Bluefin Insurance Services Ltd, R (On the Application Of) v Financial Ombudsman Service Ltd [2014] EWHC 3413 (Admin)

[2014] EWHC 3413 (Admin)Case No CO/10401/2013
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 20/10/2014
Before
MR. JUSTICE WILKIE
Between
THE QUEENClaimant-on the application of-ClaimantBLUEFIN INSURANCE SERVICES LTDClaimantFINANCIAL OMBUDSMAN SERVICE LIMITEDDefendantWAYNE LOCHNERInterested Party
Charles Béar QC and James McClelland (instructed by DAC Beachcroft LLP) for ApplicantJames Strachan QC (instructed by Financial Ombudsman Service) for DefendantHearing Hearing date: 7 th October 2014Judgment

Introduction

[1]The Claimant (“C”) claims judicial review of a decision of one of the Defendant’s (“FOS”) ombudsmen, Ombudsman Derry Baxter, dated 3rd May 2013 (“the Jurisdiction Decision”). By that decision, FOS decided that the Interested Party (“Mr Lochner”) was eligible to bring a complaint (“the Complaint”) to FOS against C.[2]C, trading as Laythorn Blackham Insurances Brokers Ltd, originally acted as a broker for a Directors and Officers Insurance Policy (“the D&O policy”) taken out by Betbroker Ltd (“Betbroker”). C is authorised to provide insurance broking services under the Financial Services and Markets Act 2000 (“FSMA 2000”) and is subject to the compulsory jurisdiction of the Defendant.[3]C acted for Betbroker in obtaining the D&O policy. Betbroker was the policyholder. Mr Lochner benefited from the policy as an “insured person” (as did his spouse).[4]As an “insured person”, Mr Lochner complains that he notified C of a potential legal claim to be made against him alleging wrongful acts by him in his capacity as director of Betbroker. He claims that his liability in respect of such a claim should have been covered by way of indemnity under the D&O policy. Mr Lochner’s complaint to FOS is that, he alleges, C failed to act on his notification to them of the potential claim by alerting the insurer to it. The insurer subsequently rejected cover for Mr Lochner as an insured person under the policy. The claim made against Mr Lochner has been compromised on terms which have resulted in a loss to Mr Lochner from which, he complains, he would have been protected by the policy but for C’s failure to notify the insurer of his potential claim under the policy.[5]Thus, the act or omission about which Mr Lochner sought to complain to FOS was C’s failure to act properly in its capacity as a broker when dealing with the notification of a claim by Mr Lochner as an “insured person”.[6]C’s judicial review challenge raises a single issue: did FOS err in law in finding that it had jurisdiction to entertain Mr Lochner’s complaint? It would have had jurisdiction under the scheme if he was an “eligible complainant”. The category of “eligible complainant”, as defined by the rules, which FOS found that Mr Lochner satisfied, was that he was a “consumer”. Under the rules, the term “consumer” is defined as “any natural person acting for purposes outside his trade, business, or profession”. FOS concluded that he was. C contends that this is a question for the court to decide and that the FOS decision is wrong. Alternatively, C contends that FOS misdirected itself in concluding that Mr Lochner was a consumer for the purposes of his complaint and that its decision should be quashed on conventional Judicial Review grounds.[7]The Ombudsman has not decided the merits of the complaint, only that she considers Mr Lochner to be an eligible complainant.[8]The claim for Judicial Review was launched on 2nd August 2013. Permission was refused on the papers by the Hon. Mrs Justice Lang DBE on 16th September 2013. She said:
“There is no arguable error of law in the decision made by the Defendant. The Defendant has correctly applied the relevant rules and guidance in concluding that the Interested Party is a ‘consumer’ and therefore eligible to bring a complaint.”
[9]On oral renewal, C argued that FOS had made two errors.(1) in assessing whether Mr Lochner was a consumer at the time that the complaint was made. C alleged that the relevant time for assessment should have been the time of Mr Lochner’s allegedly wrongful act or when the D&O Policy was taken out. C now argues that the status of Mr Lochner was to be determined, at the latest, at the time of the act or omission of which he complains i.e. when C failed to notify the insurers of the potential claim against him, and(2) in concluding that, because Mr Lochner was not bringing his complaint on behalf of Betbroker he was, for that reason alone, acting as a consumer. C claims that FOS failed to grapple with whether Mr Lochner was acting outside the purposes of his own trade, business or profession by considering the context of his complaint. Had it done so, it would have been bound to conclude that he was not acting as a consumer at the material time.[10]Permission was granted by Blair J on 12th February 2014, and the Judge directed that C’s grounds of claim were to be taken from C’s skeleton argument for the renewal hearing.[11]C has developed its challenge so as to give rise to the following sub-issues:(1) Is the decision whether Mr Lochner was acting as a consumer a question of “precedent fact” for the Court to determine regardless of the FOS assessment?(2) If the issue is for FOS, did the Ombudsman misdirect herself in law in reaching her decision?(3) If the issue is for FOS and she directed herself correctly in law, is the Ombudsman’s decision irrational in the Wednesbury sense?

The Legal Framework and FOS procedure

[12]Section 225(1) of FSMA provides as follows:
“This part provides for a scheme under which certain disputes may be resolved quickly and with minimum formality by an independent person.”
[13]Section 226 provides (emphasis added): “226. Compulsory jurisdiction(1) A complaint which relates to an act or omission of a person (“the respondent”) in carrying on an activity to which compulsory jurisdiction rules apply is to be dealt with under the ombudsman scheme if the conditions mentioned in subsection (2) are satisfied.(2) The conditions are that- (a) the complainant is eligible and wishes to have the complaint dealt with under the scheme; (b) the respondent was an authorised person … at the time of the act or omission to which the complaint relates; and (c) the act or omission to which the complaint relates occurred at a time when compulsory jurisdiction rules were in force in relation to the activity in question.(3) “Compulsory jurisdiction rules” means rules- (a) made by the FCA for the purposes of this section; and (b) specifying the activities to which they apply…. (6) A complainant is eligible, in relation to the compulsory jurisdiction of the ombudsman scheme if he falls within a class of person specified in the rules as eligible. (7) The rules- (a) may include provision for persons other than individuals to be eligible; but (b) may not provide for authorised persons to be eligible except in specified circumstances or in relation to complaints of a specified kind. (8) The jurisdiction of the scheme which results from this section is referred to in this Act as the “compulsory jurisdiction”.[14]Section 228 makes detailed provision for determination under the compulsory jurisdiction. That provision includes: … (2) A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case.[15]Section 229 concerns awards under the compulsory jurisdiction. It includes: … (2) If a complaint which has been dealt with under the scheme is determined in favour of the complainant, the determination may include-(a) an award against the respondent of such amount as the ombudsman considers fair compensation….(b) a direction that the respondent take such steps in relation to the complainant as the ombudsman considers just and appropriate (whether or not a court could order those steps to be taken).[16]It is common ground that these provisions enable FOS to make decisions which do not necessarily reflect the strict legal position and that those powers reflect the objects of the scheme identified in section 225.[17]The relevant rules, which take effect as delegated legislation, are contained in the “Dispute Resolution: Complaints” section of the Financial Services Handbook (“the Handbook”), known as “DISP”. The FCA is subject to detailed statutory provisions including obligations to consult before making any rules ( s138I of FSMA).[18]DISP 2.7.3R (the “R” denotes a rule, G denotes guidance) provides that:
“An eligible complainant must be a person that is: i) a consumer ii) a micro-enterprise; a) in relation to a complaint relating wholly or partly to payment services, either at the time of the conclusion of the payment service contract or a the time the complainant refers the complaint to the respondent; or b) otherwise, at the time the complainant refers the complaint to the respondent; iii) a charity which has an annual income of less than £1 million at the time the complainant refers the complaint to the respondent; or iv) a trustee of a trust which has a net asset value of less than £1 million at the time the complainant refers the complaint to the respondent.”
[19]The term “complaint” is defined in the Glossary to the FCA Handbook:
“any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a financial service or a redress determination which: (a) alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience; and (b) relates to an activity of that respondent, or of any other respondent with whom that respondent has some connection in marketing or providing financial services or products, which comes under the jurisdiction of the Financial Ombudsman Service.” (a) alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience; and (b) relates to an activity of that respondent, or of any other respondent with whom that respondent has some connection in marketing or providing financial services or products, which comes under the jurisdiction of the Financial Ombudsman Service.”
[20]At the material time the term “consumer” used in DISP 2.7.3(1)R was defined in the Glossary to the FCA Handbook as follows (so far as material for present purposes):
“(except as specified in this definition) any natural person acting for purposes outside his trade, business or profession. [Note: article 2 of the Distance Marketing Directive, article 2 of the Unfair Terms in Consumer Contracts Directive (93/13/EEC), article 2 of the E-Commerce Directive, and article 4(11) of the Payment Services Directive].”

Factual background

[21]Betbroker was a company of which Mr Lochner was a director. Betbroker entered administration on 22nd August 2008. Betbroker was the policyholder of the D&O insurance policy. C was the broker that arranged the D&O insurance policy. Chartis Europe Ltd was the insurer.[22]The D&O policy was taken out by Betbroker in 2007. Betbroker is identified as the “policyholder” in the Schedule (clause 6.39). “Any actual or alleged act, error, or omission by an insured person in any of the capacities listed in the definition of insured person, or any matter claimed against an insured person solely because of such listed capacity.”[23]The capacities listed in the definition of insured person (clause 6.19) all relate to persons playing a role in the business of a company or their spouses or personal representatives. They include: (i) with respect to any claim: any natural person who was, is or during the policy period becomes: (a) a director or officer …of a company; … (c) the spouse or domestic partner of an insured person for loss arising from a claim for a wrongful act or such insured person; (d) the administrator, heirs, legal representatives or executor of a deceased, incompetent, insolvent or bankrupt insured person’s estate for loss arising from a claim for a wrongful act of such insured person;”

The Claims against Mr Lochner

[24]The claim brought against Mr Lochner was for allegedly dishonest misrepresentations made by the directors, including Mr Lochner, in the course of fund-raising on behalf of the Betbroker group, of which Mr Lochner was the founder, CEO and a shareholder. There was also a claim for breach of personal covenants entered into by Mr Lochner (and the other directors) as part of the fund-raising exercise. The claims were disputed but have now been compromised.[25]Mr Lochner was CEO of Betbroker, which was the operating company within the Betbroker Plc group. It was an online gaming business and is now in administration. He owned some 6% of the shareholding in Betbroker Plc.[26]On 7th September 2007, Betbroker entered into the D&O policy with AIG Europe Ltd. That policy expired on 8th September 2008. C was the broker who arranged that policy for Betbroker.[27]On 12th March 2008, an investment of some £500,000 was made in Betbroker Plc by Aberdeen Asset Management (AAM) on behalf of its investors. AAM contended, in the proceedings, that their investment was made in reliance on representations made by Mr Lochner at meetings in January and February 2008, that those representations were false and that they were made fraudulently or recklessly by Mr Lochner. On 22nd August 2008, Betbroker was placed in administration.[28]Clause 10.8 of the policy provided that “Any insured may, during the policy period, notify the insurer … of any circumstance reasonably expected to give rise to a claim … the notice must include the reasons for anticipating that claim … and full particulars as to dates, acts, and persons involved.”[29]Once litigation, which commenced on 7th September 2011, was in prospect, Mr Lochner sought the protection of the D&O policy. The insurers rejected his claim, contending that, according to their records, they had not received any notice of a claim or circumstance likely to give rise to a claim, pursuant to clause 10.8 of the policy, prior to its expiration on 8th September 2008. As a result, the insurer has declined to provide any indemnity under the policy in respect of the claim being made, and now compromised, against Mr Lochner and others by AAM.[30]Mr Lochner’s complaint to FOS against C is that he claims to have notified the potential claim against him by AAM to C before the expiration of the policy, but that C failed to pass that information on to the insurers. As a result of C’s omission Mr Lochner complains that he has lost the benefit of the insurance cover against any loss to him arising from his liability in respect of the claim made by AAM against him.[31]When AAM commenced the proceeding against Mr Lochner, in September 2011, his solicitors provided a copy of those proceedings to C and asked C to obtain confirmation from the insurers that the claim would be covered under the policy. The insurers maintained their previous position, refusing to provide cover on the basis that it had not been notified of the claim by C.[32]On 4th July 2012, C received notification from FOS that Mr Lochner had made a complaint against C. C provided a response to that complaint on 27th July 2012, refuting the claim as a matter of substance but, prior to that, C, in correspondence with FOS, challenged its jurisdiction on the grounds that Mr Lochner did not fall within the definition of a consumer under DISP2.7.3.

The FOS decision

[33]The FOS decision was dated 3rd May 2013. It sets out a summary of the complaint, namely that Mr Lochner was unhappy because he believed that C failed, properly, to notify a claim to his insurer resulting in it being rejected.[34]It sets out the background to the complaint, including the assertion that, in August 2008, Mr Lochner informed C of a possible claim against him and his fellow directors and that the insurer subsequently refused the claim on the ground that it was not made in accordance with the policy terms and conditions.[35]FOS sets out a series of findings in which it noted:
“The jurisdiction of FOS is set out in the Financial Conduct Authority’s dispute resolution DISP rules. These rules stipulate exactly what the Financial Ombudsman Service can and cannot consider.”
It then sets out DISP 2.7.3R and the glossary definition of consumer as “any natural person acting for purposes outside his trade, business, or profession”. There is no reference to the note drawing attention to specific provisions in four EU directives, one of them the Unfair Terms in Consumer Contracts Directive (93/13/EEC).[36]The decision proceeds as follows:
“The policy taken out in the name of Betbroker Ltd provides that “the insurer shall pay the loss of each insured person”; loss being defined as “any defence costs, investigation costs, awards of damages … awards of costs or settlements for which an insured is legally liable, resulting from a claim against the insured”
. Insured is defined as any insured person, which in turn is defined as “any natural person who was, is, or during the policy period becomes, 1. A Director or officer … of a company”. The question of our jurisdiction is not whether Mr Lochner was acting in the course of his employment when he carried out the acts for which he has been sued, but rather whether he is acting outside his employment when bringing this complaint to this service. Mr Lochner was a director of the company which held the policy and therefore an insured person. However, the claim under the policy relates to a legal action brought against him, personally, as well as his fellow directors. Importantly, his complaint concerns a loss of policy benefits that would go to him as an individual rather than his former company (the policy holder). Consequently, Mr Lochner is complaining on his own behalf and, as he is not acting on behalf of his former company, is, therefore, acting outside his trade, business, or profession. As such, he meets the DISP definition of a consumer. As the beneficiary of a contract of insurance taken out through (C), Mr Lochner is eligible to raise a complaint about any concerns he has regarding acts or omissions relating to his claim under the policy. Whilst there may be other individuals able to bring complaints regarding substantially the same issues in respect of their own loss, there is nothing to prevent Mr Lochner from bringing such a claim under the policy and, therefore, a complaint to this service.”[37]She then sets out her decision:
“I have concluded that this complaint is one that we are able to investigate under our rules …”
The grounds of Challenge Issue one: is a decision on “consumer” an issue of “precedent fact”? C’s submissions

The grounds of Challenge

[38]C’s primary contention is that it is for this court, not FOS, to determine the jurisdictional issue. If Mr Lochner was not a “consumer” then FOS has no jurisdiction. None of its statutory powers would be engaged.[39]FOS contends that this is a question for it, alone, to determine. The Court may intervene only if FOS’s determination was Wednesbury unreasonable or based on a misdirection.[40]C submits that the suggestion that a public body can decide for itself the extent of its own jurisdiction is unsound. It relies on Anisminic Ltd v Foreign Compensation Commission [1969] AC 147, in which Lord Pearce said:
“[…] the courts have a general jurisdiction over the administration of justice in this country. From time to time Parliament sets up special tribunals to deal with special matters and gives them jurisdiction to decide these matters without any appeal to the courts. When this happens the courts cannot hear appeals from such a tribunal or substitute their own views on any matters which have been specifically committed by Parliament to the tribunal. Such tribunals must, however, confine themselves within the powers specially committed to them on a true construction of the relevant Acts of Parliament. It would lead to an absurd situation if a tribunal, having been given a circumscribed area of inquiry, carved out from the general jurisdiction of the courts, were entitled of its own motion to extend that area by misconstruing the limits of its mandate to inquire and decide as set out in the Act of Parliament. [at pp.194-195]”
[41]In accordance with this wider principle, where a tribunal’s jurisdiction depends upon the existence of a given fact, C submits that the Court is required to examine for itself whether that fact existed. It is a threshold requirement which must be objectively made out before the tribunal can have jurisdiction. This doctrine of “precedent” or “jurisdictional” fact has been summarised as follows: “One of the exceptions to the general prohibition on courts reviewing the facts upon which decisions of public authorities are based is where it is alleged that there is an absence of required “jurisdictional fact” (sometimes called “precedent fact”). Where a set of facts must exist for the exercise of the jurisdiction of the decision-maker (in the strict sense of permitting the decision-maker to enter into its inquiry) the courts are entitled to inquire into the existence of those facts. The language of jurisdiction is not necessary to justify such intervention. The statute in such a case imposes a condition as precedent to the exercise of the public authority’s power and it is the duty of the court to ensure that the condition has been met”. (De Smith, 7th edn, at para. 4-052).[42]C further submits that the doctrine is often engaged when (as here) a person’s status is decisive of whether particular statutory powers or duties are engaged. The doctrine has been applied (by the House of Lords) to the question of whether a person was an “illegal entrant” for the purposes of triggering statutory powers of detention, (R v Secretary of State for the Home Department ex p. Khawaja [1984] 1 A.C. 74). C also relies on the decision of the Supreme Court in R (A) v Croydon London Borough Council [2009] 1 WLR 2557. In that case it had to consider whether a person was a “child” for the purposes of engaging a local authority’s duty to provide accommodation. In that case Lady Hale said as follows (at paras 30-31):
“30 In R v Secretary of State for the Home Department, Ex p Khawaja [1984] AC 74 , the same principle was applied to the power of the Home Office to remove an “illegal entrant”
. The existence of the power of removal depended upon that fact. It was not enough that an immigration officer had reasonable grounds for believing the person to be an illegal entrant. As Lord Scarman put it, at p 110:
“where the exercise of executive power depends upon the precedent establishment of an objective fact, the courts will decide whether the requirement has been satisfied.” 31 This doctrine is not of recent origin or limited to powers relating to the liberty of the subject. But of course it still requires us to decide which questions are to be regarded as setting the limits to the jurisdiction of the public authority and which questions simply relate to the exercise of that jurisdiction. This too must be a question of statutory construction, although Wade and Forsyth on Administrative Law 9th ed (2004), p 257 suggest that “As a general rule, limiting conditions stated in objective terms will be treated as jurisdictional”.”
[43]Lady Hale also addressed the issue of the obligation of the court to make its own decision on an issue independent of whether or not it was a matter of “precedent fact.” At paragraphs 26-27 26… But where the issue is not, what order should the court make but what service should the local authority provide, it is entirely reasonable to assume that Parliament intended such evaluative questions to be determined by the public authority, subject to the control of the courts on the ordinary principles of judicial review. Within the limits of fair process and “Wednesbury reasonableness” there are no clear cut right or wrong answers. “27 But the question whether a person is a child is a different kind of question. There is a right or a wrong answer. It may be difficult to determine what that answer is. The decision makers may have to do their best on the basis of less than perfect or conclusive evidence. But that is true of many questions of fact which regularly come before the courts. That does not prevent them from being questions for the courts rather than for other kinds of decision makers.”[44]C contends that the question is one of statutory construction and that, as a general rule, limiting conditions stated in objective terms will be treated as jurisdictional. C contends that the contextual arguments in support of treating “consumer” as a jurisdictional fact are overwhelming:(1) Section 226 FSMA is specifically concerned with prescribing FOS’s jurisdiction and is expressed in both objective and mandatory terms. C contends that this is in contrast to the description of how, once established, FOS’s jurisdiction may then be exercised: section 228 providing that “A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case”. C contends that where statutory provisions alternate between subjective and objective terms this indicates a precedent fact analysis in respect of the latter (R v SSETR, ex p. Midland Expressway [1992] Env LR 447, at 466-467 (Sullivan J)).(2) C submits that the language which permeates Chapter 2 of DISP, entitled “Jurisdiction of the Financial Ombudsman Service”, is objective and mandatory: a) DISP 2.1 “Purpose, interpretation and application” provides that:
“The purpose of this chapter is to set out rules and guidance on the scope of the Compulsory Jurisdiction and the Voluntary Jurisdiction, which are the Financial Ombudsman Service's two jurisdictions […]” (DISP 2.1.1 G) b) DISP 2.2: “Which complaints can be dealt with under the Financial Ombudsman Service?” provides: “The scope of the Financial Ombudsman Service's two jurisdictions depends on: … (3) whether the complainant is eligible (see DISP 2.7).” (DISP. 2.2.1G) c) DISP 2.7 : “Is the complainant eligible?” provides: “2.7.1R A complaint may only be dealt with under the Financial Ombudsman Service if it is brought by or on behalf of an eligible complainant.” (DISP 2.7.1 R)… 2.7.3R An eligible complaint must be a person that is (1) a consumer […]”
[45]Applying the test set by Lady Hale, C contends that the crucial question is whether these provisions should be seen as “setting the limits to the jurisdiction of [FOS]” or merely setting out requirements “relat[ing] to the exercise of that jurisdiction”. C contends that the draftsman was stipulating a jurisdictional threshold couched in objective terms to which there is a right and a wrong answer. It is therefore a matter for the court to determine, whether as a precedent fact, properly so called or, in the alternative, where the court must determine whether or not FOS was right or wrong in concluding that Mr Lochner was a consumer as defined in the rules so as to be an elgibile complainant.[46]C contends that the emphasis placed by FOS upon the objectives set out in section 225 (1) of FSMA, that the scheme be quick, decisive, and informal, does not support an argument that, upon its true construction, the statutory scheme has not placed a precedent or jurisdictional fact as the gateway to access to that scheme. C submits that the fact that, by sections 228 and 229, once in the scheme, FOS can impose financial and other liabilities and obligations on the basis, not of legal entitlement, but by reference to whether in its view such liabilities imposed would be fair and reasonable, does not override the clear language of the statutory scheme, in FSMA and the rules, which makes access to the scheme subject to meeting mandatory objective criteria.

D’s submissions

[47]D contends that, even if the issue were one of precedent fact, the FOS’s decision was correct.[48]However, it submits that C is wrong in suggesting that the decision is one of “precedent fact”.[49]D refers to R v Secretary of State for the Home Department ex parte Onibiyo [1996] QB 768, CA, in particular, in a passage in the judgment of Sir Thomas Bingham MR at 784-785:
“the role of the court in the immigration court varies depending on the legislative and administrative context. Where an exercise of administrative power is dependent on the establishment of an objective precedent fact the court will, if called upon to do so in case of dispute, itself rule whether such facts establish to the requisite standard. Thus, for example, where power to detain and remove is dependent on a finding that the detainee is an illegal entrant, one who has entered clandestinely or by fraud and deceit, the court will itself rule whether the evidence is such as to justify that finding ‘see [ Khawaja v Home Secretary ]’. By contrast, the decision whether an asylum-seeker is a refugee is a question to be determined by the Secretary of State and the Immigration Appellate Authorities, whose determinations are susceptible to challenge only on Wednesbury principles (see Bugdaycay v Secretary of State for the Home Department [1987] AC 514 ). I am of the opinion, although with some misgivings, that the judgment whether a fresh ‘claim for asylum’ has been made should be assimilated with the latter, and not the former, class of judgment. If the test propounded in (1) above is correct, the answer to the question whether or not a fresh “claim for asylum” has been made will depend not on the finding of any objective fact, nor even on a literal comparison of the earlier and the later claim, but on an exercise of judgment and this is a field in which the initial judgments are very clearly entrusted to the Secretary of State.”
[50]D contends that whether or not a statutory provision gives rise to an issue of precedent fact is a matter of statutory construction dependent on the specific statutory scheme and the intention of Parliament: (R(A) v Croydon LBC at paragraph 31 Baroness Hale and Lord Hope at 52-54). The statutory scheme is critical: (Bugdaycay v Secretary of State for the Home Department [1987] 1 AC 514, HL Lord Bridge at 523).[51]The fact that an issue may be expressed in objective terms is not, it is contended, a sufficient basis for concluding that it gives rise to an issue of precedent fact.It is well-established that jurisdictional pre-conditions governing whether a decision-maker can accept a reference can be matters for the decision-maker to determine without becoming issues of precedent fact: I am referred to the House of Lords decision, R v Monopolies and Mergers Commission ex p South Yorkshire Transport Ltd [1993] 1 WLR 23, in which references to the Commission depended upon whether they concerned “a substantial part of the United Kingdom”. The true construction of those words empowered the Commission to make a decision, for which a court would not substitute its own unless the decision was irrational. FOS contends that a judgment as to “the purpose” for which a person is acting in bringing a complaint in a particular set of circumstances calls for the same approach by the court.[52]In Queen Mary University of London v Higher Education Funding Council for England [2008] EWHC 1472, (Burnett J as he then was) the court considered section 65 of the Further and Higher Education Act 1992 which provided authority for the Higher Education Funding Council to set such terms and conditions as it thought fit. The architecture of that statutory scheme is said to be similar to the FSMA in that the Act itself did not set any specific statutory criterion for eligibility, but left it to the discretion of another authority in due course. Reliance is placed on paragraph 22 of the judgment:
“… The reality is that even where Parliament has not used subjective language, it is the exception rather than the rule that factual matters will fall within the precedent fact category leading the court to take on the primary fact finding role.”
[53]In the FSMA scheme, D contends that the indicia provide compelling reasons why no “precedent fact” arises:(1) the FSMA gives the power to the FCA to set the eligibility criteria for a complainant in whatever way it sees fit;(2) the FCA’s criteria are not inherently clear cut but call for judgments by the decision-maker, on issues such as “the purpose” for which someone is acting;(3) there is no obvious reason why either Parliament or the FCA would have wished to establish that the Court would be the primary fact-finder where the scheme is meant to be a substitute for the court and where the scheme is intended to operate quickly and with minimum formality;(4) the eligibility criteria set at the discretion of the FCA could be subject to judicial review.[54]D relies on the decision of this court ( Sales J as he then was) in R ( on the application of Bankole) v the FOS [2012 EWHC 3555 (Admin). In particular the passage at paragraphs 15 and 20 “15 It is clear from the scheme of the rules in the DISP section of the FSA Handbook, and in particular from 2.2, that the scheme created by the rules envisages that it will be the ombudsman who determines whether or not a complaint is made within the time limits specified in those rules. That is fully in line with the indications one gets from the primary legislation in the 2000 Act, in particular at section 225(1), setting out the general objective for a scheme under which certain disputes may be resolved quickly and with minimum informality by an independent person, being the ombudsman; and by paragraph 13(1) of Schedule 17 to that Act, which states that the applicable time limit is to be determined in accordance with the rules, that is to say as set out in the subordinate legislation contained in the DISP…. 20 In my view, it is clear from the statutory scheme which I have set out above that the question whether a complaint is brought within 6 months as required by the rules or not is primarily a decision for FOS, subject only to review in this court on usual judicial review grounds. In terms of the construction of the relevant limitation rules in the DISP regime, the question whether a complaint is brought within time or not cannot be categorized as turning on judgment of precedent fact in the sense of being factual determinations for this court to make for itself. Therefore, the decision of the ombudsman in the decision of 5th November 2009 has to be tested against the usual judicial review standards.” D submits that the same principles apply to the determination whether a complainant is eligible.[55]C contends that Bankole is distinguishable:(1) Whether a complaint is brought in time is only of consequence ifthe complaint is brought by an eligible complainant, which is logically prior.(2) The timing provisions within DISP contain a discretionary component which makes them unlike the binary, jurisdictional, issue whether a complainant is, or is not, a consumer. FOS is vested with a discretion to extend time, and may do so if “in the view of the Ombudsman, the failure to comply with the time limits in DISP 2.8.2 R or DISP 2.8.7 R was as a result of exceptional circumstances” (DISP 2.8.2 R). The fact that the issue in Bankole did not turn on the exercise by FOS of this discretion but had to do with whether or not the complaint was brought in time is, it is said, not relevant.(3) FOS has jurisdiction over a complaint brought out of time, unless the respondent takes the time-bar point (DISP 2.8.2 R). Whether a complaint has been brought in time is, therefore, a defence exercisable at the respondent’s election, rather than a bar to FOS assuming jurisdiction. Thus, it is not surprising that, once raised and determined by FOS, the court decided that such a decision could only be overturned on judicial review grounds.[56]This court is, therefore, invited to distinguish Bankole.[57]D responds that these arguments are misplaced. Bankole deals with the jurisdictional rules on time limits under DISP 2.8. but the analysis of the statutory scheme which underpins the court’s conclusions on DISP 2.8 are relevant to the assessment required of DISP 2.7 . The analysis by the court of the objectives underpinning the statutory scheme and the rules, in Bankole, demonstrates the absence of any logic in treating issues of complainant eligibility, or adherence to time limits, as issues of “precedent fact.” To treat “complainant eligibility” as an issue of precedent fact would be inconsistent with the whole thrust of the scheme as described in s.225 of FSMA and the role of the FCA in making the rules.[58]The Judge in Bankole was applying the approach identified in Croydon of interpreting the relevant statutory scheme, FSMA and the rules made under it, to determine whether any “precedent fact” principle was inherent in it. He correctly identified that there was not.[59]D submits that the decision whether Mr Lochner was “a consumer” as defined by the rules was a matter for FOS not for the court and that decision can be challenged only on conventional judicial review grounds.

My Conclusions on issue one

[60]There is, in my judgment, little dispute as to the test to be applied in considering whether the FOS decision, that Mr Lochner was an eligible complainant, constituted a decision on precedent fact, where this court has to make the decision, if so asked, or was a decision for FOS subject to challenge only on conventional judicial review grounds. The judgments in the Supreme Court decision in R (A) v Croydon LBC constitute a clear and up-to-date statement of the approach and the distinguishing features of the two categories of decision.The judgment of Lady Hale, at paragraphs 30 and 31, with which three of the other Judges explicitly agreed, in dealing with the “precedent fact” issue is clear and binding.[61]It is of significance that DISP 2 has been the subject of such an analysis more subsequent to the Croydon case. I do not for a moment consider that the decision of Mr Justice Sales (as he then was) was other than wholly correct on the issue he had to decide. He conducted an analysis of the legal framework within which FOS operates, starting at paragraph 12 of his judgment. He focused on section 225(1) identifying the objective of the scheme that disputes be resolved quickly with minimum formality by an independent person.[62]He was considering whether under the scheme the time limit rules (DISP 2.8.2 R) required FOS to determine whether or not a complaint was made within time and whether the FOS decision could only be challenged on conventional judicial review grounds.[63]It is clear that Sales J was influenced by the objective of the scheme identified in Section 225(1) in concluding, as he did in paragraph 20 of his decision, that the question whether a complaint was brought within time could not be categorised as a question of precedent fact.[64]I accept that it is important to appreciate that the objective of the scheme in Section 225(1) is to achieve resolution of certain disputes quickly, with the minimum formality, by FOS as an independent person.[65]It is for that reason that FOS has a compulsory jurisdiction, as long as the complaint is one to which the compulsory jurisdiction rules apply. That includes the requirement that the complainant is eligible as defined by the rules. It is of some significance that the rules are required to be made by the FCA, not by the Secretary of State, but I accept the contention of C that, given the statutory underpinning to the FCA’s rule-making function (Section 138(1) FSMA), I should consider the rules made as of similar, if not the same, level of significance legally as if the rules were contained in regulations.[66]It is also of significance, in my judgment, that, by Sections 228 and 229, dealing with different aspects of the compulsory jurisdiction, in each case FOS has powers to make determinations and to make awards and give directions which would not be available in a conventional court, applying the strict legal entitlements of the parties to the contracts in question.[67]The primary statute states that access to the compulsory jurisdiction exercised by FOS requires that the complainant is “eligible.” The rules define an eligible complainant in various ways. In each case it requires a hard-edged finding of an objective fact.[68]Of the four ways in which a person may be an eligible complainant, three of them, a micro-enterprise, a charity, and trustee of a trust, are each defined, either in the rules themselves or in the glossary, as requiring the satisfaction of specific hard-edged criteria.[69]The fourth way in which an eligible complainant is described, namely that he or she is “a person that is a consumer” depends upon a definition contained in the glossary. The definition uses a formulation which is also used in a series of European Union Directives, which are identified in the glossary. The terms of that definition require a specific finding of objective fact, namely whether the natural person is “acting for purposes outside his trade, business, or profession”.[70]I return later to the question of the significance of various decisions of the European Courts in which they have considered that formulation of who is a consumer. Suffice it to say, however, that it is clear in all these cases that the courts regarded the question whether an individual satisfied that definition as being a decision with which the courts were comfortable to take and involve an objective decision based upon a series of known facts.[71]I have been referred to a number of cases in which the questionwhether particular statutory formulations, are satisfied have been considered by the courts to be matters of judgment to be exercised by the primary decision taker subject to review only on judicial review principles. These reflect no more than that different statutory provisions will require different approaches.[72]I am satisfied, however, that in the context of this statutory scheme access to the compulsory jurisdiction of FOS, with its enhanced benefits or burdens, is determined by reference to limiting conditions stated in objective terms. That being the case, in my judgment, this is a case where the FOS decision was one of precedent fact and, upon its being challenged in judicial review proceedings, it is a decision which the court has to take, rather than being limited to review the decision of FOS on conventional judicial review grounds.[73]If I were wrong in that analysis, however, I am satisfied that the nature of the decision is such that, as Lady Hale identified in Croydon, there is a right or wrong answer. It is not a question where Parliament and/or FCA intended the issue to be an evaluative issue, to be determined by FOS subject to the control of the courts on the ordinary principles of judicial review and where, within the limits of fair process and Wednesbury reasonableness, there are no clear cut right or wrong answers.[74]Thus, if I were wrong that the question is one of precedent fact, nonetheless I must consider whether the decision of FOS in relation to whether Mr Lochner was an eligible complainant was right or wrong. If, in my judgment, it was wrong it would necessarily have involved a misdirection in law so as to render FOS’s decision challengeable by way of judicial review.[75]I consider the issue below on both bases as a question of precedent fact and whether FOS misdirected itself as a matter of law Issue two: Did FOS misdirect itself in Law? First, the point of time by reference to which the assessment of eligibility was to be made C’s submissions

Issue two: Did FOS misdirect itself in Law?

[76]FOS decided whether Mr Lochner was an eligible complainant on the basis of his status as a consumer “when bringing his complaint to this service”.[77]C says that is erroneous. C accepts that the assessment of eligibility must be undertaken when the complaint is made. But that does not mean that the test of eligibility cannot be based on his status at a previous time. The intention of the scheme is to protect persons who occupy the role of consumers in the economic relationships out of which the relevant complaint emerges. That calls for consideration of the nature of the relationships which are to be crystallised, for this purpose, at an earlier stage than making a complaint to FOS.[78]For that reason, it is contended that the relevant point in time is when the transactions, which create the relationship out of which the complaint arises, are entered into. In this case that event is the entry into the D&O policy or, at the latest, the date of the act or omission which is the subject of the complaint. In any event C maintains that at whatever point in time the test is focused, the answer remains the same, since it is not possible to sever Mr Lochner’s status when making the complaint from the economic relationship out of which his complaint arises.

D’s submissions

[79]FOS points out that the complaint may only be dealt with if brought by an eligible complainant DISP (2.7.1). An eligible complainant must be “a person that is (1) a consumer” DISP (2.7.3R). D contends that the explicit terms of DISP 2.7.1 and 2.7.3 provide that the complainant must fall within the definition of eligibility at the time the complaint is brought.[80]D points out that, in any event, C now envisages that the complainant’s eligibility to make a complaint may be by reference to his standing at the date the act complained of occurs. In that case the relevant act would be C’s alleged failure to forward the potential claim against Mr Lochner to the insurer. D suggests that, on the facts of this case, whether the time by reference to which the standing of the complainant is to be judged, is, as C claims, or is as FOS claims, makes no difference. On each occasion, Mr Lochner was acting as a consumer, as an insured person, pursuant to a contract of insurance, taken out for his personal benefit, for his own private interests in seeking protection from the claim prospectively to be made personally against him.

My Conclusions on this issue

[81]In my judgment, the position is clear under the rules, as explained in the glossary. S. 226 (2) of FSMA provides that FOS may only deal with a complaint if it is brought by, or on behalf of, an eligible complainant. The clear meaning of these words is that the complainant must be eligible at the time complaint is brought. This will be the case unless the rules made pursuant to s 226 (3)(a) and (6) otherwise provide. Those rules, however, are clear that an eligible complainant must be a person who “is, (1) a consumer”.[82]In my judgment it is clear that a complainant is only eligible if, at the time the complaint is brought, he or she falls within the definition of a consumer.[83]Further, there is nothing in the definition of “consumer” in the glossary which suggests otherwise.[84]Accordingly, I agree with D that Mr Lochner would be an eligible complainant if, at the time he brought the complaint, he was a consumer as defined by the glossary. The second alleged misdirection of law: Did FOS incorrectly conclude that Mr Lochner was “a consumer” ?

The second alleged misdirection of law:

[85]There is no dispute but that Mr Lochner is a natural person. The issue is whether, at the time of, and in making his complaint to FOS, he was “acting for purposes outside his trade business or profession.” If he was, then he was a consumer and FOS had jurisdiction to entertain his complaint as an eligible complainant. If he was not, then he was not a consumer. He was not an eligible complainant and FOS had no jurisdiction to entertain his complaint.

C’s submissions

[86]C submits that FOS pursued a false course of reasoning in concluding that Mr Lochner in bringing his complaint, was acting for purposes outside his trade, business, or profession.[87]The criticised line of reasoning was as follows:(1) Mr Lochner was an insured person under the policy because he was a director of the company, for the purpose of his trade business or profession;(2) his claim, as an insured person, under the D&O policy was for an indemnity against his liability in litigation brought against him personally in respect of his conduct as a director in the course of his trade business or profession;(3) his complaint to FOS concerned C’s alleged omission, which had resulted in his claim under the policy being rejected by the insurer. This resulted in his loss of benefits under that policy which would have gone to him as an individual, rather than his former company.(4) thus he was exposed personally to the loss arising from the claim brought against him in respect of his alleged wrongful act as a director in the course of his trade business or profession;(5) FOS concluded as a consequence, that Mr Lochner, by complaining on his own behalf, not on behalf of his former company, was acting outside his trade, business, or profession. As such, he satisfied the definition of consumer.[88]C contends that FOS’s approach is unsustainable for a number of reasons:(1) It rests on a non sequitur:that a person who claims personally and not on behalf of his former company by reason of that acts for purposes outside his trade business or profession. C contends that a person can claim on their own behalf whilst also acting for the purposes of their trade, business or profession.(2) C contends that, by assuming otherwise, FOS equated “consumer” with “natural person” and thereby rendered the second part of the two part definition nugatory.(3) As a result, the decision maker failed to appreciate that, whilst claiming as a natural person, rather than as the agent of a company, may be a necessary condition of being a consumer as defined, it is not a sufficient condition: all consumers will be natural persons, but not all natural persons will be consumers.(4) Just as a natural person may have rights as a non-consumer, he may also incur liabilities in that capacity. The fact that a liability is personal does not, without more, make it a consumer liability, less still does it transform the individual into a consumer when seeking to abate it.(5) In this case Mr Lochner was only an insured person under the D&O policy for the purposes of his trade business or profession.(6) The protection provided to him by the policy was in respect of personal liability against claims brought against him for wrongful acts for the purpose of his trade business or profession.(7) The claim, in fact, made against him was for such alleged wrongful acts.(8) The alleged omission of C, of which he complained to FOS, had the result that he was personally exposed to loss in respect of that claim. That potential loss only arose because of his allegedly wrongful acts for the purposes of his trade business or profession.(9) Thus, his complaint to FOS was for redress in respect of that loss to which, by C’s alleged omission, he was exposed.(10) Thus, in making that complaint his purpose was to eliminate or diminish that loss which arose out of his allegedly wrongful acts which were engaged in for the purpose of his trade business or profession.

The EU Authorities

[89]The definition of a consumer in the glossary has attached to it a note drawing attention to four EU Directives. One of them is the Unfair Terms in Consumer Contracts Directive (93/13/EEC). That Directive was the source for what, in UK Law, was enacted as the Unfair Terms in Consumer Contracts Regulations 1999. In those Regulations, as in the Directive, the definition of a consumer was substantially the same as the definition adopted by the FCA in the DISP Rules. Certain of the authorities referred to by C, being decisions of the European Court of Justice and the Court of Justice of the European Communities concern the Brussels’ Convention. In Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] EWHC 257 (Comm) at paragraph 270, Mr Justice Andrew Smith agreed with an earlier decision of Mr Justice Longmore, (as he then was), in Standard Bank London Ltd v Apostolakis that there was no substantial difference between the meaning of “consumer” in the 1999 Regulations and in the Brussels’ Convention.[90]C submits that there is guidance given in the European case law on the approach to be adopted when construing the definition of a consumer under the FCA rules.[91]In particular, C says that a distinction is drawn in the case law between acts comprising running of a business, even terminating its operation, and acts which are for the family or personal requirements of the trader (see The Republic v Di Pinto [1993] 1 CMLR 399 at p. 16). A similar distinction is said to be drawn in Benincasa v Dentalkit Srl [1997] ECRI-3767, in particular, at paragraphs 16-18:where, in order to determine whether a person had the capacity of a consumer it was necessary to consider… “16 […] the position of the person concerned in a particular contract having regard to the nature and aim of that contract, and not to the subjective situation of the person concerned.17. Consequently, only contracts concluded for the purpose of satisfying an individual's own needs in terms of private consumption come under the provisions designed to protect the consumer as the party deemed to be the weaker party economically. The specific protection sought to be afforded by those provisions is unwarranted in the case of contracts for the purpose of trade or professional activity, even if that activity is only planned for the future, since the fact that an activity is in the nature of a future activity does not divest it in any way of its trade or professional character.18. Accordingly, it is consistent with the wording, the spirit and the aim of the provisions concerned to consider that the specific protective rules enshrined in them apply only to contracts concluded outside and independently of any trade or professional activity or purpose, whether present or future.”[92]The distinction being drawn is said to be that a consumer contract is concluded for the purpose of satisfying an individual’s own needs in terms of private consumption.[93]That formulation was adopted without criticism in the decision of the Court of Justice of the European Communities in Gruber v Bay Wa [2006] QB 2004, in particular, at paragraph 36, the principle being expressed in the following terms:
“The court held that only contracts concluded outside, and independently of, any trade or professional activity or purpose, solely for the purpose of satisfying an individual’s own needs in terms of private consumption, are covered by the special rules laid down by the convention to protect the consumer as the party deemed to be the weaker party. Such protection is unwarranted in the case of contracts for the purpose of a trade or professional activity.”
[94]C contends that this distinction, identified in the case law, is of significance and it points out the erroneous approach of FOS in focusing exclusively on the question whether Mr Lochner, as an insured person, had a personal protection against the liability or a claim brought against him personally, as the determining factor in considering whether he was acting for purposes outside his trade, business, or profession. On the contrary, C contends that, by reference to these established principles of European Law, albeit in different contexts, FOS has erred in failing to consider that the purpose of him making the complaint to FOS was to obtain redress against C to relieve him from loss arising out of a liability incurred by him for purposes of his trade, business, or profession, and not at all in relation to his own needs for private consumption.[95]D contends that little assistance is to be derived from these European Authorities. First, it is said that the question in each of them was whether the party being considered entered into a contract as a consumer. In this case Mr Lochner did not enter into any contract, whether as a consumer or otherwise. FOS had to consider whether he was a consumer in making a complaint to it, in respect of his being denied the protection he would otherwise have had from a policy in which he was an insured person for his own personal benefit and where his complaint was solely in his capacity as an individual and not on behalf of his erstwhile company.[96]It is also pointed out that in the case of Standard Bank London v Apostolakis [2002] C.L.C. 933, Mr Justice Longmore concluded that a person could be a consumer in respect of a contract which, on the face of it, was a business contract where, looking at the individual circumstances of the parties, they were wealthy people disposing of income which they had available in the hope of making a profit and, as such, well within the definition of “a consumer”. That is to say they were acting for purposes outside their trade, business, or profession. C points out that the correctness of this conclusion was called into question in Maple Leaf Macro Volatility Master Fund v Rouroy [2009] 1 Lloyd’s Rep. 475, in the Greek courts dealing with the same litigation, in the leading academic textbook and by Mr Justice Andrew Smith.[97]I have already had regard to the fact that, in each of these cases, courts had no difficulty in dealing with the definition of a consumer as having a right or a wrong answer and as treating it as an issue appropriate for determination by the courts. In my judgment, the distinctions drawn in these cases may be of some use in identifying where the line is to be drawn, but in the present case I am satisfied that the outcome is clear cut, without the need to adopt, or not adopt, those distinctions as being either determinative or persuasive.

C contends that Mr Lochner was not a “consumer” within the meaning of DISP 2.7

[98]C contends that FOS has introduced a new concept which is not contained in DISP 2.7.3, viz.“personal capacity”. FOS has assumed that, because Mr Lochner was invoking “personal rights”, he must have been acting “for purposes outside his trade, business or profession”.[99]C contends that, when an individual conducts a business as a sole trader, his own personal enrichment or liability may be co-extensive with that of the business. It does not follow that in all his relationships he acts as a consumer simply because he is a natural person who would be capable, in other contexts, of forming consumer relationships. If he is enforcing a debt he is acting qua professional, if he is being sued on a liability, equally he is acting qua professional. It is said to be fanciful to suggest that, when seeking an indemnity for his professional liabilities, such an individual would be acting independentlyof his profession (cf Benincasa) or in a manner unconnected with it (cf Di Pinto), orthat he would not be serving his professional needs to any non-negligibledegree (cf Gruber).[100]On the contrary, C contends that everything points against Mr Lochner being a “consumer”:(1) Mr Lochner was the founder, CEO and substantial shareholder of Betbroker, through which he advanced his business interests. His relationship with Betbroker, and the third parties with which it dealt, was not that of a “consumer”. The Policy insured Mr Lochner qua director of Betbroker. He was covered under the policy only in respect of those liabilities that he might incur when discharging that role.(2) D&O policies promote a corporate interest: a) Directors typically have an indemnity from their companies against liabilities which they incur in the course of their office. It is intra vires for a company to pay for its directors’ D&O policy (as here). b) Persons considering taking up the responsibilities of a director need comfort in respect of their external liabilities. Without D&O cover, companies would find it difficult to attract suitable board members.(3) The claims brought against Mr Lochner were for representations made when conducting negotiations with a prospective investor. FOS does not dispute that “Mr Lochner was acting for the purposes of his trade, business or profession when seeking to raise capital for the [Company]”. The putative liability arising from those negotiations was quintessentially occupational in character and Mr Lochner’s only interest under the Policy lay in obtaining an indemnity for that occupational liability. C contends that it is unrealistic to suggest that Mr Lochner’s complaint to FOS for redress against C for its failures in exposing him to the loss arising from that occupational liability was for a purpose outside of his professional or commercial interests. Mr Lochner’s connection with the Policy, and anyone administering it, flowed out of and related to his involvement in the Company’s affairs.[101]C contends that the suggestion that policies such as group health insurance policies are “indistinguishable” from D&O policies for this purpose is erroneous. D&O policies, whilst a form of group insurance, are unlike policies such as “private health insurance (“PHI”), income protection, group accident, life assurance and critical illness”. That type of policy, protects the members of the group against risks which are intrinsically private – principally to a person’s health and physical well-being. The contrast with a policy that only covers an individual against professional or business liabilities is clear.[102]Thus C invites the Court to quash the Decision on the basis that:(1) Mr Lochner was not a consumer, that being an issue of precedent fact for the Court to determine;(2) Alternatively (even if the issue is not one of precedent fact), FOS misdirected itself in law in deciding that Mr Lochner was a consumer and its decision should be quashed; and/or(3) In the further alternative Mr Lochner plainly was not a consumer and FOS’s decision to the contrary was Wednesbury unreasonable.

D’s submissions on this issue

[103]D contends that C has addressed the wrong question. It is not in dispute that Mr Lochner was acting for the purpose of his business when raising capital for Betbroker. Neither he nor any other insured person (such as his spouse) would have had any valid insurance protection in respect of the legal claim if this were not the case.[104]Mr Lochner’s complaint is not about his actions when capital-raising, it is about C’s actions or omissions when dealing with Mr Lochner as a beneficiary of the insurance policy, an “insured person,” which served to protect him in his private life against liabilities he incurred as a director.[105]His position is no different to that of his spouse, also an insured person, were she to have notified a claim and C had failed to notify the insurers of it.[106]C has acknowledged that, had Mr Lochner’s spouse given notice of a potential claim against the policy arising from her loss attributable to a claim against her husband for his wrongful acts, and had C failed to act by notifying the insurer of that potential claim against the policy, then Mrs Lochner would have been an eligible complainant. She would have been a consumer in that she would be making the complaint for a purpose outside her trade business or profession.[107]D contends that the D&O policy is analogous to a PHI policy providing insurance cover to protect an individual in his private life from liabilities or misfortunes that may, or may not, occur through employment (eg health problems in employment). There is no dispute that a beneficiary under such a policy would be an eligible complainant in the event that an omission by a broker had resulted in benefits under the policy being denied. Such a complainant would, it is agreed, in making his/her complaint, be acting for a purpose outside his /her trade business or profession.[108]D contends that C fails to grapple with what is “the subject of the complaint.” It is C’s alleged failure to act on Mr Lochner’s notification of a potential claim under the insurance policy. FOS was entitled to conclude, that Mr Lochner, in respect of this complaint, is a consumer. Mr Lochner was not acting for the purpose of his trade, business or profession in seeking to invoke the protection afforded to him under the policy. On the contrary, Mr Lochner is seeking to protect himself in his own personal interests, outside his trade, business or profession, just as his spouse might seek to do.[109]D contends that a fair reading of the decision of FOS demonstrates that FOS concluded that Mr Lochner was “complaining on his own behalf” and “as he is not acting on behalf of his former company, is therefore acting outside his trade, business or profession”. D contends that the Ombudsman’s decision and reasoning has to be read as a whole. The decision maker expressly concluded that Mr Lochner was not acting in the course of his trade, business or profession in making his complaint. She concluded that his complaint was about the loss of benefits under the policy due to him as an individual, in respect of a liability in respect of a claim which was made against him personally.[110]D contends that the FOS conclusion was open to it on the facts and cannot be described as irrational. It is, therefore, not susceptible to challenge by way of judicial review.[111]Even if the question were one of “precedent fact”, D submits that the Ombudsman’s decision was right on the facts for the reasons she gave as amplified in these submissions.[112]C’s contrary analysis is said to be misconceived. The fact that Mr Lochner was originally a director and shareholder of Betbroker does not affect the fact that, when complaining to FOS about his loss of personal cover in respect of liability arising from C’s mismanagement of his claim invoking insurance protection, he was acting for a purpose outside those original business interests. Mr Lochner was a former director of a company in administration, seeking to invoke a policy protecting his private interests and life, in which Betbroker had no interest.[113]The fact that the policy provided such protection arising from his actions as a director does not, D contends, alter that analysis. The question is whether Mr Lochner was acting for purposes outside his trade, business or profession in respect of the complaint he was making.[114]The fact that D&O policies may promote a corporate interest is nothing to the point. The same is true of PHI policies (making companies attractive for their employees), but it is clear from the FCA rules that this does not make such policies incapable of being invoked by insured persons as consumers. The ability to offer such policies may be of benefit to the company, but that does not affect the analysis whether a person, seeking to take the benefit of the policy to protect his private interests covered by the policy, is acting outside his business, trade or profession.[115]The fact that Mr Lochner was seeking policy protection in relation to events arising from his role as a director does not alter the analysis any more than it would for an employee seeking to avail himself of PHI cover for an illness arising from work.

My conclusion on this issue

[116]FOS had to decide whether Mr Lochner, in making his complaint, was an eligible complainant such that the compulsory jurisdiction of FOS was triggered by his complaint. In so doing, FOS had to decide whether he was a consumer within DISP 2.7.3 R(1). That, in turn and by reference to the definition of a consumer in the glossary, required a decision whether Mr Lochner was “any natural person acting for purposes outside his trade, business, or profession”. If he was, then he was a consumer and FOS had jurisdiction to consider his complaint. If he was not, then he was not a consumer and FOS did not have jurisdiction to consider his complaint.[117]Mr Lochner, by making his complaint, was “acting”. The question is what, upon a true analysis, was he doing and for what purposes?[118]He was making a complaint to FOS with a view to obtaining a determination under the compulsory jurisdiction, pursuant to Section 228 of FSMA, and an award and/or a direction under Section 229(2). An award had to be by way of compensation for loss or damage of a kind falling within subsection (3), suffered by the complainant. Section (3) provides that a money award may compensate for(a) financial loss or(b) any other loss or any damage of a specified kind.[119]The complaint against C was that C had failed to notify the insurer of a potential claim against Mr Lochner to be made by AAM. The notification by C to the insurer would be for the purpose of entitling Mr Lochner to recover an indemnity from the insurer, pursuant to the D&O policy, in respect of any loss incurred by him as a result of the claim made against him by AAM.[120]The complaint made against C by Mr Lochner was to the effect that, by virtue of C’s omission to communicate that notification to the insurers, the insurer had denied cover under the policy so that Mr Lochner was exposed to any loss arising in respect of the claim brought against him by AAM.[121]The claim by AAM against Mr Lochner was in respect of Mr Lochner’s allegedly wrongful acts when acting as a director of Betbroker. Those acts were in the course of his trade, business, or profession. The D&O policy benefitted him as an insured person only in respect of his liability to a third party, (AAM), by virtue of his acting in the capacity of director or official or employee of Betbroker and, therefore, in the course of his trade, business, or profession.[122]Thus, the purpose of Mr Lochner making his complaint to FOS was to obtain redress which would compensate him for the loss sustained by virtue of his being left unprotected under the D&O policy in respect of loss arising from the claim made against him by AAM for his wrongful acts undertaken in the course of his trade, business, or profession.[123]Thus, no financial redress could be awarded by FOS to Mr Lochner except that which would compensate him for any loss in relation to that litigation which would otherwise have been the subject of an indemnity under the D&O policy, had notification been properly made and cover been accepted by the insurer.[124]In my judgment, looking at the purposes for which Mr Lochner was acting in making his complaint to FOS, there is no proper basis on which FOS could have concluded that his purposes were outside his trade, business, or profession. On the contrary, the subject matter of his complaint was wholly concerned with the potential loss arising from lack of insurance cover in respect of a liability which he had incurred in the course of his trade, business, or profession.[125]In that context, the fact that, under the D&O policy, he was a beneficiary in respect of his personal loss and that he, therefore, made his complaint to FOS in his personal capacity in respect of that personal loss, could not be considered to be sufficient to cause him to fall within the definition of a consumer:
“a person acting for purposes outside his trade, business or profession”
. In my judgment, his complaint to FOS was inextricably linked with his trade, business, or profession, in respect of which he was potentially personally liable for alleged wrongful acts.[126]I do not accept the contention that the D&O policy, being a group protection policy, is, as such, to be regarded in the same way as other group protection policies which may be entered into for the benefit of the workforce, for example a private health insurance policy. Those policies may well be such that a complaint made by a beneficiary in respect of a failure properly to manage the policy, thereby causing loss, could be made as a consumer. The point of such a policy is to provide protection in respect of the private interests of the members of the scheme in having a particular level of healthcare or a particular level of income in the event of ill-health. It is not difficult to conclude that a complaint made to FOS in such a context could be for a purpose outside the person’s trade, business, or profession.[127]Nor in my judgment, is it of significance to this claim that Mr Lochner’s spouse might, in similar circumstances, have been able to make a complaint to FOS as a consumer. Any loss sustained by her in respect of a claim by AAM against her husband would not involve her doing other than acting for a purpose outside her trade, business, or profession in the event that maladministration of the scheme by a broker caused her to be denied the benefit cover under the D&O policy to which otherwise she would have been entitled.[128]Accordingly, in my judgment, as an issue of precedent fact, Mr Lochner did not fall within the compulsory jurisdiction of FOS as he was not an eligible complainant.[129]In the alternative, in concluding that Mr Lochner was an eligible complainant, FOS misdirected itself in law. Had it properly directed itself it would have properly concluded that Mr Lochner was not an eligible complainant so as to have the benefit of the compulsory jurisdiction of FOS.[130]In conclusion, therefore, this claim for judicial review succeeds. I shall, accordingly, grant an order quashing FOS’s decision to entertain the complaint made by Mr Lochner against C under the compulsory jurisdiction mandated by Section 226 of the FSMA.

Cited in 6 later judgments