FOS ruling upheld by court

A ruling by the Financial Ombudsman Service that a financial planning business must pay A$142,000 in compensation to two clients has been upheld by the Supreme Court of Western Australia.

Utopia Financial Services contested a determination made by an FOS panel that Utopia had breached its obligations to the two clients.

The panel had ruled that Utopia did not have a reasonable basis for the advice it provided and had also failed to adequately disclose to its clients the risks associated with the strategy it recommended. (This strategy involved borrowing against the family home to invest in unlisted property trusts.)

The judge, Rene Le Miere, ruled that at the date of the determination the clients "had suffered actual economic loss and damage."

"It is not necessary to enquire whether or not the panel correctly quantified that loss or damage.

"The contract between FOS and Utopia required FOS to deal with the dispute between Utopia and the Rees in accordance with the terms of reference. The terms of reference require FOS to decide upon a remedy.

"FOS decided that Utopia pay to the [clients] compensation for direct financial loss or damage."