Stephen Kosmin successfully defends the Financial Ombudsman Service in investment advice case


On 10 February 2023, Mrs Justice Heather Williams gave an oral judgment dismissing a judicial review claim by Charles Street Securities Europe LLP (“CSSE”) against the Financial Ombudsman Service. Stephen Kosmin successfully represented the Financial Ombudsman Service.

CSSE was a limited liability partnership authorised and regulated by the Financial Conduct Authority. It had an appointed representative under section 39 of the Financial Services and Markets Act 2000, namely, CSS Partners LLP (“CSSP”), which carried on business comprising regulated activities for which CSSE accepted responsibility. Mr Rees is an individual who formerly owned and ran two hearing aid businesses. He first contacted CSSP in January 2006, by which time he had retired and was in the process of selling his business. Thereafter, he was advised to enter into high-risk investments. That advice continued after he had exceeded his capacity for loss, which was 25% of the assets held with CSSE. By the challenged Decision, the Ombudsman upheld Mr Rees’ complaint, made a money award, and recommended the payment of additional compensation in excess of the then statutory cap of £150,000 plus interest.

CSSE advanced various irrationality challenges to the Decision at the substantive hearing of the claim. Referring to COBS 9.2.2R, CSSE contended that the crucial regulatory difference between an assessment of a client’s attitude to risk and his capacity for loss was “specious”. CSSE also contended that the Ombudsman had erred in failing to apply common law principles, including the principles in South Australia Asset Management Ltd v York Montague Ltd [1997] 1 AC 191.

Heather Williams J dismissed the claim in its entirety and awarded the Financial Ombudsman Service its costs in full. In particular, her judgment provided a detailed account of an Ombudsman’s obligations to provide reasons when departing from the common law. Heather Williams J adopted the approach of Stanley Burnton J in R (IFG Financial Services Ltd) v Financial Ombudsman Service [2005] EWHC 1153 (Admin), [2006] 1 BCLC 534, which she reconciled with his later judgment in R (Heather Moor & Edgecomb Ltd) v Financial Ombudsman Service [2008] EWCA Civ 642, [2008] Bus LR 1486.

Heather Williams J’s judgment was the second in these proceedings. On 26 September 2022, Mr Justice Murray had refused CSSE permission to claim judicial review in respect of a jurisdiction decision of the Financial Ombudsman Service: see R (Charles Street Securities Europe LLP) v Financial Ombudsman Service [2022] EWHC 2401 (KB).  Charles Street had contended that the Ombudsman had applied the wrong test when considering whether the interested party, Mr Rees, was properly classified as a “elective professional client” at the time of his complaint to the Ombudsman Service and as an “intermediate customer” under prior transitional provisions.  Mr Justice Murray accepted Stephen Kosmin’s submissions for the Financial Ombudsman Service and ruled that Charles Street’s challenge did not meet the threshold for the grant of permission to claim judicial review.

A copy of Heather Williams J’s judgment will be provided when available.