31 August 2016

Templars Estates Ltd and Others v National Westminster Bank and Royal Bank of Scotland [2016] EWHC 2020 (Comm)

The background

The claimants brought proceedings against NatWest and RBS alleging that they had been negligently advised. Proceedings had been issued in the Mercantile Court in order to preserve the limitation period.

After issuing proceedings, the claimants also applied to the Financial Ombudsman Service (FOS). It is a requirement of the FOS that a complaint to it and court proceedings cannot be pursued at the same time. The FOS will not investigate unless there are no proceedings in court, or, if there are Court proceedings, they have been stayed.

The claimants sought a stay of proceedings. The banks did not consent to a stay, stating that this was now a ‘stale claim’ and that there should be no further delay in proceedings. The banks argued that granting a stay would prejudice them and their employees. The court therefore considered the claimants’ application for a stay.

The decision

The stay was granted. It was held that the claimants would plainly suffer prejudice if there were no stay, because they would be prevented from pursuing their chosen route of complaint to the FOS of a much more ‘informal and much more economical’ kind. The claimants had been 'diligently pursuing' their complaints against the banks and had not caused any delay in the proceedings to date: there had been “no sitting on hands”. It was held that the banks and their employees would not suffer any prejudice if the matter was not resolved for another year.

The court considered that the banks had a legitimate concern that the claimants might win on their FOS complaint and then to continue with the proceedings. The court agreed with the submission on behalf of the banks that the claimants, if they are seeking a stay of the High Court proceedings, must accept the limited jurisdiction of the FOS.

There is a financial limit of £150,000 on the amount the FOS can award. Beyond this amount, the FOS can do no more than issue a direction to a firm to make a further payment and the firm may choose to comply with the direction or not. In this case, it was accepted by the court that if the claimants fail in front of the FOS and obtain no award, they would be entitled to return to the High Court. However, if the claimants do obtain an award from the FOS, they are not entitled to return to the High Court. They should enforce that award, so far as it relates to £150,000 (or up to £150,000) and must “take their chances” as to whether a further direction is made and whether the banks choose to comply with it.

The claimants gave an undertaking that in the event that they obtained an award from the FOS, they would not return to the High Court and would discontinue the proceedings. On the basis of this undertaking, the stay was granted.

The decision is in line with the Court of Appeal approach in Clark v In Focus where it ruled that claimants are not entitled to accept a FOS award and then bring the same claim for damages in civil proceedings.

In practice

  • Reiterates the fact that a claim cannot be brought before the FOS if court proceedings are active
  • Courts will try to avoid parties pursuing lengthy and expensive proceedings if possible
  • Where there are arguments relating to delays in proceedings, the Court will look carefully at the actual prejudice caused to each party as well as the conduct of the parties to date in dealing with the dispute.

Key contact

Paul Haggett

Paul Haggett Partner

  • General Counsel
  • DPO

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