In recent judicial review (“JR“) proceedings, R (on the application of Kelly ) (Claimants) v Financial Ombudsman Service & Shawbrook Bank (Interested Party) (2017), the High Court quashed a Financial Ombudsman Service (“FOS”) decision to dismiss a husband and wife’s complaint involving a lender and the interested party bank (“IPB”).  The Court decided that the FOS had misunderstood the nature of the complaint and therefore had acted irrationally.


The claimants took out a £7,150 loan from a lender, repayable over 10 years. The pertinent terms of the loan agreement provided that the borrowers should notify the lender of any change to their address and that the lender could transfer the loan to another loan provider without the consent of the borrowers.

The claimants failed to inform the lender of their change of address and the lender transferred the loan agreement to the IPB without gaining the complainants consent. Unbeknown to the claimants,  both the lender and the IPB had issued letters to the claimants’ old address to inform them that their loan had been transferred to the IPB.

Upon receipt of her bank statement and fearful of fraudulent activity, the first claimant cancelled her loan repayments to the IPB. She contacted the IPB to allay her suspicions, but remained suspicious of fraudulent conduct in the absence of written evidence from the IPB of the loan transfer.

Eventually, satisfied that the loan had in-fact been transferred to the IPB, the claimants  paid the outstanding loan amount. This delayed payment however, resulted in additional fees and charges, along with a negatively affected credit rating.

The claimants complained to the FOS but their complaint was rejected.


The FOS was established by parliament to provide cost-effective alternative dispute resolution for eligible complainants.  In so doing the FOS determines complaints is by reference to its opinion of, ‘what is fair and reasonable in all the circumstances of the case’ (Section 228 of the Financial Services and Markets Act 2000 (“the Act”)). The Act states, that in making this opinion, the FOS must take in to account the law and regulations, regulators’ rules, guidance and standards, codes of practice and good industry practice where appropriate.

The claimants applied for JR on the basis that the FOS’s opinion of what was ‘fair and reasonable’ with regard to their complaint was  irrational.  But the FOS’ decision could only be irrational if it contained such errors of reasoning so as to deprive it of logic.

The claimants’ complaint had asked specifically for details in writing as to how they owed further money, a welcome letter from the IPB and assurance in writing from the IBP that their credit rating would not be affected.  But the FOS decision  (only one-and a half pages long) detailed the complaint as being that the first claimant had not been informed that the debt had been taken over by the IPB. The FOS’s decision therefore responded only to the perceived complaint, not addressing the actual complaint about the welcome letter (so that the claimants could ensure that there had not been any fraud).

The Court held that the FOS decision was irrational as the FOS had misunderstood the complaint and had not properly engaged with it.  The  decision was quashed and the Court sent it back to the FOS for fresh consideration.


2017 has seen a number of reported decisions involving JR and the FOS. The threshold for a succesful JR of the FOS still remains high but institutions will welcome the growing body of case law that can inform and shape their complaint handling processes.