This is quite a complicated cased which started many years ago. The full details can be read by clicking the links below but in essence the Judge decided that an FOS Ombudsman’s final decision was not correct and he ordered the Zurich to pay £223,000 damages rather that the £1000 offered. Perhaps the most interesting concerning comments regarding FOS are in para 53 of the Judge’s decision, reproduced below.
- The Financial Ombudsman’s Final Decision was given on 24 January 2014 in these terms:-
“…Whilst I accept that the adviser was mistakenly recommending the use of this trust arrangement, I have not seen evidence that this has in itself caused [Mrs X] any financial loss or other detriment …. By placing the investments in the offshore bonds, this had the effect of removing the potential future tax liability. Overall, given [Mrs X’s] requirements to mitigate her tax liability whilst retaining access to her capital and also receiving an income, the advice seems to have largely met her needs.”
In expressing himself in this way the Financial Ombudsman appears to have assumed that the Gift and Loan Trust and the bonds were simply pieces of paper that had to be signed to secure a tax advantage, and that really nothing had changed. Of course in truth Mrs X had converted her absolute ownership of her share portfolio into an interest-free loan obligation owed by two of her daughters. She did not have “access to her capital”, nor did she receive “income”. She would get loan repayments if she demanded them and if her daughters agreed to withdraw part of the capital value of the bonds to satisfy the demand. She would never get access to that part of her “capital” representing the growth in the original portfolio.
So the Ombudsman’s decision, whilst it may have been “fair and reasonable”… did not properly reflect the financial implications of the issue.
Legal Futures article covers the basics
FOS actual decision as published on the FOS website