R (on the application of Bluefin Insurance Services Ltd) v Financial Ombudsman Service Ltd [2014] EWHC 3413 (Admin)

The High Court gave judgment in a judicial review claim brought by Bluefin Insurance Services (claimant), an insurance broker, challenging a decision made by the Financial Ombudsman Service (FOS) to accept jurisdiction over a complaint made against the claimant.

The claimant originally acted as a broker for a Directors and Officers (D&O) insurance policy taken out by Betbroker Ltd. Mr Lochner, founder, CEO and shareholder of Betbroker, benefitted from the D&O policy as an ‘insured person’. A claim was brought against Mr Lochner for allegedly dishonest misrepresentations made in the course of fund-raising on behalf of the Betbroker group. Litigation commenced in 2011 and Mr Lochner sought the protection of the D&O policy. The insurer rejected his claim contenting that it had not received any notice of a claim or circumstance likely to give rise to a claim pursuant to the policy terms.

Mr Lochner claimed to have notified the claimant (the broker) of the potential claim before the policy expired but the claimant failed to pass that information on to the insurer. Consequently, Mr Lochner brought a complaint to the FOS against the claimant.

In its decision of May 3, 2013, the FOS found that it did have jurisdiction to investigate Mr Lochner’s complaint and he was an ‘eligible complainant’, in this case ‘a consumer’, for the purposes of the Dispute Resolution: Complaints (DISP) section of the Financial Services Handbook. The FOS reasoned that the claim under the D&O policy related to a legal action against Mr Lochner personally and that his complaint concerned a loss of policy benefits that would go to him as an individual rather than his former company. The FOS decided that Mr Lochner was complaining on his own behalf and was, therefore, acting outside his trade, business, or profession. As such, Mr Lochner satisfied the DISP definition of a consumer.

The High Court ruled that ‘this was 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’. In giving judgment, Wilkie J then went on to consider whether the FOS was wrong to conclude that Mr Lochner was ‘a consumer’ and found in favour of the claimant concluding that, as an issue of precedent fact, Mr Lochner did not fall within the compulsory jurisdiction of the FOS as he was not an eligible complainant.

This is an important case for a number of reasons. It determines that it is for the courts to determine whether eligibility is a question of precedent fact. Furthermore, the case reviews case law on who is a consumer and draws boundaries around the eligibility of natural persons seeking redress from the FOS in relation to D&O policies taken out for protection against liability in their role as directors.

For further information: R (on the application of Bluefin Insurance Services Ltd) v FOS [2014] EWHC 3413 (Admin), 7 October 2014