Lawyers have said a High Court ruling permitting a couple to sue their IFA for more than £500,000, despite having accepted the maximum amount of compensation available via the Financial Ombudsman Service (FOS), is "bad news" for advisers.
The ruling overturns a previous judgement which ordered Barry and Julie Clark's legal case against Focus Asset Management should be dismissed after they received £100,000 from the firm via the FOS for wrongly advising them about their investments after they sold their business in 2001.
The couple, who are in their mid to late 60s, said that they specifically stated in their acceptance of the FOS award that they were only accepting the award on the grounds it would not negate their right to pursue their adviser through the courts for the remainder of their losses.
The Clarks claim the losses they incurred as a result of being advised to invest in endowment policies by Focus are in excess of £500,000.
In his ruling, Judge Ross Cranston said that it is his view that the word "final" in the FOS' use of "full and final settlement" refers to the end of the Ombudsman's process and not necessarily the end of claimants' attempts to get redress, and that therefore they can pursue their case through the courts.
Lawyer Alasdair Sampson, who acts for both financial advisers and investors, said the ruling was "bad news" for advisers.
"Say the claim is for £250,000, now investors can test their case at FOS and if it is upheld they can try to chase the rest of the amount through the courts.
"It opens up a lot of claims for high value claimants."
He said the ruling puts back the standard that was in place prior to a ruling in 2010 in the case of Andrews v SBJ Benefit.
In that case the presiding judge ruled that the investor could not claim through the courts in the same case where FOS had awarded them a "full and final settlement".
The chairman doggedly tries to be amusing
'Profitability is almost a myth'
Active Wealth in liquidation
Cautious welcome for volatility
Report output options