In the recent decision of R (Assurant General Insurance Limited) v the Financial Services Ombudsman (FOS) & Ors [2023] EWCA Civ 1049, the Court of Appeal clarified the jurisdiction of the FOS as well as the respective roles of the Courts and the FOS on judicial review.
Background
Historically, Assurant General Insurance Limited (Assurant) underwrote payment protection insurance (PPI) policies which were offered by retailers to consumers, when purchasing from home-shopping catalogues. Four of those consumers were Respondents in this appeal, alongside the FOS.
The Respondents complained to the FOS about Assurant regarding mis-selling of these policies (as the retailers were not regulated at the time the policies were sold). The FOS accepted these complaints, on the basis the acts complained of were carried out by the retailer, who was Assurant’s agent, and therefore Assurant fell within its compulsory jurisdiction.
Assurant sought to judicially review the decision by the FOS to accept jurisdiction over these complaints. The High Court rejected its claim for judicial review on the basis that the Court would not consider the question of jurisdiction itself, but would only review the FOS’s decision on public law principles (eg procedural fairness, rationality in fact finding, and avoidance of error of law). As such, the High Court did not undertake its own assessment of the relevant contractual provisions to determine whether an agency relationship existed, and found the FOS’s conclusion that such a relationship existed to have been rational. Assurant appealed that decision to the Court of Appeal.
The Appeal
Assurant appealed on two grounds, namely that the Court:
- erred in adopting a traditional judicial review approach, as the question of whether there was a relationship of agency was one of “precedent fact” which the Court itself had to decide, because the correct constitution of the agreements was a question of law; and
- wrongly concluded it could not find fault with the FOS’s conclusion that it had jurisdiction (applying public law principles).
The Court of Appeal dismissed the appeal, but for different reasons to those given by the High Court. It found that the High Court should have conducted its own contractual analysis, but that the FOS was correct to determine that an agency relationship existed between Assurant and the retailers, meaning the FOS did have jurisdiction over the complaints.
In reaching its decision, the Court of Appeal provided helpful guidance as to the roles of both the courts and the FOS in judicial review proceedings.
Scope of FOS jurisdiction
The Court of Appeal noted that it is a matter of statutory construction which decisions can only be challenged on traditional judicial review grounds, and which require a different approach. In that regard, certain guiding principles can be gleaned from the Court of Appeal’s commentary on the authorities it considered:
- Cases concerning a procedural aspect of the complaint are within the FOS’s powers (as Parliament couldn’t have intended the High Court to reconsider the substance of such issues, beyond traditional judicial review grounds).
- Where the FOS is considering the limits of its jurisdiction, it is for the Court to determine, as the FOS “cannot act without jurisdiction simply because its error was reasonable”.
- In cases involving contractual interpretation, it is for the Court to undertake such analysis.
- The FOS must reach rational findings of fact, and such findings are reviewable by the Court on traditional judicial review grounds. By contrast, it is for the Court to consider the application of the law to the facts, and therefore it may conduct its own substantive contractual analysis.
Therefore, the roles of the court and the FOS will depend on the facts of the dispute in question. If there is a dispute as to the contractual terms (such as an oral contract, or where terms are said to be implied by conduct), the Court of Appeal accepted that this would concern questions of fact, and determination of those facts would primarily be for the FOS (subject to judicial review on conventional public law principles). However, the proper construction of a document is a question of law and must be determined by the court.
Agency relationship
The Court of Appeal then turned to consider whether an agency relationship existed on the facts of this case.
At the hearing, Assurant accepted that a degree of agency relationship existed between it and the retailers, but denied that this extended to mean the retailers were Assurant’s agents when it came to critical acts or omissions about which the complaints were made (ie actually selling the policy).
This was rejected by the Court of Appeal, firstly because the manner in which the retailers created the relationship between consumers and Assurant (which it was accepted they did as Assurant’s agent) was by selling the insurance policy; and secondly, because the relevant terms of the insurance agreements created an implied agency relationship when it came to the sale of insurance policies to consumers.
The Court of Appeal indicated that the main indicators of an agency relationship were present, namely, that there was a large degree of control exercised by Assurant over the retailers (regarding marketing and other matters), the retailers owed fiduciary duties to Assurant in that they had to account to Assurant for its share of the money, and the retailers could exclusively market Assurant policies.
As a result, the Court of Appeal concluded that an agency relationship existed between Assurant and the retailers.
Key takeaways
While this decision relates to the law of agency in relation to PPI policies, its implications and findings are likely to have a broader application in judicial review proceedings.
This case represents a helpful clarification of the scope of judicial review of the FOS’s decisions, and the respective roles of the Courts and the FOS in such judicial review. In particular, this judgment demonstrates that financial institutions can challenge the FOS’s jurisdiction where that jurisdiction is based on a question of law. As such, this decision may influence how future judicial review proceedings are framed.
