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Issue 18 - August 2014

Recent Supreme Court decision confirms FOS approach to resolving disputes


The recent court case of Financial Ombudsman Service Limited v Pioneer Credit Acquisition Services Pty Ltd [2014] VSC 172 has received some industry interest and commentary since it was handed down on 16 April 2014. The judgment upheld FOS’s claim against Pioneer and dismissed Pioneer’s counterclaim in its entirety.

Some commentary has attempted to draw a link between the Pioneer judgment and reported concern from the legal industry that FOS makes binding Determinations that cannot be appealed, and that the Determinations do not necessarily apply the applicable law if to do so would produce an unfair result for the parties.

Pioneer submitted that FOS could not act like a court and relied on evidence given by Lead Ombudsman Philip Field who said:

“We have to reach a resolution of the dispute and in order do that you have to take into account the legal principles that apply to that particular dispute. That’s what we do and if that involves the interpretation of the law and the application of those legal principles to the facts in dispute, then that’s what we are required do, that’s our job.”

Justice Ferguson, in rejecting this submission by Pioneer, said that FOS was required under its Terms of Reference to have regard to legal principles, as well as other matters, when resolving disputes and that FOS had taken into account what it believed to be the relevant legal principles.

In any event, none of the disputes involving Pioneer were the subject of an Ombudsman’s Determination. If Pioneer did not like the views expressed in the Recommendations issued by the case manager then it had the opportunity to respond to the Recommendations, to provide further information and to explain why the views expressed in the Recommendations were wrong. Instead of adopting that course, Pioneer chose to settle the disputes.

Justice Ferguson also took the additional step of awarding FOS more than the standard rate of costs against Pioneer as a result of Pioneer rejecting an offer by FOS to try and settle the dispute on commercial grounds. FOS notes that some industry media articles have attempted to interpret a concession drafted between the parties in an effort to resolve the dispute during mediation as possessing a significance that it never held. As Justice Ferguson noted in her judgment, the concession was proffered by FOS "with a view to settlement" and was a common thing for parties involved in legal proceedings to do.

FOS remains confident of the integrity of its processes and its impartial and effective handling of disputes in the financial sector, and is working hard to enhance and develop these processes in order to further improve its external dispute resolution service for all stakeholders, both consumer and industry.