Matter of:

IFA Defence Union

and

The European Convention of Human Rights

Instructions to Counsel to advise

Counsel has herewith: -

1. Index with summary.

2. 3 document files.

Counsel is requested to consider the matter before formal appointment so a discussion can take place as to the basis of Counsel’s retainer.

The clients wish to submit a petition to the European Court of Human Rights and to be advised generally if it is considered necessary while taking into account a substantial opinion has already been provided by Anthony Speight QC.

The clients have limited funds and therefore priority is to be given to the drafting of the petition.

England Kerr Hands advise counsel to look first look at the opinion of Anthony Speight QC at index number 50 of the of file 2 of the documents file,

In the words of Anthony Speight QC “Such a system would be tolerable if the maximum award were modest – say £5,000 (which is the maximum summary compensation under the legal professions’ schemes for “inadequate professional service”). It would also be tolerable if, as is the case with the summary system of adjudication in the construction industry under the Housing Grants Construction and Regeneration Act 1996, there could be a complete rehearing before a court. And it might even be tolerable if it were applied only against very large companies.

The FSA say: “The lack of an Appeal process may offend the “fair trial” provisions of Article 6 of the European Convention of Human Rights ECHR incorporated into law by the Human Rights Act 1998. The right to a Judicial Review is not a right to an appeal and an external appeal could maintain the quality of the decision.

The FOS say: “Currently, the laws of evidence play little part in the Ombudsman process, HEARSAY, UNSWORN TESTIMONEY – all are considered by the Ombudsman. There is also the matter of the interpretation of Article 6 by the European Courts and how far that will impact upon our attempts to make the process informal while, in doing so, cut across the rights bestowed by Article 6. The principle behind such rights being regarded as sacrosanct by the Court at Strasbourg.”

We have highlighted the main points of the documents provided in the index.

The background of this case is:

There has been since 2000 a huge surge of endowment complaints. The IFA is able to first issue a final response to the complainant and thereafter the complainant has 6 months to take the complaint to the Financial Ombudsman Service (FOS). Once the FOS has issued their findings even if they find against the complainant, the complainant has the option of taking this matter to court. On the contrary the IFA is not able to bring this matter to court and does not have the option to appeal the FOS decision. The only appeal open to the IFA is Judicial Review. This right in reality is redundant.

Although the IFA has no right of appeal they must pay the case fee whether they win or lose. The awards made against the IFA may be considerable. Although the outcome of a decision can have such a detrimental effect on the IFA there is no recourse if it was later found that the award was granted in error.

We feel that the lack of the right of appeal together with the non-independence of the FOS with the FSA means that the FOS goes against Article 6 of the Human Rights Act.

There is a document which is the general document of running points of interest Instructing Solicitors have prepared on various aspects that maybe of interest which accompanies this Brief.

The Financial Ombudsman Service (FOS) was set up under Section 228(2) of the FSMA 2000 and does not require the FOS to determine complaints in accordance with the law, but “what is, the opinion of the Ombudsman, fair and reasonable in all of the circumstances of the case”.

Section 229(2)(b) of the FSMA 2000 enables the FOS to direct “that the respondent takes such steps in relation to the complaint as the Ombudsman considers just and appropriate (whether or not a Court would order those steps to be taken).

The initial rules governing FOS were to be modelled on current legislation and case law in respect of damages and limitation periods, and indeed this was followed by FOS. However when cases went against complaint imposing stricter time limits, FOS has used its wide powers of jurisdiction to go against the original principle and now ignore the limitation period when it considers it should be undertaken at its complete discretion.

A number of attempts at judicial review have been made, and it is quite clear that judicial review is not seen as the right of appeal, and indeed the Courts will not interfere with FOS in a particular matter in the whole, leaving it unaccountable operating as a quasi-judicial process, unaccountable to the judicial review. It is also unaccountable to the executive and legislator and exempt from the Freedom of Information Act.

When the legislation was drafted there was clear concern, but the rules now applied are very draconian. However I have noticed that even the Prime Minster now has brought the matter into public debate with public criticism of the FSA, and impliedly FOS.

An interesting point is that the Government set up the investors compensation scheme for cases where the financial advisor was no longer in business, and the principle rule is that no compensation can be claimed until the loss has been determined, ie. At the end of the policy, no doubt based on common law principle, but this important feature is directly ignored by FOS, which seeks to assess damages at the current moment in time.

This seriously undermines the basis that most endowment policies payments are determined by final bonuses, that are only allocated when the policy is finished, and very much is dependent on the stock market.

The rates of return being used by FOS are also fundamentally flawed, and at the end of the day they are based on industry averages and not on the specific returns of a life company.

A further fundamental flaw with FOS is that they will not take into account which parties are the principle cause for any financial loss, as there is much debate as shown in the papers that the reason for the poor returns is that unrealistically high rates of growth were set when policies were first taken out and premiums were set using artificially low charges, but these rates were set by the regulator at the time, and therefore it is manifestly unfair that a party ie. The life companies and the regulator itself should not be held accountable, but leave principally others, namely independent financial advisors (IFAs) to be responsible for the loss caused by others.

In a normal Court of Law there would be a right to claim for a contribution/indemnity, but these important principles are not available under FOS.

Instructing solicitors have had talks with a senior commercial litigation partner in Messrs. Ward Hadaway, with whom they have had previous dealings, and a strong expression of interest has been made for that firm to be involved at a later date, as the consequences of a favourable result could provide a substantial litigation for previous cases that have been unfairly dealt with by FOS and for future claims.

Information supplied by clients indicated that some conventional with profit savers has meant that an average 25 year mortgage endowment was now paying almost £10,000.00 over its projected target, and in particular:

With a final bonus of £10,407.00, a £50.00 per month policy was paying out £41,017.00 - £9,814.00 over target, so clearly it is critical importance normal rules and assessment of damages are followed rather than the current principle being applied by FOS.

Instructing solicitors have prepared a point of interest document under Number 13 and Counsel is recommended to view this document initially in conjunction with that of Anthony Speight QC.

IFA Defence Union

Claimants

-and-

The European Convention of Human Rights

Defendant

Instructions to Counsel to consider the matter

Prior to formal appointment

Counsel details

England Kerr Hands & Co.

Solicitors

DX 19768

HARBORNE

Ref: AREK

Telephone: (0121)

427 9898