Andrews v SBJ Benefit Consultants

Court:Chancery Division
Docket Number:Case No: HC 09 C 02160
Judge:His Honour Judge Pelling QC
Judgment Date:04 Nov 2010
Jurisdiction:England & Wales
Neutral Citation:[2010] EWHC 2875 (Ch)

[2010] EWHC 2875 (Ch)


Royal courts of Justice

Strand, London, WC2A 2LL


His Honour Judge Pelling QC

(Sitting as a Judge of the Chancery Division)

Case No: HC 09 C 02160

SBJ Benefit Consultants

Mr Elkington (instructed by Messrs Taylor Wessing) for the Applicant.

Mr Evans (instructed by Messrs Fishburns) for the Respondent.

His Honour Judge Pelling QC



In these proceedings, the Claimant claims damages pursuant to section 150 of the Financial Services and Markets Act 2000 (" FSMA"), which are provisionally quantified at over £400,000. The claim is made by reference to an allegation that the Defendants contravened the statutory rules applicable to pension reviews that were required to be carried out in relation to pension transfer business transacted between 1988 and 2004.


It is common ground that the Defendant made a complaint to the Financial Ombudsman Service ("FOS") which resulted in a final determination, dated 28th March 2008, by which the FOS awarded the Claimant sums totalling £103,860.93 which included compensation assessed at the maximum sum that can be awarded by FOS of £100,000.


As will shortly become apparent, the statutory provisions which apply to the activities of the FOS permit a claimant either to accept or reject the FOS's final determination. Here, the Claimant accepted it. The Defendant maintains that the cause of action by reference to which these proceedings have been commenced, merged in the award of the FOS once the Claimant had accepted the final determination of the FOS and, accordingly, it was extinguished. In advancing this submission, the Defendant relies on the principle that a person in whose favour a tribunal of competent jurisdiction has provided a final judgment is precluded from afterwards recovering from any other English tribunal a second judgment for the same relief in respect of the same subject matter: see Thoday v Thoday [1964] PR 181 and the Indian Grace [1993] AC 410. I refer to this doctrine hereafter as "the merger doctrine". In the alternative, if for purely technical reasons the merger doctrine does not apply, then it is alleged that the commencement of these proceedings is nonetheless an abuse of process.


These being the issues that were pleaded between the parties, Master Bragge directed the trial of a preliminary issue, to the following effect:

"Whether as alleged in paragraph 14.4 of the Defence (1) the claim has been extinguished by operation of the doctrine of merger and judgment, (2) the Claimant is estopped from asserting the claim by a cause of action estoppel; or (3) the claim is an abuse of process such that the claim should be dismissed."

Before me, the Defendant advanced its claim that these proceedings ought to be dismissed by reference to the first and third of these propositions only. With that qualification, this is the trial of the preliminary issue ordered by the Master. Although various witness statements were served, in the end, most if not all the relevant factual material was agreed and was set out, at any rate in summary form, in the Statement of Agreed Facts at page 21 and following in the bundle.

Factual Background


The Defendant is a company whose business is the provision of financial advice. Prior to 1989, the Claimant, who is now aged 67 and is retired, was a member of an employees' pension scheme. In 1988–9, the Defendant advised the Claimant to transfer his pension benefits out of the employees' pension scheme and into a personal pension policy. The Claimant acted on that advice in May 1989, and it is common ground that the Claimant would have been better off if he had not acted on that advice.


From 1995, the Defendant became obliged to comply with an industry-wide review of pension transfer business which had been transacted between 1988 and 1994. In March 2000, the Defendant contacted the Claimant and offered to include him in the review process then being carried out. The Claimant agreed to this course. The review process was completed in the summer of 2002 and, by a letter dated 28th June 2002, the Defendant advised the Claimant that it had established that it was likely he would have been better off had he remained in the employer's scheme. There was thereafter no dispute that the Defendant was liable to compensate the Claimant.


There followed correspondence concerning the Defendant's proposals to compensate the Claimant. There was no discussion concerning liability because that had already been accepted or conceded. The effect of the correspondence between March and July 2003 was that agreement could not be reached as to the appropriate method for calculating the Claimant's losses and, in consequence, agreement could not be reached either concerning the appropriate level of compensation.


In the light of this, the Claimant made contact with FOS. The Claimant described what happened thereafter in his letter to FOS of 25th January 2005, in these terms:

'In January 2004, I spoke to the FOS, but their response indicated that the size of my claim precluded their involvement. I then sought the advice of the FSA, whose responses confirmed that actual annuity rates could be used in the loss calculation and that a redress annuity should restore the pension that would have been provided by the employer's scheme. In the meantime, SBJBC, claiming to have checked the position with the FSA, announced that they would be imposing acceptance of their offer by purchasing an annuity by the end of March. I objected to this, restating my reasons, but SBJBC ignored these and reaffirmed their stance. I asked SBJBC for details of their calculations and of the FSA guidelines with which they claimed to comply, but their "final response" letter refused to give this information, claiming they were not obliged to provide it and suggesting that I refer the matter to the FOS, although I told them you could not handle it. Before contemplating further action, I decided to seek professional actuarial advice and this reassured me that SBJBC's calculation and form of redress offer was inappropriate. I told SBJBC but they remained unmoved.'


Correspondence was sent by the Claimant to the Defendant down to August 2004 without any response being received from the Defendant, who considered that they had by this stage done all that they could be properly expected to do. As the Claimant puts it in paragraph 13 of the 25th January 2005 letter:

"Still hesitant to initiate costly court proceedings, I learnt that the practice of the FOS in cases over £100,000 might not be entirely as I had believed and a phone call on 13th January confirmed that consideration would be given if I submitted the form previously issued."


The Claimant therefore initiated a complaint to FOS concerning the conduct of the Defendant. In the letter under cover of which the Claimant sent his complaint form to FOS, the Claimant said:

"Naturally, I'm aware that you are unable to enforce an award in excess of £100,000, but a recommendation in my favour establishing the principle on which SBJBC should have based their compensation offer would, I believe, greatly increase the chances of my reaching a satisfactory settlement with them without resorting to litigation."


Although the Claimant now maintains that the complaint concerned what he calls the "misselling claim", it is clear from the complaint form that the complaint was concerned with, and only with, the basis on which his losses had been computed by the Defendant. In the box on the form that requires the complainant to summarise the nature of the complaint made, the Claimant said this:

'Customer unhappy the firm are only calculating loss on basis of prospective loss even though customer retired approximately two months ago. Customer has been told by actuaries that this basis of calculation is incorrect as retirement date has past. Firm has since "imposed" settlement, which fails to cover actual loss by a very significant amount. Firm claimed to have followed FSA guidelines but refused to provide any explanation or evidence of this.'

The relief sought was summarised as being:

"Providing additional annuity and tax-free cash to restore me to the same financial position as I would have enjoyed had I not acted on their advice (including interest and costs incurred in pursuing my claim)."

The covering letter made clear that the Claimant considered that the Defendant had failed to provide redress in accordance with the rules that applied to the review. So, in paragraphs 4 to 6 of his letter of 25th January 2005, the Claimant said:

'4. The basis for redress in cases of actual loss (which SBJBC agree this is as distinct from prospective loss) was clearly laid down by the SIB at the outset of the pensions review. SBJBC's method of fixing the costs of the annuity rather than addressing the amount of pension to be purchased and ignoring the loss of lump sum benefits is in conflict with these requirements. I have a professional actuarial opinion that SBJBC have not made a redress offer in a form that meets the guidelines. SBJBC maintain that they have carried out their loss assessment entirely in accordance with FSA guidelines, using "FSA approved calculation software", a term whose validity is disputed by my actuary. They have calculated a "target fund" of £712,812 based on an annuity interest rate of 5.5% "set by the FSA" (in published tables), though the FSA have confirmed to me that in this situation actual annuity rates currently available should be used.

As the comparator, they have...

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