Davis v Lloyds Bank Plc

Factual and Procedural Background

The Appellant purchased two interest rate swaps in 2002 and 2005 from Company A. Following a review process arranged between Company A and the Financial Conduct Authority (FCA), Company A offered compensation for both products. The Appellant accepted the redress offer for the 2002 swap but not for the 2005 swap. The Appellant claimed a breach of statutory duty by Company A related to the conduct of the review process, not the original alleged mis-selling. Two preliminary legal issues were formulated: whether the Appellant had made a complaint under the FCA Handbook rules on dispute resolution ("DISP") regarding the swaps, and if so, whether Company A was bound by statutory duties under DISP to assess the complaint according to the review agreement with the FCA. The trial judge found against the Appellant on both issues, holding that no complaint had been made sufficient to trigger DISP rules and that even if it had, Company A was not required to handle the complaint under the review process terms. The Appellant appealed, but the appellate court indicated it was not persuaded that the judge erred on the first issue and dismissed the appeal without needing to address the second. This summary explains the reasons for that decision.

Legal Issues Presented

1. Did the Appellant make a complaint for the purposes of the FCA Handbook rules on Dispute Resolution and Complaints (DISP) concerning the sale of the interest rate hedging products at issue?
2. If so, was Company A bound by statutory duties under DISP 1.4.1R to assess the complaint in accordance with the terms of the review process agreed with the FCA?

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed whether the Appellant's communications constituted a "complaint" as defined in DISP, which requires (1) an expression of dissatisfaction communicated to the financial service provider, (2) that the dissatisfaction relates to the provision or failure to provide a financial service or a redress determination, and (3) that the complainant alleges having suffered or may suffer financial loss or material distress or inconvenience. The court emphasized the importance of interpreting communications in their factual context, especially given the proactive review process which did not require customers to make complaints to be included.

The court found that the Appellant's initial email and subsequent communications did not amount to a complaint under DISP. The email of 4 November 2013, while expressing dissatisfaction about the product's effect on net worth, did not allege loss or dissatisfaction with the provision of the financial service itself but rather sought information to decide whether to participate in the review. Subsequent communications requesting the 2005 swap be included in the review were not complaints about the original sale or losses suffered but requests for review inclusion. The letter logged as a complaint by Company A was understood as a complaint about eligibility for review, not about the original sale or losses. The court rejected the argument that the Appellant's communications could be construed as complaints about the original sale or losses suffered, emphasizing that the communications must be reasonably understood as complaints by a reasonable recipient in the sequence they were received.

Consequently, the court concluded that the Appellant did not make a complaint sufficient to trigger the DISP rules, and thus the second issue concerning the application of statutory duties under DISP did not arise.

Holding and Implications

The court DISMISSED the appeal, agreeing with the trial judge that the Appellant did not make a complaint as defined by DISP in relation to the interest rate swaps.

The direct effect is that the Appellant’s claim for breach of statutory duty based on the review process does not proceed to trial. No new legal precedent was established, and the decision confirms the narrow interpretation of what constitutes a complaint under the FCA Handbook rules in the context of review processes voluntarily agreed between a bank and the FCA.