The King on the application of Options UK Personal Pensions LLP (formerly Options Sipp UK LLP and Carey Pensions UK LLP) v Financial Ombudsman Service Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bourne |
| Judgment Date | 21 December 2022 |
| Neutral Citation | [2022] EWHC 3325 (Admin) |
| Docket Number | Case No: CO/2192/2022 |
| Court | Queen's Bench Division (Administrative Court) |
and
[2022] EWHC 3325 (Admin)
THE HON. Mr Justice Bourne
Case No: CO/2192/2022
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Jonathan Hough KC and Simon Pritchard (instructed by Eversheds Sutherland) for the Claimant
James Strachan KC (instructed by Financial Ombudsman Service) for the Defendant
Jemima Stratford KC (instructed by Fieldfisher) for the 2 nd Interested Party
Hearing date: 1 December 2022
Approved Judgment
This judgment was handed down remotely at 10am on 21 December 2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
THE HON. Mr Justice Bourne
Introduction and factual background
This is a renewed application for permission to apply for judicial review of a decision of the Defendant, the Financial Ombudsman Service (“FOS”) made on 28 March 2022. The Claimant, now known as Options UK Personal Pensions LLP, previously traded as Carey Pensions UK LLP and is here referred to as Carey.
The decision of FOS was made on a complaint by a Mr Fletcher. In 2011, he was cold-called by a business called Commercial Land and Property Brokers (“CLP”). CLP was not regulated by the Financial Conduct Authority as an adviser. The CLP representative told Mr Fletcher that he would receive a greater retirement income, with very little risk, if he transferred pension savings into investments of a business called Store First, consisting of leases of storage units, held in a SIPP administered by Carey. Carey accepted Mr Fletcher's referral on 29 September 2011. He transferred about £30,000 from existing pension schemes into the SIPP and CLP paid him a £2,000 “cashback” which he wrongly believed would be tax-free. The investment in Store First was unsuccessful and Mr Fletcher suffered a significant loss. In his complaint to FOS he alleged that Carey did not carry out sufficient due diligence on CLP before accepting business from it.
Carey emphasizes that FOS is handling numerous complaints arising out of similar introductions by CLP, so the issues in this case have a wider significance.
In its decision, FOS set out a history of the business relationship between Carey and CLP which I now briefly summarise.
Carey first accepted introductions from CLP on 15 August 2011. On 20 September 2011 it conducted background checks using a database known as “World Check” on two individuals at CLP which revealed no issues. On 29 September 2011 it received a “non-regulated introducer profile” from CLP, signed by a Mr Terence Wright. In a conference call with CLP on 9 December 2011, Carey raised a concern about a suggestion that an investor was expecting a payment in return for making a Store First investment. CLP said that no parties referred by them received any such inducement and Carey emphasised that such inducements were prohibited. On 20 March 2012, a Ms Adams of CLP signed Carey's Terms of Business for Non Regulated Introducers. On 12 March 2012, Carey's compliance support asked CLP by email for its latest accounts and for certified copies of the passports of the main directors/principals/partners of the company. It chased for this on 3 April 2012, but Carey has no record of receiving the information. On 29 March 2012, Carey staff again expressed concerns about reports of clients being offered inducements. On 15 May 2012, Carey conducted a World Check search on Terence Wright, which revealed that he was on a FSA list of unauthorised firms and individuals. On 25 May 2012 Carey terminated its agreement with CLP, citing the giving of inducements as a reason.
Mr Fletcher complained that Carey had not undertaken any or any sufficient “due diligence” before accepting referrals from CLP and that this enabled CLP and Store First to trick him into losing his money.
On 26 November 2021 FOS issued a provisional decision, setting out why it believed that the complaint should be upheld. Carey did not accept the provisional decision, made further submissions and requested an oral hearing “in particular to explore Mr Fletcher's understanding of his investment and his and Carey's roles” and “to assess Mr Fletcher's motivation for entering into the transaction and what he would have done if given more information”.
In the further submissions responding to the provisional decision, Carey argued (in particular) that (1) the due diligence duty to which FOS referred was not recognised by law, i.e. there was no such actionable duty that a Court would recognise, and (2) if FOS was imposing a duty going beyond legal requirements then it was bound to give a clear explanation of that decision and the reasons for it, and had not done so.
The decision letter, dated 28 March 2022, set out the provisional decision in full, summarised Carey's further submissions, set out the reasons for refusing an oral hearing and then set out the final decision of FOS on the complaint.
FOS upheld the complaint. It took into account the fact that Carey acts on an execution-only basis i.e. it does not advise or comment on the suitability of its customers' investments and it tells all customers that they should seek independent financial advice from an adviser regulated by the FCA. However, FOS decided that Carey failed to carry out sufficient due diligence before accepting any business from CLP. Had Carey carried out sufficient checks at the outset on all directors, it would have discovered that Terence Wright was the subject of an FSA warning notice from 15 October 2010. The notice appeared on the FSA's website in a list headed “Firms and individuals to avoid” and was described as a “warning notice of some unauthorised firms and individuals that we believe you should not deal with”. The notice stated that Mr Wright was not authorised to carry out regulated activities in the UK including advising on investments and that the FSA believed that he “may be targeting UK customers”. Further, if Carey had requested accounts and identification documents at the outset, it would have been alerted by CLP's failure to provide them. FOS considered that although Carey had no duty to advise Mr Fletcher, it was not fair or reasonable for it to accept his application for the SIPP or the Store First Investment. FOS also ruled that it was fair and reasonable for Carey to compensate Mr Fletcher for his financial loss, plus £500 for trouble and upset.
So far as the oral hearing request was concerned, FOS decided that the complaint could be fairly determined without one. The decision maker considered that the relevant questions had already been put to Mr Fletcher and that his answers were consistent with information previously provided. No dispute of fact had been identified which would require further oral evidence. The decision maker also noted that even if there were a hearing, this would be inquisitorial rather than adversarial in nature and Carey would not be able to cross examine Mr Fletcher.
Legal framework
Section 226 of the Financial Services and Markets Act 2000 (“ FSMA”) provides that FOS will deal with certain eligible complaints and refers to this jurisdiction as the “compulsory jurisdiction”.
In respect of such complaints, sections 228 and 229 provide (so far as material):
“ 228 Determination under the compulsory jurisdiction
(1) This section applies only in relation to the compulsory jurisdiction.
(2) A complaint is to be determined by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case.
(3) When the ombudsman has determined a complaint he must give a written statement of his determination to the respondent and to the complainant.
(4) The statement must—
(a) give the ombudsman's reasons for his determination;
(b) be signed by him; and
(c) require the complainant to notify him …, before a date specified in the statement, whether he accepts or rejects the determination.
(5) If the complainant notifies the ombudsman that he accepts the determination, it is binding on the respondent and the complainant and final.
…
229 Awards
(1) This section applies only in relation to the compulsory jurisdiction.
(2) If a complaint which has been dealt with under the scheme is determined in favour of the complainant, the determination may include—
(a) an award against the respondent of such amount as the ombudsman considers fair compensation for loss or damage (of a kind falling within subsection (3)) suffered by the complainant (“a money award”);
(b) a direction that the respondent take such steps in relation to the complainant as the ombudsman considers just and appropriate (whether or not a court could order those steps to be taken).
(3) A money award may compensate for—
(a) financial loss; or
(b) any other loss, or any damage, of a specified kind.
…”
The scheme is subject to rules contained in part of the FCA Handbook known as the “Dispute Resolution: Complaints” sourcebook (“DISP”). DISP 3.6.4 R provides:
“In considering what is fair and reasonable in all the circumstances of the case, the Ombudsman will take into account:
(1) relevant:
(a) law and regulations;
(b) regulators' rules, guidance and standards;
(c) codes of practice; and
(2) (where appropriate) what he considers to have been good industry practice at the relevant time.”
DISP 3.5 stipulates the processes for resolving complaints. In particular, DISP 3.5.5 R states:
“If the Ombudsman considers that the complaint can be fairly determined without convening a hearing, he will...
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