Barclays judicial review delayed pending Supreme Court judgment

Barclays’ legal challenge to a Financial Ombudsman Service (FOS) decision on auto finance commission payments has been postponed until the outcome of the Supreme Court appeal – expected later this month – over concerns about the court making findings on “the wrong legal basis,” and thus being open to a further appeal.

At the opening of the case, Clydesdale Financial Services v Financial Ombudsman Service, in the Court of Appeal on 1 July, Lord Justice Males said that to try to give judgment before the Supreme Court decision was known “seems ambitious”, noting that “whatever the Supreme Court decision is, it is almost inevitability going to be highly relevant to setting the legal landscape for consideration  of the Ombudsman’s decision and the rules and general principles.”

The judge cautioned that if the Court of Appeal went ahead with its current hearing, there was a risk that any decision it made would subsequently be challenged almost immediately depending on the findings of the Supreme Court hearing, which he said were likely to be known “in the next 31 days.”

Overlap

Barclays was appealing against a FOS decision relating to a 2018 car finance agreement, which found that the lender’s subsidiary, Clydesdale Financial Services, had mistreated a customer when it paid a discretionary commission to the dealer/credit broker Arnold Clark without disclosing the arrangement to the customer.

There was disagreement between the lawyers representing Clydesdale Financial Services and those representing the Financial Conduct Authority (FCA) as to whether or not the Barclays’ challenge and the Supreme Court hearing do directly overlap.

The FCA’s representative described the current situation as a “jigsaw of different proceedings” but said the two cases are “truly separate”, pointing out that the Supreme Court is considering different legal issues notably fiduciary obligations, questions of tort and bribery, and the Consumer Credit Act, none of which apply in the Barclays’ judicial review.

However, Clydesdale’s lawyer argued that there was a connection, particularly with regard to the nature of the commercial relationship which is involved in being a broker dealer for car finance.

Lord Males pointed out that if the Supreme Court upheld the Court of Appeal decision and established there is a fiduciary relationship between the credit broker and the consumer, this would put the Barclay’s legal challenge “in very great difficulty.” If, however, the Supreme Court said no duty existed at all, or “something in between”, then fuller legal argument would need to be explored.

September re-listing

Following discussion between all parties, it was decided to postpone the hearing to a date in September, which falls in the court vacation period and so means that the re-listed hearing will not necessarily be in front of the same panel of judges.

However, all parties stressed the need for a prompt resolution to the issues raised.  The FOS legal team said over 25,000 cases relating to discretionary commission arrangements are currently on hold, while the FCA cited “hundreds of thousands” of complaints which had been paused, and emphasised its concerns around the need to find a way of dealing with mass consumer claims which is efficient and orderly.

“What the auto finance sector needs, above all else, is clarity and certainty regarding the legal and regulatory framework, and an end to the unpredictability of the last few months.

“At AFC we are following developments closely and as soon as the Supreme Court decision is known, we will be providing up to date commentary on the next steps and in-depth webinars with our legal partner, Shoosmiths.”