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ombudsman news

issue 16

May 2002

costs

We are receiving an increasing number of cases where consumers have employed third parties such as solicitors, actuaries, financial advisers and, in particular, representatives of complaint-handling businesses, to look into their complaints. These third parties often charge a significant amount for their services and some consumers assume that we will reimburse the costs when the complaints are referred to us.

Our position on the matter remains largely as set out in the PIA Ombudsman's News from the Ombudsman Bureau, dated September 1997. Our service is free of charge to consumers and provides an informal alternative to going to court. Consumers should not need special expertise or the help of a paid representative to bring their case to us. We judge cases on the facts - not on the way the case is presented. Were we to require consumers to employ a representative to present their cases to us, then our informal process would become adversarial rather than inquisitorial. It would begin to replicate the court system rather than being an alternative to it.

If consumers choose to employ a professional to look into their case and present it to us, then they will almost certainly have to pay the costs themselves, even if the complaint is successful. We never reimburse such costs if a complaint is unsuccessful.

Very exceptionally, in certain successful complaints we may sometimes consider reimbursing part of the costs. But the circumstances would have to be unusual. We would also have to be convinced that:

  • it was entirely reasonable for the consumer to have sought the third party's assistance, in view of the complexity of the issues involved; and
  • the fees were reasonable.

case studies - costs

The following cases illustrate our approach when consumers claim the costs of obtaining professional advice about their complaint.

16/07

Mrs A submitted a claim for the fees she paid a financial adviser to help her with her pension review complaint. The adviser suggested that his involvement was warranted because of the complexity of the case, since Mrs A's employment history was not straightforward.

The firm that was the subject of the complaint noted that, at various times during the dispute, it had told both Mrs A and her adviser that Mrs A had the right to refer the complaint to us. So it did not think it appropriate that Mrs A should be claiming the adviser's costs.

We rejected Mrs A's claim for reimbursement. In our view, she could reasonably have been expected to pursue this matter herself, without the need for professional help, and she had been clearly informed of her right to refer the case direct to us.

16/08

Mr J submitted a claim for fees arising from his appointing both an independent actuary and a solicitor in connection with his pension review complaint.

The firm that carried out the pension review had concluded that Mr J had not suffered any financial loss, so was not owed any redress. Mr J employed an independent actuary, who established that there had been a loss. However, the firm then disputed whether the most appropriate form of redress was to reinstate Mr J in his occupational pension scheme or to augment his personal pension arrangement.

We upheld Mr J's claim for the independent actuary's fees. The complaint was successful and the evidence provided by the actuary played an important part in its success. The actuary had demonstrated the firm's failure to calculate redress in accordance with the regulator's guidance. He had also showed that Mr J suffered a significant loss as a result of the firm's advice.

We could not have expected Mr J to be able to put forward the case made by the actuary and we considered the actuary's fees - which were set out clearly and in detail - to be fair and reasonable.

However, we rejected Mr J's claim for legal fees. He had not consulted the solicitor until after his complaint had been referred to us and the solicitor's work on the case had no effect on the complaint's success. It consisted solely of providing Mr J with copies of pages from the pension review guidance, indicating that reinstatement in the occupational pension scheme was the preferred option. The fees did - in any event - appear unreasonably high.

16/09

Mr C was advised to transfer benefits from an executive pension scheme to a small self-administered scheme with a different provider. His adviser did not tell him that he would incur a penalty when he transferred. He only discovered this after he had completed the transfer and the new scheme had been set up. He also found out at this stage that there had been no need to move to a new provider.

Mr C contacted the two provider firms and they agreed to return him to his original position if he acted immediately. Mr C asked the adviser who had recommended the transfer to help him reach a quick decision on the matter. The adviser refused, insisting that the original advice had been suitable. The adviser had taken his fee directly from the amount transferred.

Mr C was able to obtain help from a second adviser. In due course, Mr C complained to us about the first adviser and submitted a claim for reimbursement of the second adviser's fees. His complaint was successful and we thought it reasonable that he had sought assistance from a second adviser, in view of the strict time restraints, the complexities of the transactions and the first adviser's refusal to help.

The second adviser's fees were fair and were clearly detailed. In the unusual circumstances of the case, we agreed to reimburse the fees.

16/10

Mr T complained to the firm about advice it had given him to take out a mortgage endowment policy. The firm rejected the complaint but made it clear to Mr T that he could refer the matter to us if he was unhappy with its response. Mr T consulted a complaint-handling firm that specialises in financial services. The complaint-handler submitted the complaint to us.

The complaint was a straightforward one and we were able to resolve it quite speedily by mediation. The firm conceded liability and made Mr T an offer. This offer was along the lines an ombudsman would have awarded if the case had proceeded to a full investigation and an ombudsman's final decision.

We rejected Mr T's claim for reimbursement of the complaint-handling firm's fees and costs. There was no reason why he could not have dealt with us direct and the involvement of the third party had not influenced the outcome of the case.

Walter Merricks, chief ombudsman

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.