The High Court has upheld a judicial review of the Financial Services Compensation Scheme (FSCS) in a move that could have implications for the way the FSCS assesses compensation claims for poor investment advice.
The ruling, which was handed down yesterday, gifts a win to 4 New Square’s Mark Cannon QC, who was instructed for claimant Charmain Emptage by Manley Turnbull Solicitors.
SNR Denton partner Richard Caird was instructed for the FSCA with Blackstone Chambers barrister Andreas Gledhill as counsel.
The case centred on how the FSCS calculates compensation packages to those who have suffered a loss as a result of negligent mortgage advice.
Emptage was advised by Berkeley Independent Advisers mortgage broker Peter Sharratt to exchange a £40,000 repayment mortgage for an interest-only mortgage of more than £111,000. She was also advised to invest over £70,000 in Spanish property.
She launched her claim after the Spanish housing bubble burst.
In January 2010 Emptage was awarded £11,500 in compensation by the FSCS, which said it would only award compensation in respect of the bad mortgage advice and not on the bad investment advice to invest in Spanish property.
Mr Justice Hadden-Cave was asked to examine FSCS rule COMP 12.4.17, which provides that: “FSCS may pay compensation for any claim made in connection with protected home finance mediation only to the extent that FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.”
He said of the dispute: ““This case raises issues regarding the approach taken by the FSCS to assessing claims for compensation. This case may have implications for other similar cases.”
Allowing the judicial review, Hadden-Cave said: “In my judgment, FSCS failed to approach the assessment of compensation in this case correctly.”
He added: “In these circumstances, I quash the decision of FSCS awarding Ms Emptage only £11,522.98 by way of compensation for Mr Sharratt’s negligent mortgage advice and order FSCS to reconsider the question of compensation in the light of the foregoing judgment and principles.”
He also ordered that the FSCS should pay the claimant’s £150,000 legal costs.
The ruling could pave the way for hundreds of claims, lawyers close to the case said.
The FSCS was granted permission to appeal.
The legal lineup
For the claimant Emptage: 4 New Square’s Mark Cannon QC led Can Yeginsu of the same set instructed by Manley Turnbull Solicitors partner Katy Manley.
For the defendant FSCS: Blackstone Chambers barrister Andreas Gledhill instructed by SNR Denton partner Richard Caird.