High Court encourages use of FOS to resolve disputes

The Commercial Court has encouraged the use of the FOS to resolve disputes, by granting a stay to enable claimants to benefit from what it described as a more economical and informal process.

A claimant brought proceedings against two banks for alleged negligent advice, with the trial due to commence sometime in 2018 before the Mercantile Court.  However, the claimant had also complained to FOS, which usually dismisses complaints if there are on-going court proceedings and no stay has been granted.  The banks did not consent to a stay, submitting that because there had already been significant delays, granting a stay would cause them prejudice.

The court found that the delays had not been the claimant's fault and that it had been diligently pursuing its complaints against the banks.  The FOS was a more economical and informal process than court proceedings and the claimant would suffer prejudice if a stay was not granted, especially considering the banks' superior resources.  The claimant's application was held to be similar to a stay to allow for mediation to avoid the consequences of expensive litigation.  If the claimant failed before the FOS, it was permitted to come back to court to continue proceedings.

The court acknowledged the banks' concern that the claimant could try to continue court proceedings after gaining an award from the FOS, despite the 2014 decision in Clark v In Focus which would seem to preclude such a move. The claimant agreed to undertake not to continue proceedings in the High Court if it obtained an award before the FOS in light of the banks' concerns.

This case does little to avoid the risk that firms can face parallel proceedings and the risk, after FOS, of claimants taking a second bite at the cherry.