Clark v In Focus Asset Management and Tax Solutions Limited 
[2012] EWHC 3669 (QBD) 
One of the decisions it has traditionally been necessary to grapple with when contemplating prospective litigation for a financial mis-selling, is whether it would be appropriate for the complainant to pursue their complaint through the Courts or the Financial Ombudsman Service (FOS).
However, following the decision of the High Court in Clark v In Focus Asset Management and Tax Solutions Limited (“Clark”), whatever other issues a case for prospective mis-selling faces, this issue is no longer one of them.
Although a little historic, judgement being handed down in December 2012, Clark is decision worth noting in that it held that it was open to a complainant, having accepted an award from FOS of the (then) statutory maximum of £100,000 on the basis that it would be “final and binding” to bring further proceedings before the civil courts for the balance of the losses allegedly suffered.  
The Claimants (C) brought a complaint before FOS upon the basis of inappropriate advice. The complaint was upheld and FOS awarded C the statutory maximum of £100,000. C were told that if they accepted the award they “would be bound by the decision, which will be final”.
Prior to acceptance, C’s solicitors wrote and enquired of FOS the meaning of “final and binding” and expressly sought clarification as to whether acceptance of the award from FOS would preclude further action through the civil courts for the balance of C’s losses above £100,000. FOS informed them that it would be a matter for the Courts whether anything further could be awarded, and thereafter C accepted the FOS decision, albeit stating explicitly that they were reserving their right to pursue the balance through the civil courts.
At first instance C’s claim was struck out due primarily to the Court’s view that the decision of Andrews v SBJ Benefit Consultant [2010] EWHC 2875 (Ch), decided post C’s acceptance of the FOS award, was binding. Andrews, decided on similar facts to Clark, had concluded that the doctrine of merger (which provides that a party which has obtained a final judgement in a tribunal of competent jurisdiction is precluded from later recovering in court a second judgement for the same relief in respect of the same subject matter) prevented subsequent court action to “top up” an award from FOS.
However on appeal to the High Court in Clark, Cranston J allowed C’s appeal upon the basis that;
(a)    Andrews had been wrongly decided on the issue of whether merger applied to FOS decisions. It had, when considering the decision of Heather Moor and Edgecomb Limited v FOS and Lodge [2008] EWCA Civ 642, failed to appreciate the obiter statement of the Court of Appeal that FOS was dealing with “complaints, and not legal causes of action, within a particular regulatory setting”. The Court in Clark was of the view that this statement showed that there was a difference between the cause of action under consideration in the civil proceedings and the matter that had been determined by FOS (which were complaints). Accordingly merger did not apply. [Para 25]
(b)    Further, the Court decided that the acceptance of the FOS award by C on the basis that the same was “final and binding”, was only final in the sense that it was the conclusion of the FOS process rather than in the sense that the complainant could not take further proceedings. Interestingly Cranston J was of the opinion [Para 29] that it was not inconsistent with FOS’s statutory aims for a complainant to use a FOS award to finance the costs of bringing legal proceedings. In the Court’s opinion, the objectives of the FOS scheme were  to facilitate the resolution of disputes expeditiously and informally, without the necessity of applying the law. Those objectives would not be undermined by allowing a complainant to accept the FOS award and then still go to Court. 
The effect of the decision in Clark (which is subject to an appeal) is that there are now competing decisions at the same judicial level. Although neither takes precedence, Clark being the latter decision, ought to be followed. (See Re Lune Metal Products Limited [2006] EWCA Civ 1720). Clearly the guidance of the Court of Appeal in unravelling this issue will be more than welcome, although it remains to be seen whether they will be persuaded to reverse Clark. 
In the meantime a considerable amount of uncertainty in this area, both for those advising potential complainants and those in the financial services industry, has been created. Financial professionals face, the short term at least, a potential rise in claims and inevitably increased insurance premiums. By contrast, the judgement represents a positive development for claimants. No longer will there be a need to elect between the FOS and court routes, both avenues remain open. Furthermore with respect to funding, potential claimants facing uncertain funding prospects post Jackson may now elect to bring FOS proceedings in order to fund their losses as an alternative to entering in to a CFA.
Written by Philip Mantle