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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Chong & Ors, R (On the Application Of) v Financial Services Compensation Scheme Ltd [2024] EWHC 3374 (Admin) (31 December 2024) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2024/3374.html Cite as: [2024] EWHC 3374 (Admin) |
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KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| THE KING on the application of (1) MARGARET CHONG (2) MARK FRASER (3) VICTORIA LEACH |
Claimants |
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| - and - |
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| FINANCIAL SERVICES COMPENSATION SCHEME LIMITED |
Defendant |
____________________
(instructed by Anthony Philip James & Co.) for the Claimants
James Strachan KC (instructed by Bevan Brittan LLP) for the Defendant
Hearing dates: 8-9 October 2024
Further written submissions: 14 & 17 October 2024
____________________
Crown Copyright ©
THE HONOURABLE MR JUSTICE PEPPERALL:
THE FACTS
| Claimant | Decision date | Compensation paid |
| Mrs Chong | 18 February 2021 | £24,476.55 |
| Mr Fraser | 23 February 2021 | £9.673.25 |
| Mrs Leach | 10 February 2021 | £31,819.31 |
7.1 new claims together with any claims that were outstanding on 1 April 2021 should be assessed on the basis of the law as understood after Adams; but
7.2 claims that had already been finally assessed before such date were not to be reopened either proactively or upon an appeal.
THE STATUTORY SCHEME
THE SCHEME RULES
"The FSCS may withdraw any offer of compensation made to a claimant if the offer is not accepted or if it is not disputed within 90 days of the date on which the offer is made."
"The FSCS may pay compensation for any claim made in connection with protected investment business which is not:
(1) a claim for property held; or
(2) a claim arising from transactions which remain uncompleted at the quantification date;
only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation."
19.1 In R v. Investors Compensation Scheme Ltd, ex parte Bowden [1996] 1 A.C. 261, Lord Lloyd said that such a provision conferred "a broad discretion to include within the definition of a compensatable claim either the claim as a whole, or those elements of the claim which the management company considers essential in order to provide fair compensation, and to exclude those elements which do not meet that requirement". The exercise of the scheme's discretion could only be challenged on grounds of Wednesbury unreasonableness in accordance with the principles established in Associated Provincial Picture Houses Ltd v. Wednesbury Corporation [1948] 1 KB 223.
19.2 A similar rule in the sourcebook was considered in Emptage v. Financial Services Compensation Scheme Ltd [2013] EWCA Civ 729. Moore-Bick LJ observed, at [10]:
"This provision provides considerable scope for the [FSCS] to exercise a measure of judgment about the way in which compensation is to be assessed, but its judgment must be exercised in a consistent and principled manner."
APPEALS
"The FSCS must put in place and publish procedures which satisfy the minimum requirements of procedural fairness and comply with the European Convention on Humans Rights for the handling of any complaints of maladministration relating to any aspect of the operation of the compensation scheme."
22.1 The decision letters indicated by way of a simple timeline the progress of the claims indicating that the final and outstanding stage was "dealing with any issues".
22.2 The letters closed by informing the claimants that if they had any questions about their decisions or their payments, they should contact the FSCS.
22.3 The decisions were explained further in accompanying documents which included the following text:
"What if you believe your compensation is wrong, of if you don't understand how we've worked it out?
Call us as soon as possible on 0800 678 1100 to talk it through.
If you're still unhappy, visit www.fscs.org.uk/complaint to see our complaints policy. To make a complaint, write to us at the address at the top of this letter or email [email protected]."
"Have questions about our decision on your claim?
If you want to discuss the decision we've made on your claim, please call us on 0800 678 1100. We can talk you through our decision and answer any questions you have.
Alternatively, you can reach us via our contact us page. We'll try to get back to you within 5 working days.
Appealing our decision on your claim
If you've already discussed your compensation claim decision with us, and you're still unhappy, you can appeal using the 'appeal claim decision' option on our contact us page.
To make sure we consider all available information, please provide any additional evidence when submitting your appeal. It's more likely we'll change our decision if you can supply new evidence that we haven't seen already.
Your appeal will be reviewed by someone who wasn't involved in deciding your original claim.
We'll let you know we've got your appeal within 2 working days and aim to respond within 20 working days. We'll let you know if it might take longer.
Escalating your appeal
If you're still unhappy with our decision after an appeal, you can escalate your appeal. To do this, contact our complaints team.
Our complaints team will review your escalated appeal independently of our previous decisions. This is to make sure we've made the right decision in line with our rules and policies.
We'll let you know we've got your escalated appeal within 2 working days and aim to respond within 20 working days. We'll let you know if it might take longer.
Judicial review
If you're still unhappy with our decision, even after your escalated appeal, you may be able to challenge our decision in court …"
24.1 Informal discussion: Dissatisfied claimants were first invited to talk through their concerns.
24.2 Appeal: If the matter was not resolved, claimants were entitled to appeal the decision. Appeals were reviewed by someone who was not involved in the original decision.
24.3 Escalated appeal: Claimants who remained dissatisfied could ask for their appeals to be escalated to the FSCS's complaints team. Escalated appeals were reviewed independently of the FSCS's previous decisions in the case.
CHANGES IN THE UNDERSTANDING OF THE LAW
"The point of principle to be derived from Ex parte Cheung … is that if there is a change in the law, or the law is suddenly 'discovered', the decision-maker may adopt a policy for reconsideration of previous decisions, as long as that policy is lawful."
THE FSCS'S POLICY FOLLOWING ADAMS
THE NEW CASE
THE JULY 2021 BOARD MEETING
30.1 Option A was to adopt a policy of investigating and paying future s.27 claims. The paper noted that this approach favoured the consumer and would provide some customers with significantly higher compensation and therefore have a corresponding impact on the levy. It would also be likely to have significant effect on operating costs. Option A then added:
"For SIPP claims for which FSCS has already paid compensation (i.e. for due diligence failings), it is not proposed that FSCS would re-open these to assess them for an additional s.27 liability. FSCS would seek to rely on the 'full and final' nature of our previous payment."
30.2 Option B was to rely on the FSCS's discretion to decline to investigate s.27 claims as a matter of routine save where the court had already ruled on a particular s.27 case. The paper noted that this approach afforded less emphasis to consumer protection and that its decisions might be subject to challenge.
30.3 Option C was to pay SIPP claims on an interim basis pending the outcome of any further appeal in Adams. Again, it was noted that this approach could be challenged. Option C then added:
"The Executive Team are not proposing to reopen any SIPP Operator claim to assess s.27 liability (whether proactively or in response to an appeal) where we have already paid compensation on the basis of SIPP Operator due diligence failings, and this payment has been accepted by the customer in full and final settlement."
"Overall, it is considered that Option C strikes the right balance between preserving customers' positions and maintaining sufficient flexibility for FSCS to respond dynamically in changing and uncertain circumstances."
"The Board noted that FSCS currently paid compensation predominantly in relation to SIPP claims for investment due diligence failings by SIPP operators, but that the type of protected claim emerging from the Adams case could potentially be compensatable by FSCS. Directors took into account the requirement for FSCS to have regard to the need to ensure efficiency and effectiveness in the discharge of its functions and to use its resources efficiently and economically. The Board also acknowledged that FSCS had discretions under the COMP Rules when considering whether to investigate, assess and pay compensation to claimants. In this regard … directors recognised the need to consider striking an appropriate and fair balance between consumer protection and a potentially significant increase to the levy."
"It was confirmed that the court had stated, amongst other things, that FSCS was correct to apply the law as it stood at the time (FSCS's final decision in respect of Mrs New's claim having been issued before the Court of Appeal's decision in Adams). The Board took this principle into account when considering the approach to be taken when assessing the eligibility of s.27 claims against SIPP operators."
"This approach would involve paying SIPP claims where an unregulated introducer appeared to have been involved, on an interim basis, pending a decision by the Supreme Court in the Adams case (even where the court had ruled on a particular s.27 case). The Board considered that there was a sufficient basis for FSCS to exercise its discretion to switch to paying relevant claims on an interim basis rather than on the 'full and settlement' basis, and acknowledged that FSCS would be appropriately applying the law as it currently stood. Paying such claims on an interim basis would mean that customers would be no worse-off than under FSCS's current approach to SIPP claims, and would leave the option open to decide to revisit paid claims in the future, depending on the Supreme Court's decision, by assessing whether claims under s.27 were eligible and protected claims, and potentially paying further compensation. The Board agreed that this approach should apply to FSCS's decisions made since 1 April 2021, the date of the judgment in the Adams case, on the basis that claims prior to that date had been subject to FSCS applying the law as it stood at the time (as upheld by the court in the claim brought by Mrs New).
As a more general point, the Board noted that this matter was a further example of a situation where discretions could be exercised by FSCS, so there could be potential to explore the availability of discretions further if, for example, there was any additional background and context that could be given on the types and levels of discretions available."
THE PUBLICATION OF THE 2021 POLICY
"Given that the High Court and the Court of Appeal took opposing approaches to the application of a s.27 claim to the same set [of] facts, and an appeal remains outstanding to the Supreme Court in the same case FSCS does not consider that it would be acting efficiently, effectively, or economically if it were to invest significant resource now in circumstances where the law as it applies to s.27 claims is currently unsettled. FSCS also notes that taking this approach mitigates the risk of compensation being wrongly paid, and therefore FSCS having to consider taking action to recover compensation."
"FSCS will then write to customers who have received interim payments on account to notify them of FSCS's final decision as to whether it will make a further payment of compensation to customers who can prove an eligible s.27 claim, or whether FSCS will treat the interim payment already made as the full and final settlement of the claim(s) against the SIPP Operator. For those customers who were not eligible for an interim payment in respect of due diligence failures, and may only have a s.27 claim, FSCS will reopen the claim and provide a final decision."
THE JULY 2022 BOARD MEETING
"It was agreed that this approach would only apply to claims determined by the FSCS on or after 1 April 2021, the date the Court of Appeal reached its decision in the Adams case (and, therefore, the date that the law was clarified). It was noted that FSCS's right to apply the law as it was understood at the time when deciding claims (e.g. prior to the Court of Appeal's decision on 1 April 2021) had previously received judicial backing in the unsuccessful judicial review of FSCS by Mrs New.
The board also endorsed the proposed treatment of appeals, in that, in order to mitigate against unmeritorious appeals, FSCS would not consider appeals brought by customers whose SIPP claims had been paid on a full and final basis before 1 April 2021, if the appeal was primarily seeking consideration of additional s.27 liability or challenging the quantification method that had been previously accepted when compensation was paid."
THE PUBLICATION OF THE 2022 POLICY
"That claim for compensation was decided by FSCS in late 2020. We upheld the claim on the basis of investment due diligence failings by the SIPP operator only. The compensation due to the customer was therefore calculated by reference to our approach to investment due diligence claims.
Permission for that claim for judicial review was refused, both on the papers and at an oral reconsideration hearing. In doing so, Peter Marquand (sitting as a Deputy High Court Judge) considered the impact of the Court of Appeal's judgment in Adams, which had overturned the High Court's judgment in so far as s.27 claims are concerned.
The reasons given by the judge for refusing permission to bring the legal challenge included the fact that FSCS had properly had regard to the relevant law at the time it decided the claim for compensation, including the first instance judgment in Adams, which was handed down on 18 May 2020.
This means that s.27 FSMA as a valid basis of claim is relevant for claims decided by FSCS (whether on appeal or not) on or after 01 April 2021. Accordingly, when making its most recent decision, the FSCS Board decided that FSCS should not accept appeals from customers who FSCS had paid compensation to prior to 1 April 2021 in relation to due diligence failings of a SIPP operator, where the primary purpose of the appeal would be to assert additional liability under s.27 FSMA."
THE POLICY IN RESPECT OF EXTANT APPEALS
THE CHALLENGE
47.1 First, they argue that the FSCS's decision to treat their appeals as defunct after two years of silence and after initially accepting their appeals as valid and subject to the FSCS's policy was irrational. Alternatively, they argue that the decision was procedurally unfair and irregular.
47.2 Secondly, they argue that, having initially committed to considering the claimants' appeals in accordance with the Court of Appeal's decision in Adams, the FSCS did nothing to disabuse the claimants of their legitimate expectations for over two years. They argue that the FSCS's communications gave rise at least to a legitimate expectation of a procedural benefit (namely that their appeals would be dealt with in accordance with the stated policy). Alternatively, they argue that the legitimate expectation was substantive in character.
DISCUSSION
51.1 The true nature of the compensation decisions.
51.2 The operation of the appeal procedure, and in particular the full and final settlement clause and the question of time for appeal.
51.3 Whether the policy adopted by the FSCS for dealing with appeals from pre-April decisions was lawful.
51.4 Whether this claim is a collateral challenge to the FSCS's policy formulated in 2021 and 2022 or an in-time public-law challenge to decisions made in June and July 2023.
51.5 Whether the FSCS acted in breach of the claimants' legitimate expectations.
COMPENSATION DECISIONS
"For the avoidance of doubt, FSCS considers that an appeal response from CET [the customer escalation team] is the final stage in FSCS' decision-making process."
55.1 Section 214(1)(i) provides a power to make rules "for the making of interim payments before a claim is finally determined".
55.2 Such rules are contained in COMP 11.2.4R and 11.2.5R:
a) COMP 11.2.4R provides that where the FSCS considers that "immediate payment in full would not be prudent because of uncertainty as to the amount of the claimant's overall claim, it may decide to pay an appropriate lesser sum in final settlement, or to make payment on account".
b) Further, in the circumstances envisaged in COMP 11.2.5R, the FSCS may decide "to make a payment on account or to pay a lesser sum in final settlement".
57.1 The application form used by the FSCS requires claimants to sign the following declaration:
"If FSCS finds my claim eligible, sends me a compensation payment, and I do not return that payment as specified in the payment letter, I agree and acknowledge as follows: …
2. I accept the offer of compensation in full and final discharge and settlement of the obligations of FSCS, under the relevant rules and laws (save that, where compensation is paid on an interim basis, I may become eligible for further compensation in accordance with the relevant rules and laws) …
3. All my rights against the Firm (or any third party involved in or connected to the Claim) will pass to and be assigned to FSCS absolutely on payment of compensation (or any part of it).
4. All my rights against any other person (which constitute 'Third Party Claim' as defined in paragraph 13 below) will pass to and be assigned to FSCS absolutely on payment of compensation (or any part of it).
5. On payment of compensation (or any part of it) I will no longer have the right to make any claim against the Firm or any other person in respect of the Claim or a Third Party Claim, and the right to make any such claims will be vested in FSCS. Any sums that would otherwise be payable to me in respect of the Claim (including any dividend or other payment in a liquidation or compromise with creditors or scheme of arrangement) or a Third Party Claim will be paid instead to FSCS."
57.2 The decisions in this case explained that payments would be made within ten business days directly into the bank accounts nominated by the investors. The accompanying notes reminded the investors of their agreement that upon payment their rights against the firm would be transferred to the FSCS and confirmed:
"The payment settles your claim for compensation to FSCS about the Firm in full."
APPEALS
The full and final settlement issue
64.1 First, it may be that the FSCS fails generally to give instructions specifying how compensation payments might be returned. Certainly, there is nothing in the compensation decision letters in this case specifying how the money might be returned or providing the FSCS's bank details to facilitate repayment.
64.2 Secondly, it may be that the decision letters issued by the FSCS do not generally require claimants to repay the compensation payments as a condition of contacting the FSCS to "deal" with any issues or resolve any "questions" that they might have about their decisions or payments. Certainly, the letters in this case indicated that these claimants might contact the FSCS for such purposes without imposing any requirement to repay money first.
64.3 Thirdly, there is nothing in the FSCS's published appeal policy to indicate any such condition precedent to the pursuit of an appeal.
64.4 Fourthly, the evidence before the court is that, before allowing an appeal, the practice of the FSCS is to exercise its discretion to consider whether it should waive its right to treat the compensation payment as having been paid in full and final settlement of the claim.
The time for appeal
THE LAWFULNESS OF THE POLICY
71.1 Previously, there were to be no appeals from compensation decisions that had been made in accordance with the law as understood before 1 April 2021 where the primary purpose was to obtain additional compensation under s.27. Relying heavily on New, that policy had been justified by the fact that the decisions made before 1 April 2021 had been made in accordance with the then understanding of the law.
71.2 The revised policy that extant appeals should be heard breached that principle and involved allowing claimants to seek additional compensation under s.27 by way of an appeal against a pre-April decision properly made in accordance with the then understanding of the law.
72.1 First, it was said that the implication that the claimants should have had a further opportunity to submit appeals as a result of the decision in Adams was misconceived since it would amount to the submission of an entirely new claim rather than an appeal.
72.2 Secondly, it was asserted that the FSCS had made clear on 5 August 2022 that it would not accept new appeals requested after 1 April 2021 where the primary purpose of the appeal was to seek further compensation for a s.27 claim. It was said that any judicial review claim to challenge that decision would be significantly out of time.
72.3 Thirdly, the FSCS insisted that it was incumbent on claimants to act promptly and to submit any appeal within a reasonable time of the decision letter. It then asserted that given that the claimants had received compensation in February 2021 and had not sought to appeal such decisions up to six weeks later, the FSCS was entitled to treat the decision letters as final.
73.1 First, the actual board decisions made no such distinction. While the FSCS developed a policy that it would consider appeals that were extant as at 1 April 2021, such policy was not reflected in either the board minutes or the material published on its website. Further, such policy was inconsistent with the idea that appeals should not be considered from decisions made in accordance with the then understanding of the law.
73.2 Secondly, the FSCS's argument that it was misconceived to suggest that the claimants should have had a further opportunity to submit appeals as a result of the decision in Adams because that would amount to the submission of an entirely new claim rather than an appeal does not hold water. Precisely the same point could be made about appeals lodged before 1 April 2021.
73.3 Thirdly, as to the suggestion that the FSCS was entitled to treat the decisions as final given the failure to lodge an appeal by 1 April:
a) No time limit was expressly imposed in 2021 upon a claimant who sought to appeal a decision or, being dissatisfied with the appeal decision, who sought to escalate the appeal whether by the rules, the guidance given in the decision letter or the appeal webpage.
b) As already identified, the claimants lodged their appeals between about 7 and 9 weeks after they received their decision letters. Although Bevan Brittan's letter of 20 July 2023 argued that the FSCS was entitled to treat its decisions as final after a delay of six weeks, such point is not argued in the Detailed Grounds of Resistance. Further, the time point taken by Mr Strachan is more subtle; namely that the question of what is a reasonable period of time for lodging an appeal which seeks the recalculation of a pre-April 2021 compensation decision on the basis of s.27 is answered by the policy declining to consider appeals lodged after 1 April.
c) While the delay in this case was longer, the suggested blanket policy of not allowing an appeal to be lodged after 1 April cannot possibly be justified on the grounds of delay since such policy would equally apply to a decision issued on 31 March 2021 which was barely read by the time that, on the FSCS's case, the claimant's delay in bringing an appeal would justify its automatic rejection.
75.1 Ms A received a decision in January 2021 and only got around to appealing at the end of March 2021. Assuming her appeal had not been decided by 1 April, her appeal would be treated as extant as at the time of the Adams judgment such that the payment already made to her would be treated as interim; the FSCS would waive its right to regard the payment as full and final settlement; and her claim would be reassessed on the basis of the law as understood after Adams.
75.2 Mr B also received his decision on the same day in January 2021 but was prompt in lodging his appeal such that he had a decision on his appeal on 31 March 2021. His appeal would not be extant and his case would be closed, even though the appeal policy allowed a right to escalate the initial appeal decision.
75.3 Ms C also received her decision on the same day in January 2021 and was even quicker in putting in her appeal such that she had a decision on her appeal a few days earlier and had time to escalate her appeal on 31 March 2021. Her appeal would also be regarded as extant so that, like Ms A, she would benefit from reconsideration of her case.
75.4 Mr D only received his decision on 31 March 2021 and did not have time even to absorb the decision letter by the following day such that he did not appeal until 2 April 2021. His appeal would not have been extant as at 1 April and, despite the fact that any appeal would plainly have been in time, his case would be regarded as closed.
75.5 Ms E received her decision on 1 April 2021. Although she failed ever to appeal, her compensation payment would be treated as if it had been made on an interim basis and her case would be reconsidered.
78.1 The nature of any bright-line rule is that there will be winners and losers, and yet such policy might nevertheless be lawful provided that it is rational. Here it was rational to take 1 April 2021 as a line in the sand and not to have a proactive policy of reopening pre-April decisions made in accordance with the then understanding of the law.
78.2 Appeals were, however, an important part of the scheme. It was rational to consider appeals that were extant as at 1 April 2021. Given the FSCS's policy of deciding cases – whether initially or on appeal – in accordance with the law as then understood, that meant that those with extant appeals could benefit from the Adams decision.
78.3 Having decided to consider extant appeals, I am troubled by the policy of restricting the timely exercise of appeal rights to those who had not yet launched their appeals by the end of March 2021. Such policy was arbitrary in that, as demonstrated above, it curtailed appeal rights even by those who had only just received their decision letters.
THE COLLATERAL CHALLENGE ISSUE
Legal principles
"One does not overcome the problems created by [what is now r.54.5] by writing a fresh letter to the decision-maker and thereby obtaining a reply which one then seeks to characterise as a fresh decision. That would render that provision in the Rules wholly ineffective."
"... exemplify a common principle whose nature is not dependent upon an appeal to the rules relating to delay. It is that a judicial review applicant must move against the substantive act or decision which is the real basis of his complaint. If after that act has been done he takes no steps but merely waits until something consequential and dependent upon it takes place and then challenges that, he runs the risk of being put out of court for being too late."
The judge added:
"The court in its discretion, whether so directed by rules of court or not, will impose a strict discipline in proceedings before it. It is marked by an insistence that applicants identify the real substance of their complaint and then act promptly so as to ensure that the proper business of Government and the reasonable interests of third parties are not overborne or unjustly prejudiced by litigation brought in circumstances where the point in question could have been exposed and adjudicated without unacceptable damage."
"The claimant should challenge the decision which brings about the legal situation of which complaint is made. There are occasions when a claimant does not challenge that decision but waits until some consequential or ancillary decision is taken and then challenges that later decision on the ground that the earlier decision is unlawful. If the substance of the dispute relates to the lawfulness of that earlier decision and if it is that earlier decision which is, in reality, determinative of the legal position and the later decision does not, in fact, produce any change in the legal position, then the courts may well rule that the time-limit runs from that earlier decision. Similarly, where a decision has been taken, a claimant cannot avoid the application of the time-limits in relation to a challenge to that decision by writing a fresh letter to the decision-maker and obtaining a reply and then characterising that reply as a fresh decision. The position may be different if the decision-maker actually does reconsider the decision and reaches a fresh decision."
The board decisions
84.1 From 20 July 2021: Following the board meeting on 20 July 2021, it was the FSCS's policy not to reopen pre-April 2021 compensation decisions (whether proactively or in response to an appeal) where it had already paid compensation on the basis of due diligence failings and such payment had been accepted in full and final settlement. Such policy appeared to be absolute.
84.2 From 18 July 2022: The policy was refined at the board meeting on 18 July 2022 such that the FSCS would not consider appeals brought in respect of compensation that had been paid on a full and final basis before 1 April 2021 where the appeal was primarily seeking consideration of additional liability under s.27 or challenging the quantification method that had been used. Such revised policy introduced a qualification.
84.3 From late 2022: While not traceable to any board decision, it appears that by 26 October 2022 at the latest, the FSCS had further refined its policy to consider appeals that were extant as at 1 April 2021.
The correspondence
85.1 generic correspondence with APJ which advised the firm as to the FSCS's policy and approach;
85.2 correspondence with APJ in respect of these claimants' appeals; and
85.3 correspondence with APJ about the firm's other clients.
87.1 3 August 2021:
a) On 19 July 2021, APJ wrote to Bevan Brittan about a group of 207 clients. The clients were set out by a schedule to the letter and did not include the three claimants.
b) Bevan Brittan replied on 3 August 2021. Accordingly, the letter of 3 August was not written to APJ in respect of these claimants' cases. Furthermore, Bevan Brittan's letter makes clear that the FSCS's decisions in these 207 cases were made after the Court of Appeal handed down the Adams judgment on 1 April 2021. Accordingly, the letter was not even written in respect of clients who had received pre-April decisions.
c) Although irrelevant to the 207 clients, Bevan Brittan's letter included a section at paragraphs 5.26-5.27 about the position of claims that had been decided before 1 April 2021. The FSCS again relied on the New case and asserted:
"FSCS considers that its decisions in respect of s.27 Claims, in similar circumstances to those raised in New, were clearly lawful and any challenge to those decisions pursued now would be both without merit and out of time. For the avoidance of doubt, FSCS does not waive its right to rely on claimants having accepted its offers of compensation in full and final settlement, and in discharge of FSCS' statutory function, in respect of any decision taken before 1 April 2021."
d) Had that been successfully communicated to these claimants, I observe that they were not in fact in the same factual position as Ms New in that she did not have an extant right of appeal on 1 April 2021. It is not in any event the whole picture in that it is now clear that the FSCS does waive its right to rely on the full and final settlement clause where claimants had an extant appeal on 1 April 2021.
87.2 22 February 2022:
a) Bevan Brittan's letter of 22 February 2022 appeared to be written generically and not in response to any particular group of clients. Indeed, both the claimants and the FSCS relied on the letter in their statements of case.
b) The letter noted that APJ had been chasing appeal decisions and summarised the board's July 2021 decision:
"By way of reminder, FSCS' Board decided on 20 July 2021 that where it has already paid compensation to your clients due to being satisfied that they had an eligible claim under FSCS' rules, which arose from a SIPP Operator's investment due diligence failings, FSCS will waive its right to rely on your clients' acceptance of that compensation in full and final settlement. This will apply in circumstances where your clients may also have a potential s.27 Claim (i.e. where an unauthorised introducer has been involved in the relevant transactions which caused your clients to suffer a loss)."
c) After referring to the uncertainty pending the outcome of the further appeal to the Supreme Court, the FSCS explained that in the meantime it would treat compensation already paid in such circumstances as an interim payment on account. The letter continued:
"For the avoidance of doubt, FSCS considers that an appeal response from CET [the customer escalation team] is the final stage in FSCS' decision-making process. Where CET has already responded to an appeal before 1 April 2021, i.e. the date on which the Court of Appeal's judgment in the Adams case was handed down, FSCS considers that those decisions are final and no further decision will be issued. The reasons for this were set out in our letter dated 3 August 2021, and is consistent with the High Court's decision in R (New) v. FSCS [2021] EWHC 2203 (Admin)."
As already noted, the claimants rely on this passage to support their argument that there is no final decision until the internal appeal rights have been exhausted. Regardless of that point, this passage only explained the policy that in cases where a claimant had a final appeal decision before 1 April that there would be no further decision.
87.3 11 August 2022:
a) The FSCS relies on Bevan Brittan's letter of 11 August 2022. Again, it appeared to be written generically.
b) The letter explained that the board had decided to consider s.27 claims and continued:
"Accordingly, where FSCS has paid compensation on an interim basis, or agreed to waive its right to rely on compensation payments accepted since 1 April 2021 as being in full and final settlement and in discharge of its functions, FSCS will now complete its assessment of those s.27 Claims and issue final decisions to claimants. This is consistent with the previous decision of FSCS' Board which we communicated to you on 3 August 2021."
c) The letter did not expressly deal with the position of those who had received compensation payments and had lodged timely appeals whether before or after the Adams judgment was handed down on 1 April 2021.
87.4 13 September 2022:
a) The FSCS relies on Bevan Brittan's letter dated 13 September 2022 which was written in response to APJ's letter dated 23 August 2022. By its letter, APJ had sought clarification as to the board decision made on 18 July 2022 and published on the FSCS website on 5 August. APJ argued that the law was uncertain from 29 September 2020 when the Court of Appeal's civil appeals tracker service showed that the High Court's decision Adams was to be appealed. Further, it observed that the appeal had been listed for 2 March 2021. APJ cited the case of Mr Hood, a claimant who had received his compensation decision on 18 March 2021 which the FSCS later accepted should be treated as interim. It argued that the correct decision had been taken in the Hood case and that the FSCS should review all compensation decisions made between September 2020 and 31 Match 2021.
b) Bevan Brittan's letter of 13 September 2022 rejected the suggestion that the law had been unsettled from 29 September 2020 and explained:
"c. Further, FSCS' assessment of s.27 Claims prior to 1 April 2021, based on the approach taken in the High Court in Adams, was considered and endorsed by the court in New. The points made in your letter dated 23 August 2022 do not set out any arguable grounds why our client would be required to take a different approach now.
d. In any event, we wrote to you on 3 August 2021 explaining the decision taken by our client's Board on 20 July 2021, including that: (i) it would unilaterally waive its right to rely on compensation payments as having been accepted on or after 1 April 2021 in full and final settlement; and (ii) compensation paid for final decisions issued before 1 April 2021 remained final and would not be re-opened.
e. You did not seek to challenge the cut-off date applied by our client (1 April 2021), until your recent letter dated 23 August 2022. This is despite your client having previously brought a challenge to our client's decision to make interim compensation payments, on exactly the same grounds you now advance in your letter, in the Fortt proceedings. As you know, your client's claim in Fortt was dismissed by the court on both substantive and procedural grounds given your client's delay in bringing the claim. Clearly, any further Judicial Review challenge to our client's decision dated 20 July 2021 would now be even further out of time and, in light of the court's decision in Fortt, we suggest would amount to an abuse of process.
For the avoidance of doubt, FSCS does not agree to waive its right to rely on compensation payments received prior to 1 April 2021 as having been accepted in full and final settlement and discharge of our client's functions. Our client reserves the right to bring this letter to the attention of the court on the question of costs should your client(s) decide to bring legal proceedings for the reasons set out in your letter."
c) While referencing the decision in Mr Hood's case, this correspondence was generic to APJ's clients – like these claimants – who received compensation decisions between 29 September and 31 March 2022. It made clear that final decisions taken before 31 March would not be reopened.
87.5 26 October 2022:
a) The FSCS relies on Bevan Brittan's letter of 26 October 2022. That letter was written in response to APJ's letter of 12 October 2022 which focused more closely on appeals from pre-April decisions. APJ explained that it sought "clarity on decisions issued prior to 1st April 2021 where the claimants have already engaged the FSCS appeal process against the decision." It identified that the FSCS treated Mr Hood's March 2021 decision as interim on the basis that the law had changed before the FSCS had determined his appeal. APJ sought assurance that the FSCS would follow its approach in the Hood case.
b) By its reply, Bevan Brittan confirmed that Mr Hood had appealed on 19 March 2021 such that his appeal was extant as at 1 April. Referring to his particular case, the FSCS asserted that any challenge to the original compensation decision was both out of time and without merit (presumably because it would have been a decision reached in accordance with the then understanding of the law and Mr Hood in any event had a suitable alternative remedy) and that any other challenge was premature because the FSCS had not completed its post-decision review process. It then added:
"For the avoidance of doubt, we confirm that the above remains FSCS' position, including in respect of other claims that have the same circumstances as that of Mr Hood (i.e. where there was an open appeal that had been requested but not completed as at 1 April 2021)."
c) While Bevan Brittan's letter specifically addressed Mr Hood's position, it was written in response to a generic enquiry as to the position of other clients who had engaged the appeal process against a pre-April decision. Further, the passage quoted above addressed the position of other potential claimants and made clear that the line drawn was as to whether there was an open appeal at 1 April 2021.
88.1 By its letter dated 9 March 2023, APJ asserted that the firm had about 200 such clients and that the firm would provide particulars by way of a schedule.
88.2 A schedule of 167 claimants who, APJ asserted, had extant appeals at 1 April 2021 was provided under cover of the firm's letter dated 3 April 2023. The schedule did not include these claimants' cases.
88.3 By its letter dated 24 April 2023, APJ pressed for an update on "all s.27 claims and extant appeals as of 1st April 2021".
"We are also growing concerned with the apparent pattern of you persistently submitting repeated correspondence to FSCS, in an attempt to persuade it to re-open claims which you are aware are closed, with no extant appeal outstanding, and in many cases after a significant delay. You have then repeatedly sought to challenge FSCS' refusals to re-open those closed claims. We have also seen a number of cases in which you have asserted that an appeal was requested by your clients before 1 April 2021 where FSCS has no record of receiving any such appeal. When requested to provide evidence to substantiate your purported appeal requests having been submitted, you have in many cases been unable to do so. We consider that your approach in these matters appears to be no more than an attempt to obtain replies from FSCS which you can subsequently characterise as fresh decisions to be the target of Judicial Review proceedings. Such conduct is clearly an abuse of process and has repeatedly been discouraged by the courts."
"However, FSCS has been clear throughout – including in our letter to you dated 3 August 2021 – that claims that were finally decided before 1 April 2021, either because: (i) a decision had been issued at the final stage of FSCS' post-decision review procedure by that date; or (ii) no appeal against a decision issued before that date was requested within a reasonable time, would remain closed and would not be re-opened by FSCS. This is because those decisions were made lawfully by FSCS having regard to all relevant considerations at the material time."
Conclusions
LEGITIMATE EXPECTATIONS
Legal principles
97.1 A legitimate expectation will only arise where there is a proof of a representation that is "clear, unambiguous and devoid of relevant qualification": R (Bancoult) v. Secretary of State for Foreign & Commonwealth Affairs (No. 2) [2008] UKHL 61, [2009] AC 453, at [60]; R v. Inland Revenue Commissioners, ex parte MFK Underwriting Agencies Ltd [1990] 1 WLR 1545 (QB), at p.1569.
97.2 The question of whether a representation is clear, unambiguous and devoid of relevant qualification is to be answered by considering how on a fair reading of the representation it would have been reasonably understood by those to whom it was made: Paponette v. The Attorney General of Trinidad & Tobago [2010] UKPC 32, [2012] 1 AC 1, at [30]; R (Association of British Civilian Internees: Far East Region) v. Secretary of State for Defence [2003] EWCA Civ 73, [2003] QB 1397, at [56].
97.3 Proof of detrimental reliance is not essential, although the presence or absence of detrimental reliance is a relevant consideration in deciding whether the adoption of the policy said to be in conflict with the representation would amount to an abuse of power and whether it might be justified in the public interest: Bancoult, at [60]. Where the claimant seeks to establish detrimental reliance, he or she must prove that: Paponette, at [37].
97.4 The court must then consider whether the public body was entitled to frustrate the legitimate expectation. The principle that good administration requires public bodies to be held to their promises would be undermined if the law did not insist that any failure or refusal to comply be objectively justified as a proportionate measure in the circumstances: Paponette, at [38]; Nadarajah v. Secretary of State for the Home Department [2005] EWCA Civ 1363, at [68].
97.5 The onus is on the public body to justify the policy that conflicts with the promise: Paponette, at [37]. Where the public body decides not to give effect to a legitimate expectation, it must articulate its reasons so that their propriety may be tested by the court: R (Bibi) v. London Borough of Newham [2001] EWCA Civ 607, [2002] 1 WLR 237, at [59]. Where the public body chooses not to place evidence before the court to justify its frustration of the expectation, it runs the risk that the court will conclude that there is no sufficient public interest and that in consequence its conduct is so unfair as to amount to an abuse of power: Paponette, at [38].
97.6 In R v. North & East Devon Health Authority, ex parte Coughlan [2001] QB 213, Lord Woolf MR said, at [57]:
"Where the court considers that a lawful promise or practice has induced a legitimate expectation of a benefit which is substantive, not simply procedural, authority now establishes that here too the court will in a proper case decide whether to frustrate the expectation is so unfair that to take a new and different course will amount to an abuse of power. Here, once the legitimacy of the expectation is established, the court will have the task of weighing the requirements of fairness against any overriding interest relied upon for the change of policy."
97.7 Further, where a public body is considering whether to act inconsistently with a representation that it has made and which has given rise to a legitimate expectation, good administration and elementary fairness demand that it takes into account the fact that the proposed act will amount to a breach of the promise: Paponette, at [45]-[46]; Bibi, at [49] & [51].
The argument
Conclusions
"We are considering the issues raised in your appeal. We are doing so in light of the judgment handed down by the Court of Appeal in Adams v. Options. We will respond as soon as we are able to."
OUTCOME