Edesia Law overturns FOS redress decision on Judicial Review application
Court also gives helpful guidance on Senior Courts Act
Judgment was handed down last week in R (Wills & Trust Independent Financial Planning Ltd) v Financial Ombudsman Service Ltd [2026] EWHC 1566 (Admin), in which Edesia Law acted for the Applicant financial advisory firm in its successful judicial review of the redress element of a Financial Ombudsman Service (“FOS”) decision, which the firm argued was “irrational”.
Although the Court accepted that FOS has very wide discretion in the awarding of redress, it found that the Ombudsman was nevertheless still obliged to ensure that the redress remained “compensatory” against the alleged wrongdoing of the relevant firm. The Court found that awarding redress that covered a period when new financial advisers were actively dealing with their portfolio, meant that the firm would be compensating the complainants for poor investment decisions of the new advisers, which was wholly separate to the conduct complained about. The Court quashed the redress element of the decision and referred it back to FOS for re-assessment.
The case provides useful guidance as to the parameters of FOS’s discretion when awarding redress and will support arguments by advice firms that they should not be held responsible for unrelated third-party actions which might increase a complainant’s losses.
The Court also clarified the application of s.31(2A) of the Senior Courts Act 1981, which restricts the Court’s ability to consider a Judicial Review of it can be shown that the outcome of the relevant matter “would not have been substantially different” absent the decision complained about. The Court made it clear that the mere fact that a complaint may have been upheld in any event, on different grounds, would not satisfy the test and the Cout would need to consider the consequences of the complaint being upheld on the relevant grounds (for example, as to what redress might be payable), to decide if the outcome would not have been substantially different. The Court could not reasonably determine that this would have been the case in the matter before it.
Edesia Law partner Damian McPhun, who acted for the successful firm, instructing Ruth Bala of 4 Pump Court, commented “we are pleased that the Court recognised that the broad powers granted to FOS are not unfettered and that FOS must reasonably have regard to all the factors contributing to a loss when awarding redress and not award compensation flowing from facts and matters outside of the actions and influence of the firm”.
Further details appear below:
Background
The advice firm, Wills & Trust Independent Financial Planning Limited (“W&T”), acted as financial advisor to the complainants. In 2018, W&T set up a discretionary fund manager (Wills & Trust DFM) to allow for client portfolios to be managed on a discretionary basis. The complainants agreed for their portfolios to be managed on such a basis going forwards.
The complainants later complained to W&T about the management of their portfolios and, in particular, reporting issues. The complaint was not upheld and the complainants referred the matter to FOS.
At first instance, a FOS Investigator declined to uphold the complaint and found that there was no evidence of mismanagement or poor advice and that W&T was not responsible for any reporting issues. The complainants referred the matter to an Ombudsman.
The FOS Decision
The Ombudsman decided that he need not determine the issues raised by the complainants, but that the “root cause” of the complaint was W&T misrepresenting to the complainants matters relating to Wills & Trust DFM when it recommended the complainants agree to the discretionary management of their funds. He determined that, absent the alleged misrepresentations, the complainants would have terminated their arrangements with W&T and moved to a new advisor, something they ultimately did in around November 2023.
The Ombudsman required W&T to pay redress by reference to the value of their portfolio at the date of the FOS Decision (many months after the complainants had changed advisors) compared to the value at that date of a notional portfolio (based on a market benchmark) – on the assumption that the complainants would have transferred their portfolio away from W&T in 2018 (having declined to use the services of Trust DFM).
The Judicial Review
W&T was given leave to refer the matter for judicial review on all 5 of the grounds it put forward. The three key allegations were that:
1. FOS exceeded its jurisdiction in investigating and upholding the complaint based on issues that did not form part of the complaint, so in relation to which W&T had not had the opportunity to consider and to respond within the normal regulatory process and timeframes.
2. FOS’s finding that W&T had misrepresented certain issues to the complainants was irrational and had no basis in the facts.
3. FOS’s approach to the calculation of redress was also irrational as it awarded the complainants redress by comparing the value of their portfolio at the date of the FOS Decisions with a relevant benchmark. This meant that actions taken by the complainants’ new advisory firm with regards to their portfolio (actions over which W&T had no control) would impact the redress.
Judgment
In its judgment delivered on 23 June 2026, the Court made the following key findings:
1. The Court reiterated that, although FOS has wide discretion in determining the scope of a complaint and it was for the Ombudsman to decide that scope, it could not do so in a vacuum and the determination must have some basis in the complaint referred to FOS and its surrounding circumstances and correspondence. In the context of the case, the Court determined that the decision of the Ombudsman to consider “root cause” issues could be upheld, on the basis that comments made by the complainants in certain correspondence relating to the complaint could be interpreted as referring to the broader W&T / Wills & Trust DFM relationship issues which the Ombudsman decided to examine and which founded the eventual FOS Decision against W&T.
2. The Court did not demur with W&T’s position that specific matters highlighted by FOS did not comprise misrepresentations, but found that the essence of the FOS Decision was that W&T had not clearly set out the full nature and consequences of the DFM proposal and that the facts and correspondence could support a finding along those line, such that it could not be deemed irrational.
3. The Court highlighted the broad discretion FOS has when it comes to calculating redress as part of a “fair outcome” to the case. However, it emphasised that the rules governing FOS required it to award redress that would compensate the complainant for the wrongful acts of the relevant firm. In this case, by FOS running the portfolio redress through to the point of the final Decision, the calculation would be affected by the actions of the complainants’ new adviser in that, if the adviser performed very poorly against the benchmark, that would increase the sum payable by W&T through no fault of its own and, if the adviser performed very well and exceeded the benchmark returns, that would reduce the redress payable by the firm, but deprive the complainants of the benefit of the gain arising from the new adviser’s advice.
4. The Court also reviewed s.31(2A) of the Senior Courts Act 1981, which provides that the Court should refuse a judicial review “if it appears to the court to be highly likely that the outcome for the applicant would not have been substantially different if the conduct complained of had not occurred”. FOS had argued that, as W&T had not challenged one separate ground upon which the complaint had been upheld, or, if the Court disagreed with the redress determination, but did not quash the decision to uphold the substance of the complaint, that meant that there the outcome “would not have been substantially different”, as there would still have been an upheld complaint. The Court made it clear that the simple fact of a complaint being upheld on other grounds does not of itself mean that the result would not have been substantially different. It was necessary to look at the substance of the complaint that was determined to have been correctly upheld against the aspects of the complaint subject to challenge. The financial outcome of each may be very different and, for example, if the decision that was subject to challenge gave rise to significant redress, but the part of the complaint upheld or not challenged would give rise to much lower redress, the outcome would be sufficiently different to mean that FOS could not rely on s.31(2A) of the Senior Courts Act.
Comment
The Court’s decision in the case was a rare instance of the Court interfering with FOS’s wide discretion in how it handles complaints referred to it. Courts have traditionally been reluctant to challenge FOS decisions on irrationality grounds, for the very reason that the scope of its decision-making powers is so broad that it is much harder to argue the relevant decision was irrational or unreasonable.
Notwithstanding this, it is clear that the Court did not believe that FOS could simply award redress that would not accord with the basic compensatory principle of meeting losses caused by the firm. The redress awarded would be impacted by the wholly separate advice and investment decisions of a different financial advice firm, over which W&T had no control or influence.
The Court’s decision therefore suggests that FOS should carefully consider how any redress award is made, so as to avoid requiring a firm to compensate a complainant for losses cause by the actions of third parties over which the paying firm had no influence or control.
The full judgment can be found here: W T v FOS (judgment)(final).pdf