will be strictly interpreted so that the FSPO must only consider the applicable codes, or whether the FSPO will also be required to consider applicable guidelines issued by the Central Bank or the European Supervisory Authorities.
The High Court was also of the view that even if the FSPO’s decision had been upheld, the FSPO did not have jurisdiction to direct the provider to admit the claim, as there was no lawful connection between the finding of unreasonable or improper conduct and the remedy directed. This was because the FSPO did not find that the complainant was contractually entitled to recover under the income protection scheme. Consequently, the High Court found that the FSPO could not apply the contractual remedy of directing the provider to admit the claim, pending further medical assessment.
However, it is not yet clear whether this judgment will in practice operate to limit the FSPO’s jurisdiction to uphold complaints in respect of conduct, which, while not contrary to law, is found by the FSPO to be “unreasonable” or “unjust”. It is still the position that any financial service provider seeking to challenge a decision of the FSPO based on the reasonableness of the provider’s conduct, has a high bar to overcome. It must be shown that the FSPO committed a serious and significant error or a series of such errors, and the High Court will show deference to the FSPO’s specialist expertise in such matters.
It also remains to be seen whether this judgment will be the subject of an appeal.
Written by Aisling McMorrow
“purports to make a finding that the conduct of the insurance provider was unreasonable without any attempt to measure that conduct against the relevant code of conduct; and then draws unsubstantiated inferences from certain correspondence”.
The High Court acknowledged that the FSPO enjoys what it termed as a “hybrid” jurisdiction, where it can adjudicate not only on the basis of whether the conduct complained of was contrary to law, but also in respect of whether the conduct complained of was unreasonable or unjust.
However, Simons J. stated that the starting point for the assessment of the reasonableness of the conduct complained of should have been the terms of the relevant code of conduct applicable to the insurance provider, which in this case was the Consumer Protection Code 2012 (“CPC”), this being
“…the objective standard against which the “reasonableness” of the conduct falls to be considered in the first instance”
and that it would also be appropriate for the FSPO to have some regard to the underlying contract of insurance itself.
The decision suggests that there is some degree of overlap between the different grounds upon which the FSPO can uphold a complaint. It would appear that the FSPO, when exercising its jurisdiction to consider whether conduct is unreasonable or unjust, cannot consider this in isolation and instead must also consider legal and contractual issues, and in particular the provider’s conduct as against the relevant code of conduct.
This raises questions as to the circumstances in which it may be appropriate for the FSPO to uphold a complaint under section 60(2)(c) of the FSPO Act 2017, which provides that a complaint may be upheld where , although the conduct complained of was in accordance with a law, practice or regulatory standard , that law, practice or standard is unreasonable or unjust in its application to the complainant. It is also unclear whether the requirement for the FSPO to measure the provider’s conduct as against the relevant code of conduct when assessing the fairness and reasonableness of the conduct, will be strictly interpreted so that the FSPO must only consider the applicable codes, or whether the FSPO will also be required to consider applicable guidelines issued by the Central Bank or the European Supervisory Authorities.
The High Court was also of the view that even if the FSPO’s decision had been upheld, the FSPO did not have jurisdiction to direct the provider to admit the claim, as there was no lawful connection between the finding of unreasonable or improper conduct and the remedy directed. This was because the FSPO did not find that the complainant was contractually entitled to recover under the income protection scheme. Consequently, the High Court found that the FSPO could not apply the contractual remedy of directing the provider to admit the claim, pending further medical assessment.
However, it is not yet clear whether this judgment will in practice operate to limit the FSPO’s jurisdiction to uphold complaints in respect of conduct, which, while not contrary to law, is found by the FSPO to be “unreasonable” or “unjust”. It is still the position that any financial service provider seeking to challenge a decision of the FSPO based on the reasonableness of the provider’s conduct, has a high bar to overcome. It must be shown that the FSPO committed a serious and significant error or a series of such errors, and the High Court will show deference to the FSPO’s specialist expertise in such matters.
It also remains to be seen whether this judgment will be the subject of an appeal.
Written by Aisling McMorrow