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FOS' jurisdiction - a judicial review with wider consequences?

30 May 2025. Published by Rachael Healey, Partner

FOS rejected a complaint on jurisdiction grounds finding that it had been brought out of time. The complainants challenged FOS' decision to reject the complaint on time bar grounds, arguing that the respondent bank had waived its right to rely on time bar as it had failed to raise time bar in its Final Response Letter. The High Court found that the failure of the respondent bank to raise time bar in its Final Response Letter did not mean you could infer that the bank had waived any right to raise time bar, but it did mean the Final Response Letter was not DISP compliant.

The complaint

The complaint related to a mortgage product.  The mortgage reverted to a standard variable rate interest only mortgage in 2009.  A complaint was made to the bank about an increase to the standard variable rate and the bank responded in 2013 and 2014 rejecting the complaint.  The mortgage was redeemed in 2016.  A complaint was made to the bank in 2022 on the basis that the complainants were trapped as "mortgage prisoners".  When making the complaint in 2022, the complainants specifically raised the fact that the complaint may be out of time and requested that the bank not rely on time bar when it came to whether the complaint had been made within 6 years of the event complained of or otherwise within 3 years of becoming aware they had cause for complaint.  The bank rejected the 2022 complaint and in its Final Response Letter did not refer to the time bar issue – referring only to the fact that the complaint had to be referred to FOS within 6 months of the Final Response Letter – the bank adopted the wording from option 1 of Annex 3R (more on that below).

The complaint was referred to FOS at which point the bank said it intended to argue that the complaint was made outside of the 6 years of the event complained of or otherwise within 3 years from awareness of the complaint – in short, arguing that FOS had no jurisdiction to hear the complaint.  FOS agreed with the bank and rejected the complaint on the basis it was brought outside of 6 years from the event complained of and otherwise more than 3 years after the complainants knew they had cause to complain. The complainants issued judicial review proceedings and permission was granted.

The DISP Rules

When it comes to dealing with complaints, the 'FOS process' is set out in the DISP Rules within the FCA Handbook.  When a complaint is made to a regulated firm about its regulated activities and by an eligible complainant (i.e. its FOSable), then the regulated firm must respond to a complaint within the specified 8 week period which includes whether or not it consents to waiving the historic time bar and if consent is given it cannot be withdrawn (DISP 2.8.2A(R)).  This is set out at DISP 1.6.2R(f) which states that a firm providing a final response letter must "… indicate whether or not the respondent consents to waive the relevant time limits in DISP 2.8.2R… by including the appropriate wording set out in DISP 1 Annex 3R…".  DISP 1, Annex 3R, then contains a menu of statements.   

Notably under DISP 2.8.2R, before 9 July 2015, it provided that FOS could not consider a complaint brought out of time unless the respondent firm "has not objected" to FOS considering the complaint outside of expired time limits and then after 9 July 2015, DISP 2.8.2R was changed to say that FOS could not consider a complaint brought otherwise out of time unless the respondent firm "has consented".

The relevant time limits at FOS are broadly twofold, FOS cannot consider a complaint if: (1) the complainant refers it to FOS more than 6 months after the date on which the respondent sent the complainant its Final Response Letter, redress determination or summary resolution communication or (2) the complaint is made more than 6 years after the event complained of or, if later, 3 years from when the complainant became aware or ought reasonably to have become aware he had cause for complaint.

The High Court Judgment

The High Court judgment first considered previous case law on the interpretation of the DISP rules and the court's jurisdiction to interfere with FOS decisions.  First, on the interpretation of DISP, the Court said that the wording of a provision must govern any decision as to its effect, the FCA Handbook should be read as a whole, a provision should be construed in light of its overall purpose, it should be construed on the basis that it is intended to produce a practical and commercially sensible result.  And DISP is not intended to be like conventional legislation; its drafting style is very different and it is intended to create a relatively informal and simple scheme for and on behalf of consumers (Shop Direct Finance Co v Official Receiver).  Second, analysing the various judicial review cases involving FOS decisions, the Court noted the distinction between cases where a FOS decision was subject to judicial review on grounds of irrationality and reasonableness (accordingly to the Wednesbury unreasonableness principles), and FOS decisions that could be subject to wider considerations where they involved issues of precedent fact.

The complainants argued that: (1) the FOS decision could be reviewed on a wider basis than conventional judicial review grounds and (2) the bank had waived the right to rely on time bar, having not raised any time bar defence in their Final Response Letter – in effect there was implied (if not explicit) consent as the bank had not chosen the wording under DISP 1 Annex 3R where time bar was specifically raised (e.g. options 2 or 3).   FOS argued (1) that its decision was subject to conventional judicial review grounds, and so whether its decision was irrational or unreasonable and (2) if the Final Response Letter failed to accord with DISP (in failing to set forward a position on time bar), this meant that the Final Response Letter did not constitute a Final Response Letter and so the 6 month time period to refer the complaint to FOS was not triggered and the failure to accord with DISP could potentially form the basis for FCA sanctions.  It did not mean that the respondent bank had waived any right to rely on a time bar defence based on the 6 year / 3 year rule.

On the first issue, as to how the Court should approach its consideration of FOS' decision, it found that the question was one of law based on the construction and interpretation of DISP (and of course, this is in itself, an important finding) but that there was nothing wrong with FOS' interpretation of DISP – there was no misdirection in law.  

On the second issue, the Court also found that the bank did not comply with the requirements under DISP as it failed to indicate, as it was required to do under DISP 1.6.2R(1)(f), its position one way or another its position on time bar.  But the impact of that was not that the bank had waived any right to rely on a time bar defence – instead the court found that it was up to the complainants to have taken a "self help" mechanism (on top of asking the bank in the first place if it intended to raise time bar) and gone back to the bank to clarify if they were waiving their right to rely on any time bar defence or not.  Further, the Court found that, if anything, the failure to indicate a position on time bar left the Final Response Letter non-compliant such that the 6 month time period was not triggered.  DISP did not provide that consent could be implied (albeit the DISP option 1 in Annex 3R itself was silent on the point either way) – it neither said consent should be express or implied, with the Court noting that the legislative intention to sanction non-compliance was not to provide that a respondent had waived any right to rely on time bar – it was open to say that in DISP and it was not for the Court to read in a sanction for non-compliance. 

Consequences

The first point is that in order to raise time bar, a respondent firm does not need to raise time bar in its final response letter.  It can raise time bar later in the DISP process, including when a complaint is referred to FOS.  However, there may be negative consequences for a respondent firm that does not raise time bar at the first opportunity to do so – i.e. at the time of the Final Response Letter.  If a respondent firm does not indicate whether or not it consents to FOS considering a complaint outside of relevant time limits (and in doing so comply with DISP 1.6.2R(1)(f)), this potentially means that the Final Response Letter is not compliant with DISP and so the 6 month referral period is not triggered. 

This may mean that there are lots of Final Response Letters that are potentially non-compliant if a respondent firm has not indicated either way whether it consents to a complaint being considered by FOS outside of the relevant time bar limits.  This has two immediate implications: (1) if FOS has rejected a complaint as having been referred outside the 6 month referral period – will it now review that complaint if it turns out the Final Response Letter was non-compliant? And (2) if a complaint has not been referred to FOS, then there may still be time to do so, if the Final Response Letter was itself non-compliant.  Whether FCA regulated firms go back and check their template Final Response Letters to see if they have an issue or not, is something some may be thinking about.  Whether FOS goes back (or complainants now challenge FOS' findings) if a Final Response Letter turns out to be ineffective to have triggered the 6 month referral period, is a separate question.  Whether the FCA look at sanctions is a separate issue if there are lots of non-compliant Final Response Letters out there.

There are also some further questions raised by the judgment:

  • Reviewing FOS decisions – the Court notably considered FOS' decision against the question of whether FOS had misdirected itself in law when considering the operation of the DISP rules.  This is a relevant finding for any future judicial reviews of FOS decisions on jurisdiction issues and perhaps more widely.
  • DISP – there are two issues:
    • First, does the Court's decision leave DISP as a "simple scheme on behalf of consumers" or not, if a FCA regulated firm does not need to raise time bar at the outset of a complaint and which may leave a consumer believing they have an in time complaint, when that position is later challenged?
    • Second, does the decision highlight a problem with DISP? DISP 1.6.2R(1)(f) requires a firm to indicate one way or another if it intends to rely on time bar as otherwise the Final Response Letter may not be compliant with DISP, but how does that work in the following circumstances:
      (a) complaints brought within 6 years when there is no time bar issue to waive, should firms be saying they are not going to waive the 6 month referral period in these cases; and
      (b) when considering Annex 3R which includes options that are silent on time bar – does this mean Annex 3R is not fit for purpose and should be ignored despite being expressly referred to in DISP 1.6.2R(1)(f).
  • Reading in – there is also arguably an inconsistency in the judgment, as on the one hand the Court said it would not "read in" a sanction for non-compliance, but on the other did the Court not read in "express" before consent by finding that consent could not be implicit if a Final Response Letter was silent on time bar?

As always with FOS, one decision may have wide consequences.

References

Chapman v FOS [2025] EWHC 905 (Admin

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