Square Capital Ltd v Financial Services Ombudsman

• Jurisdiction: Ireland
• Judge: Mr. Justice Bryan McMahon
• Judgment Date: 27 August 2009
• Neutral Citation: [2009] IEHC 407
• Docket Number: [2008
• Court: High Court
• Date: 27 August 2009

[2009] IEHC 407

THE HIGH COURT

[No. 122 MCA/2008]

Square Capital Ltd v Financial Services Ombudsman

IN THE MATTER OF SECTION 57CL OF THE CENTRAL BANK ACT 1942 (AS INSERTED BY SECTION 16 OF THE CENTRAL BANK AND FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2004)

BETWEEN

SQUARE CAPITAL LIMITED

APPELLANT

AND

FINANCIAL SERVICES OMBUDSMAN

RESPONDENT

AND

MARY GALLAGHER

NOTICE PARTY

CENTRAL BANK ACT 1942 S57CL(1)

CENTRAL BANK & FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2004 S16

CENTRAL BANK ACT 1942 S57CM

CENTRAL BANK ACT 1942 S57BB

CENTRAL BANK ACT 1942 S57BK

CENTRAL BANK ACT 1942 S57BX

CENTRAL BANK ACT 1942 S57CI

MURRAY v TRUSTEES & ADMINISTRATORS OF THE IRISH AIRLINES UNREP KELLY 25.1.2007 2007/43/9011 2007 IEHC 27

CONCISE OXFORD DICTIONARY 11ED REVISED 2006

ULSTER BANK INVESTMENT FUNDS LTD v FINANCIAL SERVICES ONBUDSMAN & ORS UNREP FINNEGAN 1.11.2006 2006/56/11976 2006 IEHC 323

CENTRAL BANK ACT 1942 S2

CENTRAL BANK & FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2003 S3

CENTRAL BANK & FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2004 S2

CENTRAL BANK ACT 1942 S57BK(2)

CENTRAL BANK ACT 1942 S57CI(2)

CENTRAL BANK ACT 1942 S57CI(4)(B)

COURTS

Jurisdiction

Ombudsman - Appeal - Statutory appeal distinguished from ordinary judicial review - Principles to be applied - Jurisdiction of ombudsman - No challenge to procedures followed by respondent- Finding of respondent based on objective analysis of evidence before him - Whether decision of respondent vitiated by serious and significant error or series of errors- Financial services - Whether appellant provided financial service to notice party -Whether appellant acted as financial service provider - Failure by appellant to disclose interest in property sold to notice party - Duty of care to notice party - Murray v Irish Airlines (General Employees) Superannuation Scheme [2007] IEHC 27 (Unrep, Kelly J, 25/1/2007) approved; Ulster Bank Investment Funds Ltd v Financial Services Ombudsman [2006] IEHC 323 (Unrep, Finnegan P, 1/11/2006) applied - Central Bank Act 1942 (No 22), ss 2, 57CL, 57CM, 57BB, 57BK, 57BX, 57 BY & 57CI - Appeal refused (2008/122MCA - McMahon J - 27/8/2009) [2009] IEHC 407

Square Capital Ltd v Financial Services Ombudsman

BANKING LAW

Ombudsman

Appeal to High Court - Ombudsman's jurisdiction - Statutory basis for authority of Ombudsman - Meaning of financial services - Meaning of financial service provider - Whether Ombudsman had sole responsibility for deciding whether complaint within jurisdiction - Functions and powers of Ombudsman - Adjudication of complaints - Remedies available - Informal, expeditious and flexible procedures mandated by Act - Role of Ombudsman - Role of court in appeal - Appropriate standard to be applied - Whether decision vitiated by serious and significant error - Award - Appropriate remedy - Whether award justified - Whether award unfair or disproportionate - Hayes v Financial Services Ombudsman (Ex temp, MacMenamin J, 3/11/2008) approved; Murray v Trustees and Administrators of Irish Airlines (General Employees) Superannuation Scheme [2007] IEHC 27, (Unrep, HC, Kelly J, 25/1/2007) and Orange v Director of Telecommunications Regulation considered; Ulster Bank Investment Funds Limited v Financial Services Ombudsman [2006] IEHC 323, (Unrep, HC, Finnegan P, 1/11/2006) applied - Central Bank Act 1942 (No 22), ss 2, 57CL(1), 57CM, 57BB, 57BK, 57CI, 57BA, 57BX(2), 57BY(1), 57CI(2) and 57CI(4)(b) - Central Bank and Financial Services Authority of Ireland Act 2003 (No 12), s 3 - Central Bank and Financial Services Authority of Ireland Act 2004 (No 21), ss 2 and 16 - Appeal refused (2008/122MCA - McMahon J- 27/8/2009) [2009] IEHC 407

Square Capital Ltd v Financial Services Ombudsman

1 JUDGMENT of Mr. Justice Bryan McMahon delivered on 27th day of August, 2009

Introduction

2 On the advice of a friend Mary Gallagher, the notice party, contacted the appellant (Square Capital Limited). She indicated to the appellant that she had €60,000 to invest and sought guidance from the appellant. By occupation, the notice party was a nurse. She had benefited from an inheritance and was seeking an appropriate investment. After a couple of meetings with a Mr. Enda Hunston, a director of the appellant, she purchased two apartments in Darlington in the United Kingdom, in 2004. She took out two mortgages on the properties. She alleges she was told by the appellant company that she would be able to sell one within six months, making a turn around profit of STG£10,000 and that she could let the other apartment.

3 Without going into the details at this juncture, the notice party was disappointed in the investments. The sale of one apartment did not happen and there was some difficulty with renting the other apartment. She next began to question the appellant about its interest in the apartments which she had bought. When she did not get a satisfactory response, she eventually complained to the Ombudsman. After some further probing by the Ombudsman, the Ombudsman extracted, with some difficulty, an admission from the appellant that it in fact owned the apartments it sold to Ms. Gallagher.

4 In his decision of 13 ^th June 2008, the Deputy Ombudsman awarded a sum of STG£25,000 to Ms. Gallagher. On review this was upheld by the Ombudsman on 21 ^st July, 2008.

5 The appellant brings this appeal against these decisions. In support of this appeal, which is on affidavit, the appellant claims, inter alia:-

6 (i) that the notice party did not come to it for financial advice but came to buy property. In its dealings with the notice party, therefore, the appellant says that it was acting as a vendor of property, and was not subject to the Central Bank and Financial Services Authority of Ireland Act 2004, that is the statutory basis for the regulatory authority of the Ombudsman. In short, it did not provide a financial service as required by the Act.

7 (ii) that the notice party was aware of the capacity in which the appellant was acting since the deed of conveyance clearly indicated that the appellant was the vendor of each of the apartments.

8 The appellant makes no apparent challenge to the procedures followed either by the Deputy Ombudsman or the Ombudsman and so the focus of this Court will be on whether the decision makers made any serious and significant error, or series of errors in reaching their decisions.

9 Section 57CL(1) of the Central Bank Act 1942, as inserted by s. 16 of the Central Bank and Financial Services Authority of Ireland Act 2004 provides that a complainant or regulated financial service provider may appeal to the High Court against the finding of the Financial Services Ombudsman. Section 57CM states that having heard the appeal the High Court may affirm, set aside or remit to the Ombudsman for review any such finding.

10 While there are two decisions at issue the fact is that the Ombudsman affirmed the decision of the Deputy Ombudsman and in doing so relied on and adopted the reasoning of his Deputy. For this reason, the reasoning of the Deputy Ombudsman is the basis of both decisions and will be the focus of this Court's deliberation.

The Financial Services Ombudsman: his functions and powers

11 Section 57BB of the Central Bank Act 1942, as inserted by s. 16 of the Central Bank and Financial Services Authority of Ireland Act 2004 sets up the Financial Services Ombudsman as an independent officer:-

"to investigate, mediate and adjudicate complaints made in accordance with this Part [of the Act] about the conduct of regulated financial service providers involving the provision of a financial service, an offer to provide such a service or a failure or refusal to provide such a service...and to enable such complaints to be dealt with in an informal and expeditious manner..."

12 Section 57BK, states that the principal function of the Financial Services Ombudsman is to deal with complaints by mediation and, where necessary, by investigation and adjudication. Subsection 4 of the same section states that the Ombudsman "when dealing with a particular complaint, is required to act in an informal manner and according to equity, good conscience and the substantial merits of the complaint without regard to technicality or legal form."

13 Section 57BX makes provision for a complaint:-

14 2 "(1) An eligible consumer may complain to the Financial Services Ombudsman about the conduct of a regulated financial service provider involving -

15 (a) the provision of a financial service by the financial service provider, or

16 (b) an offer by the financial service provider to provide such a service, or

17 (c) a failure by the financial service provider to provide a particular financial service that has been requested.

18 (2) Except in the case of a complaint that may be within the jurisdiction of the Pensions Ombudsman, the Financial Services Ombudsman has sole responsibility for deciding whether or not a complaint is within that Ombudsman's jurisdiction."

19 Once the Financial Services Ombudsman is satisfied that the complaint is within his/her jurisdiction, he is obliged to investigate the complaint.

20 With regard to the adjudication of complaints and the remedies available to the Ombudsman, s. 57CI is the relevant provision and I reproduce the relevant portion here:-

21 2 "(1) On completing an investigation of a complaint that has not been settled or withdrawn, the Financial Services Ombudsman shall make a finding in writing that the complaint -

22 (a) is substantiated, or

23 (b) is not substantiated, or

24 (c) is partly substantiated in one or more specified respects but not in others.

25 (2) A complaint may be found to be substantiated or partly substantiated only on one or more of the following grounds:

26 (a) the conduct complained of...