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ombudsman news

issue 2

February 2001

time limit for cases referred to the PIA Ombudsman Bureau

Under its mandatory jurisdiction, the PIA Ombudsman Bureau is not permitted to deal with complaints which, if they were negligence claims, would be time-barred under the Limitation Act 1980, as amended. Exceptions to this are cases which would otherwise fall under the Pensions Review.

In very general terms, this has meant that customers have had up to six years after acting on investment advice to complain to the firm about that advice. A longer period, subject to an overall longstop of 15 years, could apply in some cases where the complainants had three years from the time when they knew, or ought reasonably to have known, about the matters they were complaining about.

The terms of reference have not changed. However, firms may have noticed a change in our policy in this area. The reason is that the law relating to the suspension of limitation periods in professional negligence cases under the Limitation Act has been the subject of recent judgements in the Court of Appeal in Brocklesby-v-Armitage & Guest (1999 Lloyds Ref PN888) and applied in Liverpool Roman Catholic Archdiocese Trustees-v-David Goldberg QC (The Times 18 July 2000). These have been confirmed again in Cave-v-Robinson, Jarvis & Rolf decided in the Court of Appeal on 20 February this year.

Of course, each case is decided on its own facts. However, in the light of these cases, in September 2000, the PIA Ombudsman Bureau revised its policy. What this means in practice is that a client who was advised to take out an endowment policy in 1989, raised concerns in 1994, but did not complain to the firm until 2000, may not be time-barred under the Limitation Act.

This is illustrated in the following example.

In October 1989 a customer is advised by a company representative to take out an endowment to repay his mortgage. If the representative had assessed the customer's risk profile, which he did not, it would have proved to be cautious.

It is not until October 1994 that the customer receives his first review letter from the product provider. He is concerned that the policy's projected value when it matures is less than the amount he will need to repay on his mortgage but he does nothing about his concerns at that time.

July 2000 the customer receives a letter from his product provider warning that the policy is not on target to repay the loan. Partly because of the press coverage at the time, the customer complains immediately to the firm and within six months of the firm's reply, the case comes to the PIA Ombudsman Bureau.

It could be argued that with "reasonable diligence" the customer could have discovered the company's professional negligence in 1994.

Nevertheless, he now has had six years (instead of three) from then to bring his complaint and has done so just in time. In these circumstances, it could not be said that he ought to have discovered the fault before 1994, as he has no reason to question the advice he was given initially or to "double check" it with another, more competent, adviser.

Another important change, not highlighted by our example, is that apparently in such cases there would no longer be any longstop period in bringing a claim.

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.