On 13 June 2024, Mrs Justice Stacey handed down judgment dismissing a judicial review claim by Linear Investments Ltd (“Linear”) against a decision of the Financial Ombudsman Service: R (Linear Investments Ltd) v Financial Ombudsman Service and Professor Leslie Willcocks [2024] EWHC 1428 (Admin). Stephen Kosmin acted successfully for the Financial Ombudsman Service.
Linear carries on business as a provider of investment services, including the management and administration of client money and other assets. The challenged decision upheld a complaint by Professor Willcocks, the interested party, who was a former client of Linear. He alleged that Linear had used misleading terms and conditions relating to account fees; used misleading performance information relating to investment strategies; mismanaged his account; and had used misleading contractual terms that purported to exclude his right to complain to the Financial Ombudsman Service.
When upholding the complaint, the Ombudsman carefully considered the regulatory provisions set out in the Financial Conduct Authority’s Handbook and its rules for the Conduct of Business (a.k.a. “COBS”) concerning the categorisation of clients by financial firms as “elective professional clients”. The Ombudsman held that that Professor Willcocks was a “consumer” in relation to the activity to which the complaint related, such that he was eligible to bring his complaint against Linear to the Financial Ombudsman Service. Linear was ordered to compensate Professor Willcocks by reference to a stated benchmark.
Linear challenged the Ombudsman’s findings that Professor Willcocks was an eligible complainant and alleged that the Ombudsman had wrongfully interfered in Linear’s client classification assessment. Linear also challenged the measure of redress ordered and the decision that no deduction should be made for contributory fault.
Mrs Justice Stacey dismissed all the grounds of challenge. In particular, her judgment addressed:
- the case-law concerning jurisdictional challenges to the Financial Ombudsman Service (including R (Assurant General Insurance Limited) v Financial Ombudsman Service Ltd [2023] EWCA Civ 1049 and R (Chancery (UK) LLP) v Financial Ombudsman Service [2015] EWHC 407 (Admin), in which Stephen Kosmin successfully appeared for the Financial Ombudsman Service);
- the Financial Ombudsman Service’s inquisitorial jurisdiction;
- the case-law concerning challenges to the Financial Ombudsman Service’s approach to its “fair and reasonable” test (including R. (on the application of Charles Street Securities Europe LLP) v Financial Ombudsman Service (Charles Street No. 2) [2023] EWHC 448 (Admin), in which Stephen Kosmin also successfully appeared); and
- the case-law concerning client classification by regulated firms (including Spreadex Ltd v Sekhon [2008] EWHC 1136 (Ch) and R (Charles Street Securities Europe LLP) v Financial Ombudsman Service (Charles Street No. 1) [2022] EWHC 2401 (KB), in which Stephen Kosmin again successfully appeared).
A copy of the judgment can be accessed here.
