FOURTH SECTION
DECISION
Application no. 30802/11
HEATHER MOOR & EDGECOMB LTD (NO. 2)
against the United Kingdom
The European Court of Human Rights (Fourth Section), sitting on 26 June 2012 as a Chamber composed of:
Lech Garlicki, President,
Nicolas Bratza,
Päivi Hirvelä,
George Nicolaou,
Ledi Bianku,
Nebojša Vučinić,
Vincent A. De Gaetano, judges,
and Lawrence Early, Section Registrar,
Having regard to the above application lodged on 5 August 2010,
Having regard to the observations submitted by the respondent Government,
Having deliberated, decides as follows:
THE FACTS
1. The applicant, Heather Moor & Edgecomb Ltd (“HME”), was a company based in Wiltshire in the United Kingdom. According to information provided by the Government, the applicant was dissolved on 20 March 2012. The application was lodged on 5 August 2010 by Mrs A. D. Pickering, a director of the applicant company. The applicant was advised by Mr A. Speaight Q.C. and Ms. K. Livesey, barristers practising in London.
2. The United Kingdom Government (“the Government”) were represented by their Agent, Mr M. Kuzmicki.
A. The circumstances of the case
3. The facts of the case, as submitted by the parties, may be summarised as follows.
4. In 2000 the applicant was contacted by a British Airways pilot, R., who was approaching the retirement age of 55 years and was seeking advice regarding his pension fund. R. had already been advised by a financial services company linked to the pilots’ association against leaving his employer’s occupational pension scheme, since this would entail “enormous risk”. There were several exchanges of correspondence between R. and HME in the following months as well as a long meeting at the company’s premises. R. indicated he was prepared to accept a “medium” degree of investment risk, and signed a checklist prepared by HME to indicate that he and his wife had been made fully aware of the risks associated with the income drawdown scheme being proposed. HME provided figures showing that by transferring his pension funds, R. could obtain an appreciably higher annual income. Also, the benefits payable in the event of R.’s death before the age of 60 would be much greater. For its assumed growth projections, HME used a central projection rate of 9%, rather than the 7% indicated by the regulator the previous year. R. acted on HME’s advice and transferred his pension fund.
5. By March 2003, R. had become dissatisfied with his investments and, taking new advice, transferred his funds elsewhere. In November of that year he made a formal complaint to HME that he had lost 27% (£278,000) of the amount originally transferred. He complained as well that the 9% assumed rate of growth had been presented to him as a “worst-case scenario”, and that HME had taken no action in response to the concerns he had expressed at the time about stock market movements. HME rejected the complaint, leading R. to file a complaint with the Financial Ombudsman Service (FOS) in December 2003.
6. The procedure followed by the Ombudsman was an entirely written one, with submissions from R. and from HME. The latter’s requests for an oral hearing and for the opportunity to cross-examine R. were refused. The Ombudsman considered this to be unnecessary in the circumstances, and observed that the complaints process was an inquisitorial one, not an adversarial one.
7. The Ombudsman gave a provisional decision on 17 February 2006. He considered that in view of the relative security provided by R.’s occupational pension scheme, HME should have demonstrated that transfer would be clearly advantageous. He observed that responsibility for advice rested completely with the adviser and was not diminished by recommendations or warnings given by other firms. The causal link was established here since HME had recommended transfer and R. had done so. Although the firm argued that there had been a respectable school of thought among financial advisers that would have agreed with their advice to R., the witness statement they relied on indicated the contrary. The Ombudsman considered that to be consistent with good industry practice, the firm should have assumed a growth rate of less than 9%. There was, however, no evidence in the file that the consequences of a lower growth rate had been explained to R. Instead, HME had made repeated references to higher growth rates achieved in previous years. He also took the view that HME had not explained the investment risk in terms that R. would have understood properly. He concluded that the overall risks associated with the income drawdown arrangement were greater than was advisable for R. in his circumstances, and that had this been given sufficient prominence in the firm’s advice R. would not have transferred his pension funds. The most suitable advice would have been to remain in his employer’s pension scheme.
8. HME made detailed submissions on these findings. Its arguments were considered and dismissed in the Ombudsman’s final decision of 9 February 2007.
9. The firm argued first that it had received legal advice that R.’s complaint would not have been accepted in a court of law. Noting that a copy of this advice had not been forwarded to him, nor its content explained to him, the Ombudsman stated that he had had regard to the relevant law, as well as to what was fair and reasonable in all of the circumstances of the case.
10. HME maintained there was no causal link between its advice and R.’s decision to transfer his pension fund. The Ombudsman reiterated the position taken in the provisional decision.
11. Regarding R.’s attitude to risk, the Ombudsman held that R.’s pension fund, which constituted a very significant part of his overall wealth, should not have been placed at risk, there being no need to do so in the particular circumstances. The fact that R. had signed the checklist did not make the transfer more suitable, nor did it negate HME’s duty to explain very clearly the risks involved.
12. The Ombudsman reiterated that HME had not acted consistently with good industry practice when it used the rate of 9% for its projections. While this did not necessarily make the firm’s advice more or less suitable, it incorrectly made the option of transferring look more attractive than it would otherwise have been. Although R. was concerned to make adequate provision for his son in the eventuality of the untimely death of himself and his wife, the Ombudsman was not satisfied that this should have been given greater weight than the security of their retirement income. Other arrangements could have been made to ensure their son’s welfare, such as life insurance. In light of these considerations, he concluded that the appropriate advice should have been not to transfer his pension fund. He directed HME to arrange for a loss assessment to be carried out. R. accepted the decision, making it binding on HME. In August 2010 the firm paid out the statutory maximum amount (£100,000) to R.
13. HME applied to the High Court for judicial review of the Ombudsman’s decision. The application was rejected on the papers on 10 March 2009. The firm renewed its application, which was heard and dismissed by Judge Davis on 18 September 2009. Two grounds were relied on – the Ombudsman’s refusal to hold a hearing, and a lack of independence and impartiality on the part of the FOS. On the first ground, the judge noted that comprehensive written evidence of the parties’ dealings had been available to the Ombudsman. It would have been pointless to cross-examine R. on what action he would have taken had HME advised against transfer, it being probable that he would not have left his employer’s scheme. The procedure followed by the Ombudsman had been a fair one, allowing HME to put its case fully in writing. A hearing would not have added anything. Although the firm alleged that the Ombudsman’s decision contained errors, judicial review was essentially concerned with procedural fairness. Moreover, it did not appear that any facts had been plainly ignored.
14. On the second ground, the judge rejected HME’s arguments about the supervisory role of the Financial Services Authority (FSA) in relation to the FOS, and its reference to evidence in another case in which the FOS was found by an independent assessor to have effectively solicited complaints against companies. The judge was satisfied that the FOS scheme involved an independent and impartial tribunal.
15. HME applied for leave to appeal. This was refused on the papers by Stanley Burnton LJ, following which the firm renewed its application, which was dealt with orally and dismissed by Aikens LJ on 25 March 2010. He noted that Judge Davis had found both grounds to be without merit and agreed with that view. On the issue of an oral hearing, he stated that whether the facts were or were not as alleged by the firm was beside the point. Rather the issue was whether the refusal of a hearing before the Ombudsman was procedurally unfair or unreasonable. He did not consider it so, or that the will of Parliament had been subverted in this respect. Regarding the second ground, he found it to be without substance.
B. Relevant domestic law
16. The relevant provisions of domestic law, as they stood at the material time, are set out in the Court’s decision in Heather, Moor and Edgecomb v. the United Kingdom (dec.), no 1550/09, 14 June 2011.
17. The following provision of the FOS dispute resolution rules (DISP), as formulated and numbered at the material time, is also relevant to the present case:
“3.9.15 R The Ombudsman must maintain a register of each money award and direction made.”
COMPLAINTS
18. The applicant complained under Article 6 of the Convention that the Ombudsman’s decision was not pronounced publicly. It also complained that the Ombudsman refused its request to hold an oral hearing and to allow cross-examination of R. The applicant further complained that the Ombudsman lacked structural independence and impartiality, in light of the close link between the FOS and the FSA, with the latter having a supervisory role over the former. Lastly, relying also on Article 1 of Protocol No. 1, the applicant complained that the FOS did not operate compatibly with the rule of law, its case-law being neither accessible nor foreseeable.
THE LAW
19. The applicant argued that the procedure followed by the FOS in dealing with the complaint against it was contrary to Article 6 of the Convention since it had not delivered its decision publicly and had refused to hold a hearing on the complaint. The applicant further argued that the FOS itself lacked independence and impartiality, and did not take decisions based on law, which was also contrary to Article 1 of Protocol No. 1.
Article 6 of the Convention, in so far as relevant, provides:
“1. In the determination of his civil rights and obligations ..., everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.”
Article 1 of Protocol No. 1, in so far as relevant, provides:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.”
(i) The Government’s request to strike the application out
20. By letter dated 3 May 2012, the Government informed the Court of the applicant’s dissolution on 20 March 2012. They enclosed as evidence of this a copy of correspondence addressed by Mrs Pickering, dated 25 April 2012, to the FOS in the context of another matter, and indicating that Heather Moor & Edgecomb Ltd. was no longer in existence. The Government submitted that the dissolution of the company while the present proceedings were pending should lead the Court to conclude that the applicant did not intend to pursue the application. They requested that the case be struck out under Article 37 § 1(c) of the Convention. The applicant’s representative did not comment either on the dissolution of the company or on the Government’s submission.
21. The Court considers that it need not take a decision on this request, since it has in any case found this application to be inadmissible for the reasons that follow.
(ii) The complaint about the non-public nature of the Ombudsman’s decision
a. The parties’ arguments
22. The applicant stated that the FOS never delivered its decisions on complaints publicly. Instead, they were only communicated to the parties, and were not available to any other person. This prevented public scrutiny of FOS decisions, and meant that a firm could not verify whether the decision taken in its case was consistent with previous decisions. The result was uncertainty in this area of the law, since the information that the FOS did publish in its newsletter was too general to provide clear guidance to financial advisers about its approach. It also led to a culture of excessive informality in the conduct of the proceedings. It could not be said that, by omitting to expressly request public delivery of the decision, the applicant had waived this right, which served the broader public interest of ensuring justice was not done in secret. The applicant further alleged that the FOS failed to comply with its statutory duty to maintain a register of its decisions.
23. The Government argued that this complaint should be rejected for failure to exhaust domestic remedies. The applicant had not requested the FOS to publish its decision, nor had it raised the point in its application for judicial review. They recalled that the purpose of Article 35 § 1 of the Convention was to ensure that the domestic authorities were provided with the opportunity to remedy any possible breach of Convention rights before the issue was taken to the European level. Had this complaint been raised before the High Court, it could have been resolved through extensive citation by the judge of the grounds for the FOS decision. The European Court had already found in the earlier case taken by the same applicant (cited above) that this was sufficient to achieve this particular purpose of Article 6 § 1. The Government added that in any event the High Court’s decision refusing judicial review had brought the essentials of the FOS decision into the public domain, and these had been mentioned again in the decision of the Court of Appeal. Furthermore, the text of the decision had been appended to the applicant’s application for judicial review, and the relevant file could be inspected by any member of the public. The Government additionally argued that the applicant should be treated as having waived the right to public delivery of the decision. It rejected the suggestion that justice was being administered in secret – the methods used and approach taken by the FOS were widely known among financial firms thanks to the information that the FOS published. The applicant had not in any sense been taken by surprise by the final decision, since the firm had seen and been allowed to comment on the provisional decision beforehand. It could not make a complaint to the Court on behalf of the business community in general. Finally, the Government stated that recent changes to the relevant legislation meant that in future FOS decisions would be published in anonymised form.
b. The Court’s assessment
24. The Court notes that the applicant did not respond to the Government’s objection of non-exhaustion of domestic remedies. It does not need to come to a final view on this point, however, since it will instead, and of its own motion, consider whether this complaint should be declared inadmissible under Article 35 § 3(b) of the Convention. This provision reads as follows:
“3. The Court shall declare inadmissible any individual application submitted under Article 34 if it considers that:
(...)
(b) the applicant has not suffered a significant disadvantage, unless respect for human rights as defined in the Convention and the Protocols thereto requires an examination of the application on the merits and provided that no case may be rejected on this ground which has not been duly considered by a domestic tribunal.”
(α) Whether the applicant has suffered a “significant disadvantage”
25. The Court observes that while what was at stake for the applicant in the proceedings before the FOS was considerable, the non-public delivery of the decision did not in itself cause the company any significant disadvantage (compare with Holub v. the Czech Republic (dec.), no. 24880/05, 14 December 2010, and with Jancev v. the former Yugoslav Republic of Macedonia, no. 18716/09, 4 October 2011). It had no bearing on either the conduct or outcome of the proceedings. The non-inclusion of this complaint among the grounds put forward by the applicant for judicial review strongly suggests that it did not in fact attach any real importance to it.
(β) Whether respect for human rights as defined in the Convention and the Protocols thereto requires an examination of the application on the merits
26. The Court observes that it has extensive case-law on the requirement that judgments be publicly pronounced, to which it made reference in its decision on the previous case brought by this applicant (see Ryakib Biryukov v. Russia, no. 14810/02, 17 January 2008, and further references cited therein). It does not consider that the facts of this case are such as might amplify or contribute to that case-law. Respect for human rights does not therefore require an examination of this complaint on its merits.
(γ) Whether the case was duly considered by a domestic tribunal
27. The applicant’s case was considered in the context of judicial review proceedings following an oral hearing before two degrees of jurisdiction, the High Court and the Court of Appeal. The Court therefore considers that this condition has been met.
(δ) Conclusion
28. The three conditions for the application of the new admissibility criterion being satisfied, the Court declares this complaint inadmissible pursuant to Article 35 §§ 3 (b) and 4 of the Convention.
(iii) The complaint about the absence of an oral hearing
29. The applicant acknowledged that the right to an oral hearing is not absolute, but stressed that in the present case it was required in order to ensure a just determination of the issues. It had wished to cross-examine R. about his understanding of the risks involved in the course of action he chose and his intentions and wishes at the relevant time. It attributed the Ombudsman’s refusal to a general FOS policy against oral hearings. This contradicted statements made in Parliament when the legislation was adopted. A purely written procedure did not in fact make for greater efficiency, as demonstrated by the fact that it took over three years for the complaint to reach a final decision. Had the dispute gone to court it would have been dealt with in about a year, in accordance with usual court procedures.
30. The Court recalls that, in its previous application, the applicant included a similar complaint. Since the facts in both cases are highly similar, the Court refers to the considerations developed in the relevant passage of its decision. It shares the position of the Court of Appeal on this point, namely that it was neither unreasonable nor procedurally unfair to decide the complaint solely on the basis of a written procedure. Nor does the Court discern any element of arbitrariness in the reasoning of the Ombudsman, as summarised above, which was based on the detailed and contemporaneous written records of the applicant. Furthermore, the procedure followed allowed the applicant ample opportunity to make its case. This included the possibility of making representations on the Ombudsman’s provisional findings before he gave his final, reasoned decision on the complaint. The proceedings did not therefore contravene the overarching principle of fairness embodied in Article 6 (Jussila v. Finland [GC], no. 73053/01, § 42, ECHR 2006‑XIII). While the applicant reiterates that the FOS allows oral hearings only in very rare cases, the Court is required to examine only the specific case before it. In the present case it has reached the view that an oral hearing was not required in order for the proceedings to comply with Article 6 of the Convention.
31. Throughout the domestic proceedings and before this Court the applicant has argued that the Ombudsman’s decision was tainted by errors, which an oral hearing would have corrected. It is not for this Court to take a view on the well-foundedness of the Ombudsman’s decision – to do so would be tantamount to exercising a fourth-instance function. Whether the applicant would have succeeded through an oral hearing in persuading the Ombudsman to reach a different conclusion can only be a matter of conjecture.
32. The Court concludes that the absence of an oral hearing before the Ombudsman was not contrary to Article 6 of the Convention. This complaint is therefore manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
(iv) The complaint about a lack of independence and impartiality
33. The applicant argued that there was such a close structural connection between the FSA and the FOS that the latter’s independence and impartiality were open to doubt. It referred to the fact that the chairman and directors of FOA are appointed by the FSA, and that the Chief Ombudsman reports to the FSA on the discharge of its functions. FSA controlled the FOS budget, and its approval was required for the FOS rules of procedure. The applicant alleged that regarding pensions, the FSA’s point of view influenced the FOS position, which was disposed to uphold complaints against financial firms. It gave a specific example of a complaint that was found by the FOS Independent Assessor to have been effectively solicited. In view of this, the FOS lacked the appearance of independence and impartiality.
34. The Court finds that these assertions are of a general character. It is not persuaded that the statutory relationship between the FSA and the FOS is such as to compromise or raise doubts regarding the latter’s independence and impartiality when deciding individual complaints. Looking at the concrete facts of the case, it finds the applicant has not substantiated this complaint. It is therefore manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
(v) The complaint about the legal basis of the Ombudsman’s decision
35. The applicant argued that the Ombudsman was not required to base his or her decision solely on legal principles, but had broad discretion to decide a complaint in accordance with what he or she considered to be fair and reasonable. Since decisions were never published, the FOS interpretation of the “fair and reasonable” criterion was neither accessible nor foreseeable, contrary to the rule of law. Since there was no right of appeal against FOS decisions, merely the possibility of seeking judicial review, this shortcoming could not be corrected, as the present case illustrated.
36. The Court notes that the applicant raised an identical complaint in its previous application. This was rejected as manifestly ill-founded, the Court agreeing with the analysis of the Court of Appeal. The Court sees no reason to come to any other conclusion regarding the present complaint. However, since the applicant did not include this point in its application for judicial review, it must be rejected for non-exhaustion of domestic remedies in accordance with Article 35 § 1 and 4 of the Convention.
For these reasons, the Court by a majority
Declares the application inadmissible.
Lawrence EarlyLech Garlicki
RegistrarPresident
Full & Egal Universal Law Academy