The High Court has taken the relatively rare step of ordering FOS to review a decision.
The complainant, Mr Moniak, had been a customer of Barclays. Following an inheritance in 2010, a total of £500,000 was paid into two accounts he held with the bank. Mr Moniak lived abroad from the end of 201 to 2015 and on his return to the UK discovered that both accounts were empty. He contacted Barclays to report a fraud and it transpired that the funds had been depleted by 2011 and thereafter kept in credit through UK cash deposits and bank transfers. He also contacted the police, complained to Barclays and then to FOS.
It transpired the funds had been stolen by a couple known to Mr Moniak, who were convicted of theft after a trial in 2018. However, the question for Barclays and then FOS was not about whether there had been theft, but about whether Mr Moniak had complied with Reg 59 of the then PSRs 2009 requiring users of payment services to take all reasonable steps to keep the personalised security features of the payment instruments on their accounts safe. Mr Moniak said many of the withdrawals were large and had unusual characteristics that should have alerted Barclays to the fraud. Barclays had not queried any of the transactions.
Barclays had a “money management form” in Mr Moniak’s name and purportedly signed by him. Mr Moniak said the details were wrong and he had never signed it. Barclays noted most of the transactions would have required possession of Mr Moniak’s bank card, which he had had at all times. On that basis, it said there was no evidence of a “third party compromise” to Mr Moniak’s credentials and so did not accept liability for the transactions.
Mr Moniak made several complaints to FOS, of which the relevant one, made in March 2020, complained the bank had negligently permitted the fraudsters to have online access to his account and had not identified the fraudulent payments. The FOS investigator ask for a note Barclays’ had taken of the Judge’s sentencing remarks, which included a statement that the judge had said Mr Moniak, being incapable of running his financial affairs due to addition issues, had turned to one of the fraudsters (Mr Saeed) who took over the account and abused the trust to commit the offences. Mr Moniak said this note was not accurate and that he had not handed over his affairs. The FOS ultimately decided not to uphold the complaint because it thought it likely Mr Moniak had handed control of his accounts to Mr Saeed. It said that although Mr Moniak may not have realised the problem he had created by allowing Mr Saeed access to his banking details, the upshot was that the transactions were authorised and therefore it was not reasonable to ask the bank to repay them.
Mr Moniak rejected the FOS decision, and requested the court transcripts, which, among other things, said that the prosecution had not been able to point to the exact mechanisms by which the accounts were accessed but said that as a matter of inference his personal details were known to at least one of the defendants who had lived with him. Mr Moniak requested FOS review its decision in light of this, but FOS said it would do so only if it considered it to be “material new evidence”, and it did not consider this to be the case. It said that Mr Moniak could have provided the transcripts earlier if he had wanted FOS to consider them.
The court clarified that its role was not to determine whether the transcripts were “material new evidence” but to decide where FOS erred in law when it decided they were not and whether that decision was based on a rational application of the rules and guidance applicable to FOS. FOS had offered a new Ombudsman to reconsider the transcripts and assess whether they were material new evidence, which Mr Moniak had rejected. The court said
- the FOS conclusion that the transcripts were not material new evidence was “devoid of plausible explanation” given that the FOS final decision placed significant emphasis on the statement in the Barclays note that was not an accurate reflection of the transcript. The court held that this aspect of the decision was therefore an irrational exercise of FOS’ discretion;
- on the FOS argument that Mr Moniak should have known FOS needed the transcripts (and not misunderstood its request), and could have obtained them a lot earlier and on that basis the FOS was entitled to refuse to reconsider the complaint, the court held that it appears FOS did belatedly realise there had been some miscommunication and so had offered a form of redress and the court said that for this reason alone the decision to refuse to reopen the complaint was based on a material factual error.
The court then moved to consider what Mr Moniak was seeking – which was either a quashing of the FOS decision not to reopen the complaint with a requirement on it to consider the complaint in light of the transcripts, or else to require FOS to explain with reasons why the transcripts were not material new evidence. The court held that the FOS decision must be quashed so FOS could take the decision again.