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FSCL mum on court bid funding

Financial Services Complaints Ltd (FSCL) will not reveal how it is funding a court stoush with the Chief Ombudsman.

Friday, May 6th 2016, 6:00AM 1 Comment

by Susan Edmunds

Justice Kit Toogood

FSCL wants to be able to add the word “ombudsman” to its name, after the Insurance and Savings Ombudsman last year became the Insurance and Financial Services Ombudsman (IFSO).

But the use of the term “ombudsman” is restricted – those who use it need approval from the Chief Ombudsman.

FSCL entered into discussion with the Chief Ombudsman in the middle of last year but its application was declined.

FSCL then sought a judicial review, saying it wants the “gravitas” of the term as it is in direct competition with IFSO.

But former Chief Ombudsman Beverley Wakem, who made the decision, in turn applied to have the challenge thrown out by the High Court.  She said she had immunity from judicial review.

That has now been dismissed.

Justice Kit Toogood said: “I do not consider that the decision to refuse consent was the exercise of a function falling within the scope of the privative provisions. It is not plain and obvious that FSCL’s challenge by judicial review cannot succeed at trial."

He said although there was no doubt that the Chief Ombudsman is a unique actor in New Zealand’s constitutional structure, the role should not be beyond the reach of the law unless Parliament had expressed so in the clearest possible language.

FSCL board chairman and shareholder Kenneth Johnston said he was not prepared to enter into any discussion about the company’s financial affairs.

Its 2015 annual report said FSCL ended the year with a net surplus of $248,361 and equity of $2.03 million.

FSCL is a not-for-profit disputes resolution provider, with more than 6000 levy-paying participants.

Dispute resolution schemes’ financial positions have been a cause of comment in the industry. In Kepa’s submission to the Financial Advisers Act options paper, it said the schemes had accrued large reserves in a short space of time.

“To have $3.2 million sitting as reserves between the ISO and FSCL is not a sign of an efficient market,” it said.

Tags: disputes FSCL

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Comments from our readers

On 6 May 2016 at 6:07 pm Murray Weatherston said:
Disclosure - I was the 2nd person to join FSCL

I don't think it an appropriate journalistic question to ask FSCL how it is funding the court case.

However I think the obvious answer is that it is paying the costs out of its own fund. When it is successful, it will get some (but not all as you never get all) of its costs reimbursed by the Ombudsman.

Chairman and nominee shareholder Kenneth Johnston is a successful commercial barrister, and I don't think he would be chucking money away on a case that had no chance of success.

If FSCL's two main competitors are able to call themselves Ombudsmen, then FSCL could be at a disadvantage if they are not accorded the similar status.

Its not as though the Banking Ombudsman or Karen Stephens do a different job to FSCL

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