CA-2024-001533 - [2025] EWCA Civ 1369

Lord Justice Snowden :

This appeal concerns an application for judicial review of a decision of the respondent Financial Ombudsman Service Limited (the “Ombudsman”) dealing with a complaint by a client of the appellant, Linear Investments Limited (“Linear”). In essence, the Ombudsman found that Linear had wrongly permitted its client, Professor Leslie Willcocks (“Professor Willcocks”), to invest in a computer-driven trading strategy (the “Pembroke strategy”) that included dealing in derivatives (contracts for differences or “CFDs”). The Pembroke strategy was designed for professional investors. Professor Willcocks was not, however, a professional investor and had no experience of trading in derivatives.

The Ombudsman ordered Linear to compensate Professor Willcocks in full for the losses that he had sustained on his investment, calculated by reference to a notional investment of the same amount in a benchmark FTSE UK private investors income total return index, together with 8% interest from the date of the closing of the account to payment of the award.

Linear contends that it only permitted Professor Willcocks to invest in the Pembroke strategy because he applied to be treated as an “elective professional client” as defined by the Financial Conduct Authority’s Conduct of Business Rulebook (“COBS”), and he misrepresented in his application that he had traded in substantial volumes of equities and CFDs for several years.

Linear’s primary contention is that it was entitled to rely on Professor Willcocks’ representations when accepting him as an elective professional client and that the decision of the Ombudsman to hold it liable was wrong in law and irrational.

Secondly, it argues that the Ombudsman’s selection of a low risk benchmark portfolio based upon the FTSE index for the computation of Professor Willcocks’ award was also irrational, because irrespective of whether he should have been accepted as an elective professional client, he had sought a higher risk investment.

Thirdly, Linear contends that even if it was liable for having wrongly accepted Professor Willcocks as an elective professional client, the Ombudsman ought to have reduced Professor Willcocks’ award to reflect his contributory negligence in misrepresenting his trading experience to Linear.

Linear’s application for judicial review of the decision of the Ombudsman was rejected by Stacey J (the “Judge”): [2024] EWHC 1428 (Admin). Linear appeals with permission granted by Lewison LJ on three grounds which broadly reflect its arguments as outlined above.

For the reasons that follow, I would dismiss Linear’s appeal on the first and second grounds as to liability and the use of a FTSE index benchmark for the computation of the award. I would, however, allow Linear’s appeal on the third ground in relation to contributory negligence and remit the matter to the Ombudsman to determine an appropriate reduction in that respect.