Key Post High Court reminds Ombudsman to act according to equity, without regard to legal form

[Brendan Burgess]

The recent ruling by Justice Hogan is very important for the all cases heard by the Ombudsman

In summary, the judge reminded the FSO that he is obliged under the law which set up the Ombudsman that he is required to act in an informal manner and according to equity, good conscience and the substantial merits of the complaint without regard to technicality or legal form."


"...the Ombudsman was in error in failing to examine whether it would be broadly fair and reasonable for Danske to apply such a construction measured by reference to his enhanced statutory powers "


This is terribly important. Up to now, the general approach of the Ombudsman has been "What does the contract say? What do the terms and conditions say?" The Ombudsman has rejected many complaints on the grounds that the financial services provider was acting in accordance with the contract.

From now on, consumers should remind the Ombudsman of this ruling when making complaints

The Ombudsman is a barrister and many of the cases are subcontracted out to barristers to process the complaints. It's not surprising that they make decisions based on the law alone, although this is in direct conflict with the Act.

 

[Brendan Burgess]

High Court tells Ombudsman

The ruling by Justice Hogan is very important for the all cases heard by the Ombudsman

11. The Ombudsman is required bys.57BB of the 1942 Act to deal with consumer complaints in an informal and expeditious manner. Section57BK(4) of the 1942 Act further provides that the Ombudsman is also required to perform the functions imposed, and exercise the powers conferred, by thi sAct free from interference by any other person and,when dealing with a particular complaint, is required to act in an informal manner and according to equity, good conscience and the substantial merits of the complaint without regard to technicality or legal form."


15. The Ombudsman is, however,also entitled by virtue of the provisions of s. 57BK(4) to go further in order have regard to the substantive merits of the matter, even if this involves a departure from the strict rigours of contract law As I pointed out in Koczan v. Financial Services Ombudsman [2010] IEHC 407, the effect of s. 57BK(4)is, accordingly,that:
"The Ombudsman's task, therefore, runs well beyond that of the resolution of contract disputes in the manner traditionally performed by the courts. It [is clear from the terms of s. 57BK(4) that the Ombudsman must, utilising his or her specialist skill and expertise, resolve such complaints according to wider conceptions of ex aequo et bono which go beyond the traditional limitations of the law of contract."

From Wikipedia: Ex aequo et bono (Latin for "according to the right and good" or "from equity and conscience") is a phrase derived from Latin that is used as a legal term of art. In the context of arbitration, it refers to the power of the arbitrators to dispense with consideration of the law and consider solely what they consider to be fair and equitable in the case at hand.

 

[Brendan Burgess]

16. This is underscored by the provisions of s.57Cl(2) which,in effect, enables the Ombudsman tonmeasure the general fairness of a contractual provision or action taken pursuant thereto by reference to general principles ("improper motive", "unjust", "unreasonable", "discriminatory" and so forth) which have been clearly transposed from the realm-ofpublic law and which would not ordinarily apply to a purely private contract.

The powers which are conferred by both s. 57BK( 4) and s.57CI(2) of the 1942 Act are accordingly those which go far beyond the traditional boundaries of the law of contract. As [ pointed out in Koczan, it is these particular novel powers which call for the application of the specialist skill and judgment of the Ombudsman so far as financial dealing is concerned and it is in this respect that the courts should show appropriate deference to that specialist skill and judgment in the application of these wider principles to the facts of a given case.

26. In any event,the Ombudsman would have been entitled, over and above the ordinary rules regarding the interpretation of contracts, to have regard to such relevant material to assist in ascertaining the objective intentions of the parties given that s. 57BK empowers the Ombudsman to have regard to wider principles(" ... the substantial merits of the complaint without regard to technicality or legal form ...") which go beyond the strict confines of the substantive law of contract.

29. In any event, if the construction of clause 3 urged by Danske were to prove to be correct, the Ombudsman was nonetheless in error in failing to examine whether it would be broadly fair and reasonable for Danske to apply such a construction measured by reference to his enhanced statutory powers ins.57BK(4) and s.57Cl(2)~ see, by analogy, my own reasoning on this very point in Koczan. In that case I held that the Ombudsman had erred in law in failing to analyse the automatic lapsing clauses provisions of an income protection policy by reference to these enhanced statutory powers.Just as in that case,I would emphasise that the application of these statutory powers calls for the application of the Ombudsman's particular expertise and nothing in this judgment is intended to express any view as to how these powers should be exercised in this case.


31. I will accordingly make an order pursuant to s.57CM(2)(b) of the 1942 Act setting aside the decision of the Ombudsman of 10th December 2013. I will further make an order pursuant to s. 57CM(2)(c) remitting the matter to the Ombudsman for a fresh determination of the complaint in a manner not inconsistent with this judgment.