Introduction

The case of Davis v. Lloyds Bank Plc (Rev 1) ([2021] EWCA Civ 557) addressed critical questions concerning the interpretation of "complaint" under the Financial Conduct Authority (FCA) Handbook's Dispute Resolution: Complaints (DISP) rules. Mr. Davis sought to assert that Lloyds Bank had breached its statutory duties in the handling of his interest rate swap products, not through initial mis-selling, but via the bank's conduct during a subsequent review process.

This commentary explores the Court of Appeal's decision, which clarified the boundaries of what constitutes a "complaint" under DISP, particularly in contexts where financial institutions conduct proactive reviews without necessitating an explicit complaint from the customer.

Summary of the Judgment

The Court of Appeal dismissed Mr. Davis's appeal against Lloyds Bank plc, upholding the lower court's ruling that Mr. Davis had not made a valid "complaint" under DISP rules to trigger the associated statutory duties. The key findings were:

• Complaint Definition: Mr. Davis's communications were assessed against the DISP definition of a "complaint" and found lacking.
• Review Process: Participation in the bank's review process did not equate to making a complaint as defined by DISP.
• Statutory Duties: Since no valid complaint was established, the bank was not bound by DISP rules to handle Mr. Davis’s concerns following the review process.

Analysis

Precedents Cited

The judgment extensively referenced prior cases to contextualize and support its reasoning:

• CGL Group Ltd v Royal Bank of Scotland ([2016] EWHC 281 (QB); [2017] EWCA Civ 1073)
• Mazarona Properties v Financial Ombudsman Service [2017] EWHC 1135 (Admin)
• R (Holmcroft Properties Ltd) v KPMG LLP [2018] EWCA Civ 2093
• Others including Elite Property Holdings Ltd v Barclays [2018] EWCA Civ 1688 and Norham Holdings v Lloyds Bank Plc [2019] EWHC 3744 (Ch)

These cases collectively reinforced the court's stance that certain review agreements do not constitute statutory redress schemes under FSMA §404, and that not all customer interactions during such reviews amount to formal "complaints" per DISP definitions.

Legal Reasoning

The court undertook a meticulous examination of the DISP definition of a "complaint," requiring that:

• There must be an expression of dissatisfaction regarding the provision or failure of a financial service.
• The complaint must allege that the complainant has suffered or may suffer loss, material distress, or material inconvenience.
• The complaint must relate to an activity under the jurisdiction of the Financial Ombudsman Service (FOS).

Applying this framework, the court found that Mr. Davis's communications primarily revolved around seeking information and clarification within the bank's review process, rather than expressing dissatisfaction or alleging loss related to the provision of financial services. Specifically:

• The initial email did not assert suffering a loss but sought to understand potential financial impacts.
• Subsequent communications focused on inclusion in the review rather than directly addressing dissatisfaction with the financial products.

The court emphasized the importance of context in interpreting communications, determining that Mr. Davis's interactions were part of a cooperative review process rather than formal complaints as envisaged by DISP.

Impact

This judgment has significant implications for both financial institutions and consumers:

• Clarity on "Complaint" Definition: Reinforces the necessity for explicit dissatisfaction and allegations of loss for a communication to qualify as a formal complaint under DISP.
• Review Processes: Establishes that proactive review processes initiated by banks do not automatically trigger DISP obligations unless a genuine complaint is made.
• Consumer Actions: Highlights the importance for consumers to clearly articulate dissatisfaction and alleged losses when seeking redress.
• Regulatory Compliance: Financial institutions must ensure that their review and redress processes align with DISP definitions to avoid potential breaches.

Complex Concepts Simplified

Definition of a "Complaint" under DISP

Under the FCA Handbook's DISP rules, a "complaint" is not merely any expression of dissatisfaction. It must specifically:

• Be an oral or written expression of dissatisfaction regarding the provision or failure of a financial service.
• Allege that the complainant has suffered or may suffer financial loss, material distress, or material inconvenience.
• Relate to an activity under the jurisdiction of the Financial Ombudsman Service.

Simply participating in a review process or seeking information does not constitute a "complaint" unless it meets these criteria.

FCA Handbook DISP Rules

The Dispute Resolution: Complaints (DISP) section outlines how firms should handle customer complaints. Key aspects include:

• DISP 1.4.1R: Requires firms to assess complaints fairly, consistently, and promptly.
• Time Limits: Certain time frames are triggered upon receiving a valid complaint, such as responding within 8 weeks (DISP 1.6.2R).
• Redress: Firms may be required to offer appropriate redress if a complaint is upheld.

Conclusion

The Davis v. Lloyds Bank Plc decision underscores the stringent criteria for what constitutes a "complaint" under the FCA's DISP rules. By affirming that participating in a bank's review process does not inherently amount to a formal complaint, the Court of Appeal has clarified the boundaries of statutory duties financial institutions owe to their customers.

For consumers, the case highlights the importance of clearly articulating dissatisfaction and alleged losses when seeking redress. For financial institutions, it emphasizes the need to differentiate between voluntary review engagements and formal complaint mechanisms, ensuring compliance with DISP definitions to uphold regulatory standards.

Overall, this judgment contributes to a more precise understanding of complaint handling within the financial services sector, fostering greater clarity and protection for both consumers and providers.