Mr T (PO – 38354) (delayed transfer led to loss of investment opportunity)

TPO has upheld a complaint against the James Hay Partnership (“James Hay”), after holding that an avoidable transfer delay, constituting maladministration, led to the member suffering substantial financial loss.

Facts

In March 2016, Mr T had asked James Hay to make a transfer from the Tenco Executive Pension Scheme (“the Scheme”) to a new provider. He held cash and stocks with Barclays Stockbrokers (“BSB”) in the Scheme and asked James Hay to make the transfer before 30 June 2016, after BSB notified him that it would be closing its pension trader accounts with effect from that date.

Mr T corresponded with James Hay by email and telephone during the period to follow up on his request and with the aim of ensuring that the transfer was made before the closure. On 10 June 2016, he also informed James Hay that he wished the transfer to be completed before the 23 June Brexit referendum (his stated intention being to invest in shares should the result be a leave vote, with the market falling as a consequence).

However, the cash element of his portfolio was not received until 11 July 2016, with the onwards transfer to a new Hargreaves Lansdown SIPP only made on 19 August 2016. Stock was partially transferred on 26 August 2016, with the final part transferred on 3 October 2016.

During the period, the FTSE 100 had sunk to 5700 immediately following the Brexit vote, and had recovered to 6800 by 19 August 2016.

Mr T complained that the administrator had caused an undue and avoidable delay in its transfer.

James Hay did not uphold his complaint in respect of transfer delays, though it accepted that there were two instances of maladministration (relating to miscommunication). It offered Mr T £100.

Mr T took his complaint to TPO

Progress of the complaint

In 2018, TPO followed its Adjudicator’s initial Opinion, finding that, while maladministration had occurred, on the facts the relevant tests for assessing damages when loss has occurred could not be satisfied. TPO stated that the loss was “neither measurable nor the exact nature of [the] investment within the reasonable contemplation of the parties”. Amongst other things, Mr T had not informed James Hay of the specific shares he intended to purchase, nor was there evidence that he would have been able to purchase the shares in the amount he wished to, or as to what prices he would have achieved. Therefore, TPO held that he could only redress non-financial loss.

However, he awarded £2,000 in acknowledgement of the “very significant distress and inconvenience” caused by the maladministration.

Mr T appealed to the High Court.

The High Court (in 2019) found that:

• there was no difficulty in reasonable foreseeability in this case. “When a customer asks for his pension pot to be moved from one provider to another it is obvious that it is for the purpose or the possible purpose of investment; and it is equally obvious that if there is a delay through maladministration of the transfer that the investor will or may lose the opportunity to invest over that period, and if there are spikes or perceived spikes in the market during that period that is likely or foreseeable to cause the investor loss. That would satisfy reasonable foreseeability, and the conclusion that the loss is not in reasonable contemplation of the parties is not one that can be sustained”
• TPO had been wrong to find that the loss was not measurable. TPO was using “far too high a test” in this respect, and confusing recoverability of damage with quantification of damage
• TPO had not fully considered the “counter-factual” position (ie what would have happened had the transfer been made by the “non-negligent” date).

The determination was remitted to TPO, to identify:

• the date by which the money should have arrived, had there been no maladministration
• what, on the balance of probabilities, Mr T would have done with the money (with the evidential burden on Mr T). (The Court did say that TPO should assess whether Mr T’s submissions were “in part or whole based on hindsight”, and noted that “sometimes it may be necessary for a tribunal to be more sceptical than simply to accept what the investor says he would have done”).

Remission to TPO (2020)

TPO has now concluded that the money should have been available to the member by 23 June 2016 at the latest, absent any maladministration.

Mr T was clearly aware of the referendum-related investment opportunity, and intended to invest should there be a leave vote. Mr T’s reasons for which money he would use, and how, were “well argued and … plausible”, satisfying the “logical self-consistency” test from earlier cases, “even if no independent evidence [was] available as to what he actually would have done”.

James Hay was instructed to pay £43,700, plus simple interest at 8% (for the period August 2016 to the date of payment), into Mr T’s SIPP. No further award for distress and inconvenience was made.

Comment

Whilst the amounts in issue in this case were significant, the legal principles underpinning the award of damages were already in place. It is rare for a member to have a factual scenario giving rise to a claim as strong as this. The administrative delays by the administrator were lengthy; furthermore, the opportunity presented by the Brexit referendum (or similar events, such as general elections) was foreseeable, allowing for decisive investment actions related to the outcome.

The member had made it clear to the administrator that completing the transfer within a particular timeframe was important to him. Crucially, the maladministration giving rise to delays prevented the member from taking advantage of this opportunity in circumstances where the initial request had been made many months earlier.

When trustees are faced with arguments around loss this decision provides a helpful framework in applying the long-established legal principles. However, it does not necessarily signal a more member-friendly approach to the assessment of whether, or to what extent, a member has suffered financial loss. As with all individual member cases, the particular facts and situation of the member are of the utmost importance in reaching an appropriate decision.