J & E Davy -v- Financial Services Ombudsman & anor, [2010] IESC 30 (2010)

Docket Number:311 & 328/08
Party Name:J & E Davy, Financial Services Ombudsman & anor
Judge:Finnegan J.
 
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THE SUPREME COURTAppeal No. 311 AND 332/08Murray C.J.Denham J.Hardiman J.Geoghegan J.Finnegan J.BETWEENJ & E DAVY TRADING AS DAVYAPPLICANT/RESPONDENTandFINANCIAL SERVICES OMBUDSMANRESPONDENT/APPELLANTandENFIELD CREDIT UNIONNOTICE PARTYJudgment of Mr Justice Finnegan delivered on the 12th day of May 2010The applicant (hereinafter "Davy") is a stockbroker. The respondent is the Financial Services Ombudsman (hereinafter "the Ombudsman") appointed under the Central Bank Act 1942 Part VIIB(as inserted by section 16 of the Central Bank and Financial Services Authority of Ireland Act 2004) (hereinafter "the Act"). The notice party (hereinafter "the Credit Union") is a company incorporated with limited liability and operates as a Credit Union in the vicinity of Enfield, Co. Meath. At all material times the Credit Union was a client of Davy. The Credit Union took no part in the proceedings.On the 22nd August 2007 the Credit Union made a complaint against Davy to the Ombudsman concerning the investment by the Credit Union in three perpetual bonds issued by three banks, Nordea Bank, Jyske Bank and Oko Bank (hereinafter "the Bonds"). The Bonds in each case are perpetual subrogated Bonds which are unlikely to be redeemed by the issuer. It is not suggested that the issuing banks are other than stable. The market value of the Bonds had been subject to a significant decline. On 5th November 2007 the Deputy Ombudsman issued a report which upheld the complaint of the Credit Union and made certain directions. Further submissions were made by Davy and the Credit Union on this report. On the 21st January 2008 the Ombudsman issued a Final Decision ("the Decision") in which he found that the complaint made by the Credit Union was substantiated. He directed Davy:-(i) to pay the Credit Union the sum of 500,000 in exchange for the bonds;(ii) to refund the Credit Union all fees and commissions paid by it in relation to the purchase of the bonds;(iii) to complete these transactions or on before the 22nd February 2008.Arising out of the foregoing Davy took the following steps:-(i) It appealed to the High Court pursuant to section 57CL of the Act.(ii) It instituted plenary proceedings challenging the constitutionality of the Act. In short Davy claims that the Ombudsman not being a judge appointed under Article 34.1 of the Constitution in exercising his statutory powers is exercising judicial functions and powers which are not limited functions and powers of a judicial nature as provided for in Article 37 of the Constitution.(iii) It instituted the present judicial review proceedings.This appeal is concerned with the Judicial Review proceedings. Accordingly the court is not concerned with the correctness of the Ombudsman's Decision on the factual issues underlying the complaint nor with whether the Ombudsman was correct in upholding the complaint and directing the payment of compensation. The function of the court is exclusively to review the manner in which the Decision was made.The High Court ProceedingsBy order of the 8th February 2008 Davy were given leave to apply for the following reliefs:-1. An Order of Certiorari quashing the Decision.2. A declaration that the Ombudsman in purporting to make the Decision acted ultra vires and/or without or in excess of jurisdiction.3. A declaration that the Ombudsman in purporting to make the Decision acted in breach of fair procedures and/or in breach of natural and constitutional justice.4. A declaration that the Ombudsman in purporting to make the Decision acted in breach of section 4 of the European Convention on Human Rights Act 2003.The grounds upon which the Decision was challenged by Davy are as follows:-1. The Ombudsman did not, as he was required to do under section 57CA of the Act, try to resolve the complaint made by the Credit Union by mediation.2. The Ombudsman was not empowered to deal with the complaint in circumstances where the Financial Services Ombudsman Council had failed, as it is required under section 57BF of the Act, to make regulations prescribing the matters that the Ombudsman must take into account when investigating or adjudicating a complaint and prescribing the procedures to be followed in processing a complaint.3. The Ombudsman adopted a two stage procedure for investigating and adjudicating upon the complaint made by the Credit Union, involving an appeal to him against his own decision, which is contrary to the provisions of Part VIIB of the Act, and which led him to prejudging the Decision.4. The procedures adopted by the Ombudsman were unfair and he acted in breach of the requirements of natural and constitutional justice and in breach of section 3 of the European Convention on Human Rights Act 2003 in that:-(a) he refused to make available to Davy documents that had been submitted to him by the Credit Union and on which he relied in reaching the Decision including, in particular, two expert reports submitted on its behalf. He also refused to direct the Credit Union to make documents available to Davy which it required in order to defend the complaint.(b) he refused to hold an oral hearing in relation to the complaint which was essential in order to resolve the conflicts of fact that were central to the issues that he had to decide.5. The Ombudsman impermissibly relied on knowledge and experience of credit unions which he had obtained in the course of dealing with other complaints. He thereby:-(a) Adopted a procedure which was unfair because Davy was not afforded an opportunity to make submissions in relation to that experience.(b) Prejudged a number of issues that arose.6. The Ombudsman acted unlawfully and there is an error on the face of the record in that he purported to issue the Decision and make directions without finding the complaint to be substantiated against Davy on any of the grounds specified in section 57 CI(2) of the Act.The Ombudsman in the statement of opposition dealt with each of the foregoing grounds as follows:-1. Mediation.The Ombudsman denied that he is required to try to resolve a complaint by mediation in circumstances where he considers that mediation has no real prospect of success. Both the Ombudsman and the Deputy Ombudsman concluded that the case was not an appropriate one for mediation. By considering the issue the Ombudsman complied with his obligations under section 57CA of the Act. The decision that the case was not an appropriate one for mediation is not challenged on the basis that it is irrational or wrong. Davy acquiesced in the decision.2. Regulations.Section 57BF of the Act provides that the Financial Services Ombudsman Council shall make regulations which are "necessary or convenient to be prescribed for the purposes of enabling the Financial Services Ombudsman to perform the functions imposed, and to exercise the powers conferred, on the Ombudsman by this part." The failure to make regulations does not deprive the Ombudsman of jurisdiction to investigate and adjudicate upon complaints. Section 57BF is an enabling provision and not a condition precedent to the exercise by the Ombudsman of his functions under the Act. The Central Bank Act 1942 (Financial Services Ombudsman Council) Regulations 2005 S.I. 190 of 2005 oblige the Ombudsman to have regard to the existing Terms of Reference of the Insurance Ombudsman of Ireland in respect of complaints regarding insurance matters and to the existing Terms of Reference of the Ombudsman for the Credit Institutions in respect of complaints regarding banking and building society matters which is a sufficient compliance with section 57BF. The procedures adopted were appropriate and were not objected to by Davy in previous cases in which complaint was made against them.3. Two stage procedure.The Act makes provision for a Deputy Ombudsman and provides that any act done by a Deputy Ombudsman is deemed to have been done by the Ombudsman. However this does not mean that the hearing by the Ombudsman of an appeal from a finding or decision of a Deputy Ombudsman amounts to his hearing an appeal from his own decision or adjudicating twice upon the complaint nor does it involve pre-judgment. The Ombudsman is entitled to adopt his own internal procedures. Davy were notified of the two-stage procedure. Davy first complained of the two-stage procedure after the Deputy Ombudsman made an adverse finding but nonetheless participated in the appeal to the Ombudsman and accordingly are estopped from and/or have waived any entitlement to rely upon this ground.4. Fair Procedures(a) Davy were afforded the opportunity to make submissions and made copious submissions throughout the process. The procedure adopted was appropriate having regard to the provisions of section 57BB(c) which provides that an object of Part VIIB of the Act is to enable complaints to be dealt with in an informal and expeditious manner. The Ombudsman is entitled to request information or documents from parties and it is a matter for him to decide whether to furnish information or documents received from one party to the other.(b) Oral hearing. The decision whether or not to hold an oral hearing is a matter for the Ombudsman in his discretion. In exercising the discretion he must have regard to the object that complaints be dealt with in an informal and expeditious manner. In the present case the Ombudsman deemed it unnecessary to hold an oral hearing.5. The Ombudsman is entitled to rely upon his own expertise of credit unions. The Ombudsman did not prejudge any issues.6. The Ombudsman denies that he did not find the complaint to be substantiated on any of the grounds specified in section 57CI(2) of the Act. In a meticulously detailed final decision, it was not necessary to expressly specify the exact grounds under section 57C1(2) of the Act under which the complaint was found to be substantiated.Judgment of the High CourtJudgment was delivered in the High Court (Charleton J.) on the 30th July 2008. I propose to set out briefly the...

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