R (on the application of British Bankers Association) (Claimant) v (1) Financial Services Authority (2) Financial Ombudsman Service (Defendants) and Nemo Personal Finance Ltd (Interested Party): QBD (Admin) (Mr Justice Ouseley): 21 April 2011 Financial Services Authority – Payment protection insurance – Financial Ombudsman The claimant British Bankers Association (B) applied for judicial review of a policy statement issued by the first defendant Financial Services Authority concerning the assessment and redress of payment protection insurance (PPI) complaints. B’s members were among those who had sold PPI policies. Following widespread complaints about PPI policies, the FSA published its policy statement. It included amendments to the FSA Handbook rules, guidance about how complaints should be handled, identification of common failings in the selling of policies, and guidance on ‘root cause analysis’, a mechanism whereby those who had not complained could receive redress. B argued that: (1) the statement was unlawful because it treated the FSA’s high-level principles as giving rise to obligations owed by firms to customers, when the section 150(2) of the Financial Services and Markets Act 2000 prevented any obligation arising from the principles between firms and customers, meaning that the principles were not actionable in law and the second defendant ombudsman would be wrong to take them into account in ruling on redress; (2) since the FSA had made separate specific rules governing the selling of PPI policies which incorporated the principles, it was unlawful for the statement to provide that customers could obtain redress by reference to principles which conflicted with or augmented those specific rules; (3) section 404 prescribed a specific statutory procedure dealing with misselling of PPI policies, providing redress for non-complainants, making the guidance on root cause analysis unlawful. Held: (1) Section 150(1) dealt with contravention of rules by making them actionable as breaches of statutory duty. Section 150(2) removed that actionability and did nothing else. ‘Actionable’ in section 150(1) meant ‘capable of giving rise to a cause of action’. It did not mean ‘capable of giving rise to obligations or compensation’. Accordingly, section 150 did not apply to the principles; it left intact any other function or effect a non-actionable rule might have. The words of section 150 were inapt to prevent non-actionable rules giving rise to obligations between firms and customers, and it was not possible to imply such words. Furthermore, there was nothing in the provisions dealing with the ombudsman scheme containing such a limitation on the operation of non-actionable rules. That would run counter to the ombudsman scheme’s very broad statutory basis in section 228 and the ombudsman’s very broad power under schedule 17 to decide what to take into account. It was obvious that the principles were relevant rules, subject to argument about their relationship to specific rules. It would be a breach of statutory duty for the ombudsman to reach a view on a case without taking the principles into account (see paragraphs 71-77 of judgment). (2) The principles were the overarching framework for regulation. They were substrata to which the specific rules were added; they always had to be complied with. The specific rules were applications of the principles to the particular requirements they covered. There was no reason why the specific obligations in the rules should not be subject to the wider role of the principles (paragraphs 161-166). (3) Although the circumstances in which section 404 powers could be used had arisen, that was not sufficient to deprive the FSA of power to act in any other way to deal with the misselling of PPI. It would be absurd if regulatory powers diminished the more serious the circumstances in which they were needed. Neither section 404 itself nor its role in the overall regulatory framework warranted the implication in it of a restriction on other powers merely because the circumstances were satisfied. However, it was necessary to examine the purpose and effect of the scheme to see whether the FSA was seeking by other methods to achieve that for which section 404 was intended to be the exclusive vehicle. B had not challenged the relevant parts of the handbook, before their amendment by the statement, as conflicting with section 404. The changes made in the statement were not in law significantly different. The new provisions did not have the universal compulsion, regulatory oversight and effect by enforceable rules which a section 404 scheme would have had; accordingly, although there were similarities in scope and aim, they were not an evasion of section 404 and so were not forbidden by it (paragraphs 228-231, 243-258). Application refused. Lord Pannick QC, C Flint QC, J Herberg, S Pritchard (instructed by Freshfields Bruckhaus Deringer) for the claimant; M Brindle QC, M Carss-Frisk QC, R Coleman, J McClelland (instructed by SNR Denton UK) for the first defendant; Hodge Malek QC, J Strachan (instructed by Russell Cooke) for the second defendant; M Fordham QC, P Luckhurst (instructed by Herbert Smith) for the interested party.
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