Judge sides with SIPP provider Carey Pensions in landmark ruling

Carey Pensions has won its long-running legal battle against former client Russell Adams, with Adams's claims dismissed on all grounds after a two-year court battle.

STM Group announced the outcome of the judgement in the long-awaited pensions case this morning.

The judgment was handed down on Monday morning (18 May) and related to a claim by Adams against Carey Pensions for loss of value on an investment that was held within a self-invested personal pension (SIPP).

The judgement is a very welcome and clear precedent for the whole of the UK financial services sector given the increased litigation and use of the Financial Ombudsman to determine complaints. This judgment gives a solid legal footing for these to now be considered in the context of this ruling."

The case was heard in March 2018 and the result has been keenly awaited becuase it will now give clarity on the duty and obligations of SIPP providers.

Carey Pensions was merged with STM Group in 2018.

Lorry driver Russell Adams had alleged Carey Pensions mis-sold him a SIPP. He and his lawyers accused the SIPP firm of using a Spain-based unregulated introducer to facilitate investments in Store First unit pods.

In July 2012, Adams invested £50,000 into Store First unit pods. Over the years, the funds have depleted and are now virtually worthless.

During the 2018 trial, Adams' legal representatives argued the pension administrator breached Financial Conduct Authority COBS rules that dictate a firm must act in a client's best interest. They claimed that, if the firm had been doing so, it would have declined to give business to this sort of "high-risk and highly speculative investment".

They also argued that, if Adams had received "competent financial advice", it was unlikely he would have been put into a SIPP in the first place.

Carey's defence team argued the pension administrator was "blameless" for the loss, however, but the client was not.

The court heard Carey Pensions had warned Adams the investment was high-risk and highly speculative, but Adams chose to go ahead anyway to claim a £4,000 inducement from the introducer, which Carey Pensions chief executive Christine Hallett said the firm reported to HM Revenue & Customs.

Carey's lawyers added that SIPP providers were under no obligation to ascertain to what extent an investment is high-risk and reject that investment.  

This morning's judgment relates to a claim by Adams against Carey Pensions UK for loss of value in an investment which was held within a SIPP wrapper. The case opened in March 2018.

Alan Kentish, Chief Executive of STM Group, commented: "The judgment is a very welcome and clear precedent for the whole of the UK financial services sector given the increased litigation and use of the Financial Ombudsman to determine complaints. This judgment gives a solid legal footing for these to now be considered in the context of this ruling."

"The STM Board considers that potential implications for any financial institution carrying out execution-only business to have become wholly responsible for their client's decisions would be inequitable and inappropriate. I am sure many financial service providers and institutions, as well as their respective trade associations, would wholeheartedly agree and can now look to the future with greater confidence post this ruling."

Christine Hallett, managing director of Carey (now rebranded as ‘Options, for your tomorrow'), said: "We are pleased that the judgment has now been delivered, and that the judge has found in our favour on all counts."

"It has been a long time coming and while we were confident of our position, the lengthy, comprehensive and detailed judgment recognises within it our approach to implementing strong contractual agreements and documentation, together with robust systems, controls and processes within the business. It was also clear that as a SIPP provider we are expected to carry out executiononly business based on decisions made by our clients."

She add: "It is a judgment that has been long awaited by the SIPP industry and consumers alike, and gives clarity to what is expected of a SIPP provider under English law and the FCA Conduct of Business Principles when acting upon the instructions of a client. In addition, it has given a much better understanding of the legal relationship between an introducer and the service provider which will provide valuable guidance for both consumers and industry professionals."

"We now look forward to turning our minds to growing our UK businesses and maintaining our service levels for our clients."

Subscribe to International Investment's free, twice-daily, newsletter