Bruce, R (on the application of) v Financial Ombudsman Services Ltd & Ors [2007] EWHC 1646 (Admin)

Case No CO/7862/2006

[2007] EWHC 1646 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

THE ADMINISTRATIVE COURT

Venue Royal Courts of Justice

Date Monday, 11 June 2007

Strand

London WC2

B E F O R E:

MR JUSTICE HODGE

Between

THE QUEEN ON THE APPLICATION OF ALISON RUTH BRUCEClaimant

-v-

Between

FINANCIAL OMBUDSMAN SERVICES LTDDefendant

DUNCAN HENDERSONInterested Party

DAVID BRUCEInterested Party

ALAN ALLSOPP

Third Interested Party

Computer-Aided Transcript of the Stenograph Notes of

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(Official Shorthand Writers to the Court)

Mr O Ensaff appeared for Claimant

Mr J Strachan appeared for Defendant

The first interested party appeared in person for in person

for The second interested party was not represented and did not attend

for The third interested party was not represented and did not attend

J U D G M E N T

[1]MR JUSTICE HODGE: Mr Duncan Henderson was, in 1988, employed by British Rail. He was part of their pension scheme. It now turns out that in that year he was mis-sold a personal pension. He left the British Rail scheme. He lost the benefit of the employer's contribution as a result of doing that.

[2]Many years later, and after many trials and tribulations, a decision was eventually obtained from the Financial Ombudsman Service (FOS). At the time of the determination, on 26 June 2006, Mr Henderson was assessed as having lost £90,124.12. The partners of the firm that had mis-advised him in 1988 were ordered by the ombudsman to pay that sum into Mr Henderson's current pension fund. The firm responsible for the mis-selling was Bruce & Partners, then operating in Sunderland. The partners at the time were David Bruce, Alan Allsopp and the claimant Alison Ruth Bruce. She was, in 1988, the wife of Mr David Bruce. They have since, I was told, been divorced. I have no other details.

[3]The ombudsman upheld the complaint by Mr Henderson against Bruce & Partners about the mis-selling of the pension and made a direction that the former partners of the firm make good the money.

[4]In summary, the claimant Mrs Bruce says that the ombudsman's decision was unlawful; it was in breach of the rules of natural justice; it was in breach of the Financial Ombudsman Service Rules. These are found under the dispute resolution section of the Financial Services Handbook. They are known in this field as the DISP. I refer to them as "DISP" hereafter. Those rules are made pursuant to Part 16 and Schedule 17 of the Financial Services and Markets Act 2000. Mrs Bruce's position is that she was not given a chance to make any representations in relation to the assessment of the complaint made by Mr Henderson to the Financial Ombudsman Service.

[5]Permission for the judicial review claim was granted by Kenneth Parker QC, sitting as a Deputy High Court Judge, on 6 December. He said:

"It is arguable that Mrs Bruce should have been notified of the relevant proceedings and now that she has appeared that the proceedings should be re-opened to enable her to make representations regarding jurisdiction, liability and content."

[6]Mrs Bruce has, before me, been represented by Mr Ensaff and the Financial Ombudsman Service by Mr James Strachan. I am grateful to both of them for the assistance they have given me.

[7]Mr Henderson has also attended court. He, of course, has been a victim of this problem. He was invited to address me on matters he wished. He told me that the Financial Services Authority (FSA) had been in correspondence with Mr David Bruce from the period 1999 to 2001. He also told me that he had personally had to track down Mrs Bruce, the claimant. She had initially, when first confronted by process servers, denied her identity, but he was able to check it out via her professional organisation and have her served as a result. Preliminary Issue

[8]I next deal with a matter that I regard as a preliminary issue. Very late, Mr David Bruce has submitted a witness statement. In that, he purports to challenge the decision made by the ombudsman. I note that he did not make such a challenge at any stage between the making of the provisional assessment by the ombudsman's staff and the decision made by the ombudsman. I shall refer to those matters later.

[9]I examined this evidence as I was invited to do. I agree with Mr Strachan that the evidence is irrelevant, and the alleged similarity of the case quoted in the evidence with this case is misconceived.

[10]Reference is made to a complaint by Mr Cadogan. This, I am satisfied, related to a transfer of pension funds, not advice to opt out of an occupational pension scheme with the transfer of accrued benefits, as had happened in Mr Henderson's case. Key to this matter, in my judgment, is that Mr Henderson lost the benefit of his employer's contributions by joining the pension scheme he was sold in 1988. Mr Cadogan's case, in my judgment, relates to the suitability of the advice to transfer rather than the opt out provision. In any event, this witness statement is far too late. If there was to be a challenge of this sort, it should have been made by Mr Bruce and at an earlier stage. I therefore decline to admit it as fresh or new evidence and reject the application that I should so consider it. Background

[11]There is a long history to this case. We now know from the files that in April 1988 preliminary figures were made available to Mr Henderson about the proposed opt out of his employer's scheme. It seems that the matter was finalised on 11 October 1988. Mr Henderson took out a pension with the Provident Mutual. Funds were transferred from his employer's scheme. This transaction was all handled by Mr Allison. He was an employee of Bruce & Partners. He was not a partner in that firm. Hence he cannot be personally liable within this litigation at least for the mis-selling. As is well known, Mr Henderson was among a group of people who made significant losses as a result of transactions similar to the one in which he was involved. It became clear in the mid-1990s, specifically in August 1995, that he was entitled to have the transaction reviewed. He contacted Mr Allison in August 1995. Mr Allison then contacted Mr Allsopp, one of the partners in Bruce & Partners.

[12]There was a dispute who was responsible to review Mr Henderson's pension provision. This dispute between Mr Allison and his firm and Mr Allsopp and his firm dragged on. It was still unclear by June 2001 where the responsibility lay. Mr Allsopp was at that time, on 4 June 2001, in correspondence with Mr Henderson.

[13]Unsurprisingly Mr Henderson eventually complained to the Financial Ombudsman Service. His complaint is dated 23 August 2001. He was asserting that no review of his pension provision had taken place. He referred in his complaint to Bruce & Partners North East and DBS Financial Managements as the firm or firms about which he was complaining. He refers specifically to Mr Jim Allison in that complaint. The Financial Ombudsman Service chased the papers. It seems that a number of papers were obtained from one or other of those involved who has previously advised Mr Henderson. There are a set of papers in the bundle provided for the court. The matter continued to proceed rather slowly.

[14]Eventually on 1 June 2004 the case was referred by the Financial Ombudsman Service to the Financial Services Authority. The FOS appear to have thought that they may not have jurisdiction.

[15]In fact the reference was considered by the Financial Services Compensation Scheme (FSCS). They wrote to Mr Henderson on 18 March 2005, saying that they were unable to consider the claim. They said they were unable to declare the firm in default "since we are not satisfied that it is unable to meet your claim". The matter was referred back to the Financial Ombudsman Service by Mr Henderson.

[16]On 9 March 2006 the ombudsman service wrote to Mr Allsopp as Bruce & Partners at an address in Sunderland. The letter was written by Angela Pleasance. She is an adjudicator. A group of the Financial Ombudsman's staff are designated as adjudicators. Their task is to investigate complaints. They then go on to make provisional assessments. The letter of 9 March is a provisional assessment. Only if the parties do not accept the view of the adjudicator does the case go to the ombudsman for further decision. In short, the adjudicator said:

"I consider it unlikely that the advice to opt out of his employer's pension scheme would have been suitable for Mr Henderson as he would have lost the benefit of the contributions payable by his employer. I consider it more probable than not that, had suitable advice been given to him, Mr Henderson would not have opted out of his employer's pension scheme or transferred out his accumulated benefits into a personal pension."

This letter was sent to Mr Allsopp, Mr David Bruce and Mrs Bruce the claimant. The address used for David Bruce and Mrs Bruce, the claimant, was an address at Willowside Farm, Gloucestershire. It subsequently appears that Mr Bruce does live at that address, but the claimant Mrs Bruce does not.

[17]The provisional assessment from the adjudicator invited submissions. Brief submissions were made by Mr Allsopp. Nothing came back from Mr Bruce. Unsurprisingly nothing came from Mrs Bruce, as it appears she did not live at the address where the letter was sent.

[18]The next stage in the Financial Ombudsman Service procedures is to make an assessment of the loss that the complainant has suffered should the ombudsman himself decide that the complaint is made out. A loss assessment was made in this case. The figure was slightly larger than the final award ordered by the ombudsman, but that matters not. Paragraph 16 of the decision of the ombudsman is as follows:

"Circumstances Mr Henderson's complaint was considered by one of our adjudicators, Angela Pleasance. She issued her assessment of the case on 9 March 2006. A copy is attached. Briefly: • In April 1988 Mr Henderson consulted Bruce & Partners, a firm of financial advisers in Sunderland. In July 1988 he was advised by the firm to opt out of his employer's occupational pension scheme, the British Rail pension scheme, and take out a personal pension based on his own contributions and to effect a Rebate Only Personal Pension Plan. He was also advised to transfer the benefits that he had accrued in the occupational pension scheme to the personal pension arrangement. • The adjudicator considered that these sales were 'non-compliant' and should have been redressed under the review of personal pensions instigated by the firm's regulator. • The partners at that time included Mr A Allsopp, Mr D A Bruce and Mrs A R Bruce. The adjudicator considered that these partners were jointly and severally responsible for the advice given, and sales made, after 29 April 1988 and before Mr Allsopp went into partnership with Mr Allison in mid-1989. • The adjudicator considered that Bruce & Partners should arrange for a loss assessment to be carried out, using the methodology and assumptions set out in the regulator's guidance for the review of personal pensions. • Further advice was given to Mr Henderson while Mr Allsopp was in partnership with Mr Allison in late 1989 and 1990. This partnership had ceased to exist before it could be regulated by the [Personal Investment Authority], and is therefore now outside of the jurisdiction of the Financial Ombudsman Service. Neither Mr or Mrs Bruce responded to the assessment. Mr Allsopp wrote to the adjudicator stating that the affairs of Bruce & Partners North East were in the hands of the Financial Services Compensation Scheme (FSCS), and the case of Mr Henderson was classed by the FSA as being the responsibility of Mr Allison. The adjudicator responded in a letter dated 29 March 2006, explaining that the FSCS were not taking responsibility for sales made by Bruce & Partners as it had no evidence that Mr Allsopp's former partners would be unable to meet the claim. Mr Henderson's loss as at 1 April 2003 had been calculated for the FSA as £50,851.65. The adjudicator obtained figures from Norwich Union for the amount that would currently be required to bring the transfer value of Mr Henderson's policy to the level it would now be at, had the loss been redressed in April 2003. On 14 June 2006 the adjudicator wrote to Mr Henderson, Mr Allsopp, Mr Bruce and Mrs Bruce with details of the loss. A copy of this letter is attached. Briefly: • Mr Henderson's total loss amounted to £50,851.65. • Norwich Union would require a payment of £92,067.54 now to place Mr Henderson in the same position that he would have been in, had compensation been paid in full on 1 April 2003. • Bruce & Partners were wholly liable for Mr Henderson's loss of pension rights to 2 November 1990, a period of 16 years and 11 months. • Bruce & Partners was 50% liable for the loss arising from the period November 1990 to August 1991, a period of nine months. • Accordingly Bruce & Partners was responsible for 97.9% of Mr Henderson's total loss. • This amounted to £90,134.12. No response has been received from Mr Allsopp, Mr Bruce or Mrs Bruce."

[19]The ombudsman went on to say that he had agreed with the conclusions reached by the adjudicator. He upheld the complaint against the firm in respect of pension mis-selling. He said as follows:

"I direct the former partners of Bruce & Partners - that is, Mr A Allsopp, Mr D Bruce and Mrs A R Bruce - to pay £90,134.12 into Mr Henderson's personal pension policy with Norwich Union."

The adjudicator said the payment must be made within 28 days. The Legal Background

[20]There was a good deal in the skeleton arguments and in the background papers about the position of partnerships. It is trite law, and accepted, that the former partners of Bruce & Partners are jointly and severally liable for the acts and omissions of each other. It is also the case that the claimant, Mrs Bruce, remains so liable notwithstanding the dissolution of the firm unless discharged from her original liabilities incurred while the partnership was active. I note that some of the business of the firm of Bruce & Partners was transferred away from the original partners in October 1989.

[21]It is also said that proceedings against two or more partners who carry on business within the jurisdiction may be commenced in the firm name under which they carried on business. Further in respect of a dissolved firm there is no objection to proceedings being commenced against the dissolved partnership in the firm's name. By sending or transmitting a copy of the proceedings to or leaving such a copy at the partners' usual or last known residence or principal last known place of business of the firm any service under the Civil Procedure Rules would be good service. Finally it would not matter that some or all of the partners are not served although it is possible of course that the failure to serve might affect the ability to enforce any judgment.

[22]As I understand the position, those statements of the law are not challenged. Informality

[23]The 2000 Act provides in Section 225 (1):

"This Part provides for a scheme under which certain disputes may be resolved quickly and with a minimum formality by an independent person."

That has led to the scheme operator now known as the Financial Ombudsman Service. The ombudsman is operating under that scheme. It was said, certainly on behalf of the defendant, that this system has to operate with a minimum of formality, and the way in which the partners in the old firm were approached satisfies that. One cannot however say that this matter has been "resolved quickly".

[24]A further part of the legal background is the DISP Rules made by the ombudsman under the provisions of the Act. They are set out in a series of handbooks. The one relevant here is DISP 3 - Complaint Handling Procedures of the Financial Ombudsman Service. Rule 3.2.1 provides:

"On receipt of a complaint (and subsequently if necessary) the ombudsman must have regard to the following matters: ..... (3) whether or not the complainant is an eligible complainant; ..... " 3.2.7 provides: "

Where the firm disputes the eligibility of the complaint or the complainant, the ombudsman must give the parties an opportunity to make representations before he reaches his decision and he must give reasons to the parties for that decision." 3.2.11 provides:

"If the ombudsman decides that an investigation is necessary, he will: (1) during the investigation give both parties an opportunity of making representations; (2) send to the parties a provisional assessment, setting out his reasons and a time limit within which either party must respond; and (3) if either party indicates disagreement with the provisional assessment within the time limit prescribed in DISP 3.2.11 R (2), proceed to determination ..... " 3.2.12 says: "

The parties will be informed of their right to make representations before the ombudsman makes a determination ..... " Submissions

[25]At the core of the claimant's submissions is the assertion that nobody in these proceedings was dealing with Mr Allsopp as a former partner of Bruce & Partners. He was written to on many occasions as the papers show addressing him by name, but quoting the name of his subsequent firm Bruce & Partners North East. The ombudsman service did not re-designate the relevant firm against which they were making a decision on a complaint until the letter of 9 March 2006. Nobody there, so far as this submission goes, among those former partners of Bruce & Partners, had notice of what was going on or opportunity to be involved prior to that date.

[26]Mr Ensaff, on behalf of the claimant, said that the DISP Rules - "rules" might be too strong a word for them - guidance perhaps, should provide for a three-stage process. First of all, there is an initial investigation. Parties, he says, must be given a chance to make representations at that stage. So next, there is a provisional assessment by an adjudicator. Here, that happened on 9 March 2006. If there is a disagreement, there must be a chance given to the partners to make further representations. If no representations are made or if challenges are made to the provisional assessment, the ombudsman himself must make a decision.

[27]Mrs Bruce, the claimant, was, he says, never informed before the provisional decision of the position and had no chance to be involved in any form of investigation. That is a breach of natural justice. Thereafter there appear to have been three attempts to correspond with Mrs Bruce. They were, it is said, all sent to the wrong address; that includes the provisional assessment. Again she had no chance to make any representations. All of that is a breach of natural justice. Her fundamental rights are, it is said, taken away. These arguments are at the core of the claimant's case. Argument around the service of process and the like in relation to a partnership were not pursued.

[28]The defendant, on the other hand, says that the investigatory process of the Financial Services Ombudsman is not a three-stage structure. The claimant is mistaken to rely on 3.2.7 as indicating that there is a stage where representations have to be sought. That clause of the DISP relates to the question of whether or not the complainant is an eligible complainant. That was not in issue here. Accordingly Mr Strachan says this investigation and indeed all investigations by the ombudsman are carried out under the brief provisions of DISP 3.2.11.

[29]It is clear the ombudsman decided that an investigation was necessary. The process went on over a considerable period of time. The Financial Ombudsman Service did give ample opportunity both before and after 9 March 2006 to Mr Allsopp, one of the partners, to comment on the issue. The service gave Mr David Bruce and Mr Allsopp an opportunity to comment after the provisional assessment was made. All of that is a perfectly sensible and informal process. There has been no breach of any rules of natural justice in the way in which these investigations have been carried out. The parties, including Mr Henderson, have all been given an opportunity of making representations.

[30]Mr Strachan says the introduction of Bruce & Partners North East is merely a diversion. The Ombudsman Service was always dealing with Mr Allsopp. Mr Allsopp always knew that the issue he was corresponding about was to do with Bruce & Partners, the old partnership. On 5 March 1998 Mr Allsopp wrote on Bruce & Partners North East headed notepaper to Mr Allison, the man who had sold Mr Henderson the pension transfer:

[31]Mr Strachan, in his skeleton argument, said:

"The claimant has repeatedly misunderstood or misrepresented the process adopted in this case, and generally by the FOS, for investigation and determination of a complaint. The claimant appears to be alleging that no letter was sent to the former partners of the firm until after the defendant had 'considered Mr Henderson's complaint', and until 'after D had concluded that the former partners were liable.'"

He went on to say, and I agree - "the process of 'investigation' covers all stages of consideration of the complaint ..... (once it has been accepted as eligible) prior to any final determination by the ombudsman."

[32]The partnership was, in my judgment, aware of this investigation. Partners are jointly and severally liable. Mr Allsopp was always dealing with the Financial Ombudsman Service. Mr Bruce, latterly, had a proper opportunity to do so. There was an opportunity on everybody's part to identify any relevant people at any stage. Mr Henderson pointed out in his submissions to me - and I accept what he says - that Mrs Bruce clearly made some difficulties in accepting her service of the statutory demand that was eventually issued. Nothing has ever been put forward by anybody to deny liability. I regard that as significant. The only matter that has come before the court is the assertion which I rejected as part of my ruling on what I described as the preliminary issue.

[33]It seems that it would be wrong in principle to order judicial review of the decision made by the Financial Ombudsman Service here without, as an absolute minimum, having presented to me some basis on which, were there to be a re-investigation, some different decision might be reached. Nothing has been put before me about that. The very important rules of natural justice have been brought into play by the claimant. But, in my judgment, the firm, which is the responsible body, is clearly on proper notice and clearly had plenty of opportunity to put in its submissions. Mrs Bruce appears not to have been involved in that position at all, but there is some indication that she deliberately avoided doing so. However having listened carefully to everything said and read a great deal of the papers put before me, I have come to the conclusion that this application for judicial review must be dismissed for the reasons I have given.

[34]MR STRACHAN: I would ask for an order in those terms, that the claim be dismissed. I ask for an order that the claimant pay the defendant's costs.

MR JUSTICE HODGE: Have you served a schedule?

[36]MR STRACHAN: We have. May I speak to my friend to see if the quantum is agreed? I do not know if your Lordship has a copy on file. There is a schedule from the ombudsman and a schedule from the claimant.

MR JUSTICE HODGE: I have seen the schedule from the claimant.

[38]MR STRACHAN: Shall I give you the figure claimed by the ombudsman. The total figure is £8,272.50; that is not in dispute, I am told.

MR JUSTICE HODGE: It is not in dispute?

[40]MR STRACHAN: No.

[41]MR JUSTICE HODGE: I can make an order for that. In relation to Mr Henderson's costs, can someone help me as to what powers I have?

[42]MR STRACHAN: That has caught me out on the hop. I confess that I do not know the answer, save that I imagine his costs would be - - - - -

MR JUSTICE HODGE: He is an interested party.

[44]MR STRACHAN: Yes.

MR JUSTICE HODGE: I can assess some costs for him, I suppose.

[46]MR STRACHAN: Indeed.

MR JUSTICE HODGE: Can I assess some costs for him?

[48]MR ENSAFF: I can be of some assistance. There was a letter sent by his current solicitors who are not Ward Hadaway, detailing costs incurred by Ward Hadaway in respect of these proceedings. It is not a costs statement as such. This is the only copy I have; I pass that up to you.

MR JUSTICE HODGE: I think I have been sent that actually.

[50]MR ENSAFF: There is a letter to the court dated 7 June and it includes another letter from Ward Hadaway.

[51]MR JUSTICE HODGE: They are not on the record. I do not think I can make any order frankly. I ought to be able to make some order that would cover Mr Henderson's costs for coming here personally as a litigant in person, something to cover his travelling expenses, ought I not?

[52]FIRST INTERESTED PARTY: I think my solicitors submitted something on costs to the court.

MR JUSTICE HODGE: Yes, they did, but they are not on the record.

[54]MR STRACHAN: So far as we know, Mr Henderson appears in person, not through solicitors. Ward Hadaway were involved in enforcement proceedings.

[55]MR JUSTICE HODGE: I am not going to make a costs award for Ward Hadaway. I do not think I have power to do that. There may be some power to make a litigant in person's award.

[56]MR STRACHAN: I simply refer you to the general power that the court has as to discretion as to whether costs are payable by one party to another and the ability obviously to take into account the conduct of the parties. I know that is not what you are looking for, but I have not, in the short time available, been able to flag up any particular passage dealing with litigant's costs. But I do not see any reason in principle .....

[57]MR JUSTICE HODGE: I am minded to make an order that his costs in the sum of £250 is paid by your side.

[58]MR ENSAFF: I think the hourly rate which a litigant in person can charge is £9.00 or £9.25.

MR JUSTICE HODGE: Yes, but they get travelling expenses too.

[60]MR ENSAFF: Yes, out-of-pocket expenses.

MR JUSTICE HODGE: Your chap is saying something.

[62]MR ENSAFF: Yes. That is all right.