THE INTENDED informality of the Financial Service Ombudsman’s complaints resolution procedures is at risk unless a High Court decision upholding a challenge by stockbroking firm J E Davy to those procedures is overturned, the ombudsman has argued before the Supreme Court.
Ombudsman Joe Meade has submitted that the impact of the High Court ruling in the Davy case is to require him to engage in full court-type hearings which, he contends, is contrary to the letter and spirit of the legislation setting up his office.
A system involving voluminous discovery, widespread disclosure and lengthy hearings was contrary to the whole concept of the ombudsman scheme, he said.
After hearing submissions from Michael Cush SC, for the ombudsman, and Paul Sreenan SC, for Davy, the five-judge Supreme Court yesterday reserved judgment on the ombudsman’s appeal against the July 2008 High Court judgment of Mr Justice Peter Charleton. Mr Justice Charleton ruled the ombudsman failed to follow fair procedures in how he upheld a complaint by Enfield Credit Union that Davy failed to properly advise it of the risks of investing in bank perpetual bonds which later fell in value.
He also directed the ombudsman to conduct a fresh investigation into the complaint according to the correct procedures as outlined by the judge, including holding an oral hearing relating to the nature of the advice from Davy to the credit union.
In opposing the ombudsman’s appeal, Davy argued the High Court was entirely correct in concluding the procedures adopted by the ombudsman breached Davy’s right to fair procedures.
As the ombudsman’s decision of January 2008 had serious reputational and financial consequences for Davy, the level of fair procedures mandated by the High Court was justified, it also submitted.
Because of the procedures adopted, Davy said it was not given all of the material relied on to support the claims made against it and was also deprived of an opportunity to make submissions on that material. Given the conflict of evidence between it and Enfield CU, the High Court correctly decided an oral hearing was required, it submitted.
Davy also argued some of the High Court findings were incorrect and should be overturned, including a finding that the ombudsman was not obliged to attempt mediation of the complaint unless there was a reasonable prospect of achieving results.
The case arose after Enfield CU invested €500,000 in three perpetual bonds issued by three banks – Nordea Bank, Jyske Bank and Oko Bank between September 2004 and April 2005. The value of the investments in July 2007 was €422,959. The ombudsman upheld Enfield’s complaint and directed Davy to pay the credit union €500,000 in exchange for the bonds and to refund all fees and commissions.
