Claims under section 27 FSMA accrued when pension funds were transferred into SIPPs
The High Court has upheld the Financial Services Compensation Scheme’s approach to FSCS pension claims, ruling that a claim under section 27 of the Financial Services and Markets Act 2000 (FSMA) accrued when pension funds were transferred into a self-invested personal pension (SIPP).
Mrs Justice Hill dismissed judicial review proceedings brought by Ian Golding, Karen Cumming, Peter Davies and 48 other claimants. The court found that the FSCS had not erred in law by treating section 27(2) as creating a single cause of action arising on the transfer date.
The claims followed pension transfers into SIPPs after advice from Avacade Ltd, an unauthorised financial adviser. The transferred funds were subsequently invested in high-risk schemes, including Ethical Forestry in Costa Rica and Global Plantations in Malaysia. The investments failed.
Mr Golding transferred £17,112.95 on 2 December 2011, while Ms Cumming transferred £19,505.73 on 16 February 2012 and Mr Davies transferred £56,640.91 on 1 August 2012. Their investments followed in 2012.
The FSCS had previously compensated the three lead claimants for the invested funds and SIPP fees following Liberty SIPP’s failure, but did not compensate them for the returns their pensions might have generated in their original schemes.
After the Court of Appeal decisions in Adams v Options UK Personal Pensions LLP and Financial Conduct Authority v Avacade Ltd, the FSCS reconsidered the claims. It concluded that section 27 claims were subject to the six-year limitation period under section 9 of the Limitation Act 1980, running from the date the pension money was transferred into the SIPP.
The claimants argued that section 27(2)(a), covering recovery of money or property transferred, and section 27(2)(b), covering compensation for losses resulting from the transfer, created separate causes of action. They contended that a compensation claim should not accrue until a loss was actually suffered.
The High Court rejected that interpretation. Mrs Justice Hill held that section 27(2) creates a single cause of action, with different remedies available to the claimant. The cause of action arises when the relevant requirements of section 27 are satisfied and the money or property is transferred.
The court also considered whether the cause of action might instead arise when the SIPP deed was executed, fees were first paid or the underlying investments were made. It concluded that the cause of action accrued on the transfer date. The judge added that, had a later date been required, the investment date would have been the appropriate alternative.
The High Court therefore dismissed the lead claims, meaning the claimants were not entitled to relief. The remaining 48 claims had been stayed pending determination of the lead cases.