Mr Adam’s long running legal battle with Carey Pensions appears to be over thanks to a very clear decision from the Court of Appeal upholding his claim for losses arising out of his transfer into Carey’s self-invested personal pension (‘SIPP’).
This landmark decision has significant implications for the SIPP industry and should give hope to the thousands of others pursing similar claims.
What was the case about?
The case arose following Mr Adams transferring his personal pension with Friends Life into a SIPP administered by Carey in 2012 who then, on his instruction, used £52,500 of the pension fund to purchase leasehold self-storage units, owned and operated by Store First Limited (“Store Pods”).
Mr Adam’s evidence was that he has been persuaded to follow advice and guidance to transfer his pension and invest in Store Pods by CLP Brokers Socieded Limitada (‘CLP’) a firm that operated from premises in Spain.
The investment was not successful. The rental units did not generate any significant income and evidence presented at trial suggested that the units were worth a fraction of what had been paid for them.
Mr Adams brought a claim against Carey Pensions (now known as Options SIPP UK LLP) seeking to hold them liable for the loss to his pension fund within the SIPP.
It was Mr Adam’s case that he had agreed to transfer his pension to the Carey SIPP in consequence of things said and done by CLP in contravention of what is known as the ‘general prohibition’ imposed by section 19 of the Financial Services and Markets Act 2000 (‘FSMA’).
Section 19 bars anyone but a person authorised by the Financial Conduct Authority (‘FCA’) from carrying on specified activities. Section 27 renders agreements entered in consequence of something said or done by a third party in contravention of the general prohibition unenforceable.
Mr Adams alleged that CLP had breached the general prohibition by carrying on activities specified in articles 25 and 53 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (“the RAO”). Articles 25 and 53 are respectively concerned, with “Arranging deals in investments” and “Advising on investments”.
Delay and the High Court decision
The case was heard in March 2018 by His Honour Judge Dight who, without any apparent explanation, took more than two years to provide his judgment in which he rejected Mr Adam’s case it is entirety.
The delay led to the Judge being censured for judicial misconduct. This followed a complaint lodged by Hugh James Solicitors with the Judicial Conduct Investigations Office (JCIO) on behalf of many of its clients with similar claims who had a legitimate interest in the outcome of the case.
The complaint, which itself took a year to complete culminated in the JCIO issuing a press statement on 19 May 2020 stating:
His Honour Judge (HHJ) Dight has been subject to an investigation into his conduct following complaints of a serious delay in producing a judgement. The Lord Chancellor and Lord Chief Justice found that the delay was unacceptable and concluded the HHJ Dight's behaviour amounted to misconduct having fallen below the standards expected of a member of the Judiciary. They have issued HHJ Dight with formal advice.
Mr Adams appealed the judge’s decision to the Court of Appeal and judgment was given on 1 April 2021 by Lord Justice Newey, Lady Justice Rose and Lady Justice Andrews.
The Court of Appeal unanimously upheld Mr Adam’s claim based upon section 27. It rejected Carey’s attempts to argue that CLP had not provided advice which required it to be authorised by the FCA and that steps that it had taken had not brought about the transfer of the pension from Friends life.
Lady Justice Andrews said in her judgement that Judge Dight had, ‘failed to stand back and look at what Mr Adams was told in a realistic and common-sense manner.’ and when on to say that once that was done it is obvious that advice had been given that fell within the scope of Article 53 (‘advising on investments’).
The Court also agreed that on the facts of the case the steps CLP had taken had brought about the transfer of funds which engaged Article 25 (‘arranging deals in investments’).
These findings led the Court to conclude that the Section 27 claim was well-founded and to allow the appeal. The case will now be referred back to the High Court to determine the amount to which Mr Adams is entitled by way of relief under Section 27.
Carey was denied permission to appeal to the Supreme Court so barring a renewed application it would seem Mr Adam’s very long journey to recoup his lost pension funds is near an end.
The decision will also hopefully enable the Financial Ombudsman Service to now issue final decisions in similar cases which it would seem have been on hold pending the Court of Appeal ruling.
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