Very interesting High Court challenge to the FSO's interpretation of the 6 year rule

I attended a High Court case last Tuesday - Eddie Howe vs. The Financial Services Ombudsman with the EBS as a notice party.

It's a complicated case, but here are the bones of it. If anyone else has an FSO case affected by this issue, contact me and I will provide more detail on the case. I will not give advice on your case by private message, but I will provide more information on Stowe if you have a case about the non-admissibility of evidence.

In September 2006 Howe drew down a mortgage from the EBS Fixed for 5 years to roll over onto a variable rate at the end of that period.
He claims that in Sept 2006, a named official of the EBS told him that variable rates rise and fall in line with the ECB rate.
In April 2010, the EBS wrote to him telling him that due to the higher costs of funds, they were increasing mortgage rates, although the ECB rates were falling.
In July 2013, he lodged a complaint with the Ombudsman.

The Ombudsman said that the alleged conversation in September 2006, took place more than 6 years ago, so could not be admitted as evidence.

Based on the other issues, the FSO rejected the complaint.

This appeal to the High Court was solely on the admissibility of oral evidence over 6 years old.

The relevant section of the Act setting up the FSO is 57 BX (2) which says


"(3) A consumer is not entitled to make a complaint if the conduct complained of—
(b) occurred more than 6 years before the complaint is made,"

I have long made the point to Joe Meade and Bill Prasifka that their interpretation of this section to exclude evidence over 6 years was wrong.

Aidan Redmond SC for Stowe argued the case brilliantly. (I had not heard of him before, but would strongly recommend him for any similar cases challenging the behaviour of banks.)

1) The legislation is very clear - it is the behaviour complained of.
2) My client has no complaint about the behaviour in 2006.
3) His complaint is about the behaviour in 2010 where they changed their policy.
4) The FSO is eliding evidence of an agreement with breach of that agreement
5) The FSO is quoting from the contract which is over 6 years old but excluding oral evidence
6) There is nothing in the Act which justifies this.

Paul Anthony McDermott SC appeared for the FSO.I might be biased, but he did not seem to address the core issue at all. He focussed on merits of the decision, rather than on the issue at trial - the exclusion of evidence. The Judge asked him a few times to repeat his arguments. And at the end of his presentation, the judge asked him to specifically address the issue of how the FSO admits contractual evidence over 6 years old, but excludes oral evidence.

Judgement was reserved.

What struck me about this case was how strongly the FSO defended this case.

If someone sues me negligence, I will defend my case as strongly as possible and the other side will present their case as strongly as possible.

If it were Stowe vs. the EBS, I could understand the EBS seeking to exclude this evidence.

But the FSO should have been neutral. They have somehow interpreted this clause to mean that they must exclude evidence over 6 years old. Personally, I can't see how they can possibly interpret it like that. But it should not have been an adversarial contest between Stowe and the FSO. They should have presented a balanced view of the issues and they should accept whatever the High Court decides.

In fact, it was unfair on Stowe that he had to take this case and incur all the expense, time and risk of losing. The Act makes provision for the Ombudsman to seek the guidance of the High Court on the Act, and the FSO should have done this long ago and its own expense:


57CK.—(1) When dealing with a complaint, the Financial Services Ombudsman. may, on that Ombudsman’s own initiative or at the request of the complainant or the regulated financial service provider concerned, refer for the opinion of the High Court a question of law arising in relation to the investigation or adjudication of the complaint.

Now, that I reread that clause, if you have an FSO complaint and you disagree with the FSO's handling of the complaint, you can ask the FSO to refer that issue to the High Court or you can refer it yourself, before the FSO makes a decision on the case.

I think we have to salute people like Stowe who take on a case like this.

I agree with you on this, the FSO should accept the courts decision without trying to bias it.
In my opinion at all times the consumer should be given the benefit of any ambiguity/doubt that their might be.

Its highly unlikely the FSO would have had oral hearing for this case even if it was within the 6 year time frame and in such cases as I've experienced they will rely totally on what ever is in the fine print of the contract.

So whatever a bank employee says or does that isn't in black and white will be completely over looked.

I wish this person well and hope they get a positive outcome.

Thanks for bringing it up Brendan and do keep us informed of any updates.

todo said:

In my opinion at all times the consumer should be given the benefit of any ambiguity/doubt that their might be.

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The FSO is independent and is not biased on one side or the other.

However, if a contract wording is ambiguous, he tends to find against the financial institution, as they wrote the contract.

The FSO said that an oral hearing was not necessary as there was no conflict of interest. The SC for Stowe was great. "Of course there is no conflict of evidence, if you rule out the evidence which is in dispute".

Brendan

Brendan Burgess said:

The FSO is independent and is not biased on one side or the other.

However, if a contract wording is ambiguous, he tends to find against the financial institution, as they wrote the contract. ].

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- The FSO only looked at what was presented to them by complainant.
- Factually the FSO got overly legalistic (Judge Hogan's view and not mine)
- FSO never looked at continuing conduct which lengthens the 6 year rule because most complainants never raised it.
- How could they when digging the material out was essentially beyond most consumers.

Opinion: The only reason we have any consumer laws is because of European Directives. These are buried in Statutory Instruments. The Consumer Credit Act is out of date and never reflected Tracker Mortgages. The so called legal warnings said more about fixed rate penalties exiting a fixed rate period than anything else. The post 2008 behaviour of banks is clear - CONSUMERS - YOU DONT MATTER. We have a Consumer and Competition Authority with responsibilities and they simply [insert your own comment here].

I suspect the FSO defended this case quite strongly as the FSO is aware that it has continually got it wrong regarding its approach of excluding evidence over six years old. Including my own FSO case, the FSO did not appropriately distinguish between
conduct being complained about versus evidence over six years old.I suspect the FSO is afraid the if the court confirms that the FSO was incorrect it may raise queries on historic similar cases.

Brendan Burgess said:

What struck me about this case was how strongly the FSO defended this case.

If someone sues me negligence, I will defend my case as strongly as possible and the other side will present their case as strongly as possible.

If it were Stowe vs. the EBS, I could understand the EBS seeking to exclude this evidence.

But the FSO should have been neutral. They have somehow interpreted this clause to mean that they must exclude evidence over 6 years old. Personally, I can't see how they can possibly interpret it like that. But it should not have been an adversarial contest between Stowe and the FSO. They should have presented a balanced view of the issues and they should accept whatever the High Court decides.

In fact, it was unfair on Stowe that he had to take this case and incur all the expense, time and risk of losing. The Act makes provision for the Ombudsman to seek the guidance of the High Court on the Act, and the FSO should have done this long ago and its own expense:


57CK.—(1) When dealing with a complaint, the Financial Services Ombudsman. may, on that Ombudsman’s own initiative or at the request of the complainant or the regulated financial service provider concerned, refer for the opinion of the High Court a question of law arising in relation to the investigation or adjudication of the complaint.

Now, that I reread that clause, if you have an FSO complaint and you disagree with the FSO's handling of the complaint, you can ask the FSO to refer that issue to the High Court or you can refer it yourself, before the FSO makes a decision on the case.

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If you are unhappy with an aspect of their handling, do you have to ask them to refer in the 21 day appeal period or can you ask them to refer it to the high court for advice at a later date?