Martin O'Brien v Financial Services Ombudsman and Another

JurisdictionIreland
JudgeMs. Justice Iseult O'Malley
Judgment Date28 February 2014
Neutral Citation[2014] IEHC 111
CourtHigh Court
Date28 February 2014

[2014] IEHC 111

THE HIGH COURT

Record No. 19 MCA/2013
O'Brien v Financial Services Ombudsman & Anor
No Redaction Needed
IN THE MATTER OF THE CENTRAL BANK ACT 1942 (AS AMENDED) AND IN THE MATTER OF PART VIIB THEREOF AND IN THE MATTER OF AN APPEAL PURSUANT TO SECTION 57CL
BETWEEN/
MARTIN O'BRIEN
Appellant
-and-
THE FINANCIAL SERVICES OMBUDSMAN
Respondent
-and-
NEW IRELAND ASSURANCE COMPANY PLC TRADING AS BANK OF IRELAND LIFE
Notice Party

CENTRAL BANK ACT 1942 S57CL

J & E DAVY T/A DAVY v FINANCIAL SERVICES OMBUDSMAN 2010 3 IR 324 2010 2 ILRM 305 2010/24/5828 2010 IESC 30

MURPHY v FINANCIAL SERVICES OMBUDSMAN UNREP PEART 21.2.2012 2012/29/8593 2012 IEHC 92

HYDE v FINANCIAL SERVICES OMBUDSMAN UNREP CROSS 16.11.2011 2011/26/6887 2011 IEHC 422

LYONS & MURRAY v FINANCIAL SERVICES OMBUDSMAN UNREP HOGAN 14.12.2011 2011/31/8710 2011 IEHC 454

CAFFREY v FINANCIAL SERVICES OMBUDSMAN UNREP HEDIGAN 12.7.2011 2011/7/1582 2011 IEHC 285

CARR v FINANCIAL SERVICES OMBUDSMAN UNREP O'MALLEY 26.4.2013 2013 IEHC 182

MOLLOY v FINANCIAL SERVICES OMBUDSMAN UNREP MACMENAMIN 15.4.2011 (EX TEMPORE)

CAGNEY v FINANCIAL SERVICES OMBUDSMAN UNREP HEDIGAN 25.2.2011 (CASE NO 2009/38MCA)

STAR HOMES (MIDLETON) LTD v PENSIONS OMBUDSMAN UNREP HEDIGAN 21.12.2010 2010/48/12124 2010 IEHC 463

HEATHER MOOR & EDGECOMB LTD v UNITED KINGDOM 2011 53 EHRR SE18

SQUARE CAPITAL LTD v FINANCIAL SERVICES OMBUDSMAN 2010 2 IR 514 2009/53/13449 2009 IEHC 407

DE PAOR v FINANCIAL SERVICES OMBUDSMAN UNREP MCGOVERN 20.12.2011 2011/11/2670 2011 IEHC 483

WALSH & ORS v FINANCIAL SERVICES OMBUDSMAN UNREP HEDIGAN 27.6.2012 2012/46/13729 2012 IEHC 258

ULSTER BANK v FINANCIAL SERVICES OMBUDSMAN UNREP FINNEGAN 1.11.2006 2006/56/11976 2006 IEHC 323

HAYES v FINANCIAL SERVICES OMBUDSMAN UNREP MACMENAMIN 3.11.2008 (EX TEMPORE)

Banking – Investment – Financial Advice – Appellant seeking to appeal the decision of the Financial Services Ombudsman

Facts: This is an appeal pursuant to the provisions of s. 57CL of the Central Bank Act 1942 as amended, against the respondent on foot of a complaint by the appellant against the notice party (‘the company’). The complaint arose from a €45,000 investment made by appellant on advice of the company. The investment subsequently declined in value. In making his complaint, the appellant sought to recover the lump sum in its entirety in addition to compensation for distress and legal costs. The respondent found the complaint was only partially substantiated and directed the company to pay compensation in the amount of €5,000. The appellant initiated an appeal.

Held by O'Malley J,

The issues in the appeal concern the decision of the respondent not to hold an oral hearing; the drawing of inferences from a document which, according to the appellant but unbeknownst to the respondent, was inaccurate, and the method of assessment of compensation. The appellant alleged the respondent was obliged to hold an oral hearing because there was a material conflict of evidence. O”Malley J held that the respondent had been fully aware of the conflict and was entitled to exercise its discretion not to hold an oral hearing.

The appellant also contended that the respondent had reached its decision by relying on a document containing errors. O”Malley J held that there was no obligation on the respondent to check the accuracy of every piece of material and the appellant had the opportunity to point out that he did not accept the document. Finally, the appellant argued that the figure determined by the respondent of €5,000 does not bear a logical relationship to the loss suffered. The respondent did not award compensation for loss because he did not accept that any loss sustained was necessarily due to improper conduct of the company. O”Malley J held that this would not be open to a court to determine and therefore no comparison could be made with the manner in which a court would assess damages.

Appeal dismissed.

Introduction
1

This is an appeal pursuant to the provisions of S.57CL of the Central Bank Act, 1942 as amended, against a finding of the respondent on foot of a complaint by the appellant against the notice party (hereafter "the company"). The complaint arose from an investment of €45,000 in a property fund by the appellant in 2006, made on the advice of the company. At the time of consideration of the complaint by the respondent, in 2012, the investment had declined to a value of approximately €29,000. The respondent found the complaint to be partially substantiated and directed the company to pay compensation in the sum of €5,000. In making his complaint the appellant had sought the return of his lump sum in its entirety, compensation for distress and legal costs.

2

The issues in the appeal concern the decision of the respondent not to hold an oral hearing; the drawing of inferences from a document not relied upon by either party which, according to the appellant but unbeknownst to the respondent, was inaccurate, and the method of assessment of compensation.

The complaint
3

The complaint was made on behalf of the appellant by his solicitors on the 25 th April, 2012. By way of background it was explained that he was "a man with a simple life-style who [was] in no way familiar with financial matters". He was in the habit of simply lodging his money in a current account. His sister attended the bank on a weekly basis to make lodgements and otherwise look after his banking affairs. At the material time, in 2006, there was some €68,000 in the account.

4

In July, 2006 a bank teller remarked to Ms. O'Brien that the money was not earning interest in the current account and suggested a meeting with Mr. Sean Walsh, the insurance and investments manager of the branch. The appellant and his sister duly met with Mr. Walsh on the 13 th July, 2006. It was claimed on behalf of the appellant that at this meeting Mr. Walsh had access to the details of his bank account and carried out a review of his financial affairs.

5

It was a key part of the appellant's case that at the meeting he and his sister stressed that any investment to be made on his behalf must be safe and secure and that he was not a gambling man. According to them, Mr. Walsh stated that he understood this and that it would not be an issue. The appellant says that he expressed an interest in investing the sum of €25,000 but was persuaded to raise this to €45,000. The appellant said that he believed that this sum would be split between two funds on a €40,000/€5,000 basis, but in the event the entire sum was put into one fund.

6

It was stated that at the end of the meeting the appellant and his sister understood that the worst case scenario would be that there would be no gain on the investment but they were confident that none of the sum invested could be lost.

7

Over the following years the appellant received correspondence relating to the investment which indicated that its value was falling. In July, 2010 he and his sister met again with Mr. Walsh to discuss the situation. The appellant said that he had only made the investment on the basis of Mr. Walsh's assurances that the capital amount was safe.

8

After this meeting the appellant wrote a formal letter of complaint to the bank. It was stated that the responses received were unsatisfactory and the complaint to the respondent (in April 2012) was therefore necessary.

9

The complaint claimed that the company had erred in selling the product in question to the appellant in two respects. Firstly, it had carried out an incorrect analysis of the appellant's attitude to risk in a manner that contravened the Interim Code of Practice for Insurance Undertakings that was in place at the relevant time. Clause 5.2 of the Interim Code provided that

"before a non-life assurance undertaking enters into a relationship with a client, it must establish relevant facts to determine the client's requirements so that a product appropriate to the clients needs is presented for the client's consideration."

10

The Policy Application form signed by the appellant had a section dealing with "Attitude to Risk" which contained the statement

"confirm that my chosen attitude to investment risk is 100% Active Growth Investor as stated in my financial review."

The appellant's solicitor argued that a layperson would have no idea what this meant unless the significance of the term was explained. It was also contended that this characterisation of the appellant represented a fundamental mistake on the part of the company, as his history, his obvious lack of "financial know-how" and his reluctance to invest in any product wherein his investment could drop in value all demonstrated that he was completely risk-averse.

11

The second error alleged was the failure to sell to the appellant a guaranteed product. The appellant's case was that only capital guaranteed products had been discussed at the meeting with Mr. Walsh and he considered that he had been sold such a product. It was noted that he had signed a document headed "Understanding Your Investment", paragraph 6 of which read as follows:-

"Your original investment is not guaranteed and you may get back less than you invested. If you have chosen to invest in a guaranteed option, provided no encashment, income payment or fund switches take place before the 5 th anniversary of your policy Bank of Ireland Life guarantees that the value payable on full encashment on that date will be at least equal to the initial amount of your investment."

12

It was argued that this paragraph suggested that a guaranteed option was available and that it was consistent with the appellant's understanding that that was what he had.

13

On receipt of the complaint the respondent indicated to the appellant's solicitor that it was necessary to go through the company's...

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3 cases
  • Z.K v The Minister for Justice and Others
    • Ireland
    • Court of Appeal (Ireland)
    • 20 Octubre 2023
    ...the necessity of an oral hearing will be such that a request for same will not be necessary ( O'Brien v. Financial Services Ombudsman [2014] IEHC 111 (‘ O'Brien v. Ombudsman’). In O'Brien v. Ombudsman, O'Malley J. did not consider the Ombudsman's failure to inform a legally represented part......
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    ...that the standard of reasoning required of the FSPO does not have to “be as detailed or formal as a court judgment”. In O'Brien v. FSO [2014] IEHC 111, O'Malley J. held the FSO was obliged “merely to give the broad gist of his reasons” (para. 59). The decision of NECI v. Labour Court indica......
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    ...Ombudsman [2012] IEHC 92, (Unreported, High Court, Peart J., 21 st February, 2012) and O' Brien v. The Financial Services Ombudsman [2014] IEHC 111, (Unreported, High Court, O'Malley J., 28 th February, 2014)). 150 82. In the instant case, neither the appellant nor the solicitors, by whom s......

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