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European Court of Human Rights |
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You are here: BAILII >> Databases >> European Court of Human Rights >> HEATHER MOOR & EDGECOMB LTD v the United Kingdom (No. 2) - 30802/11 [2011] ECHR 1311 (12 September 2011) URL: http://www.bailii.org/eu/cases/ECHR/2011/1311.html Cite as: [2011] ECHR 1311 |
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FOURTH SECTION
Application no.
30802/11
by HEATHER MOOR & EDGECOMB LTD
against the United Kingdom (No. 2)
lodged on 5 August
2010
STATEMENT OF FACTS
THE FACTS
The applicant, Heather Moor and Edgecomb Limited (HME), is a company based in Wiltshire. The application was lodged on its behalf by Mrs A. D. Pickering, a director. The applicant has been advised by Mr A. Speaight Q.C., a barrister practising in London.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
In 2000 the applicant was contacted by a British Airways pilot, R, who was approaching the retirement age of 55 years and was seeking advice regarding his pension fund. R had already been advised by a financial services company linked to the pilots’ association against leaving his employer’s occupational pension scheme, since this would entail “enormous risk”. There were several exchanges of correspondence between R and HME in the following months as well as a long meeting at the company’s premises. R indicated he was prepared to accept a “medium” degree of investment risk, and signed a checklist prepared by HME to indicate that he and his wife had been made fully aware of the risks associated with the income drawdown scheme being proposed. HME provided figures showing that by transferring his pension funds, R could obtain an appreciably higher annual income. Also, the benefits payable in the event of R’s death before the age of 60 would be much greater. For its assumed growth projections, HME used a central projection rate of 9%, rather than the 7% indicated by the regulator the previous year. R acted on HME’s advice and transferred his pension fund.
By March 2003, R had become dissatisfied with his investments and, taking new advice, transferred his funds elsewhere. In November of that year he made a formal complaint to HME that he had lost 27% (£278,000) of the amount originally transferred. He complained as well that the 9% assumed rate of growth had been presented to him as a “worst-case scenario”, and that HME had taken no action in response to the concerns he had expressed at the time about stock market movements. HME rejected the complaint, leading R to file a complaint with the Financial Ombudsman Service (FOS) in December 2003.
The procedure followed by the Ombudsman was an entirely written one, with submissions from R and from HME. The latter’s requests for an oral hearing and for the opportunity to cross-examine R were refused. The Ombudsman considered this to be unnecessary in the circumstances, and observed that the complaints process was an inquisitorial one, not an adversarial one.
The Ombudsman gave a provisional decision on 17 February 2006. He considered that in view of the relative security provided by R’s occupational pension scheme, HME should have demonstrated that transfer would be clearly advantageous. He observed that responsibility for advice rested completely with the adviser and was not diminished by recommendations or warnings given by other firms. The causal link was established here since HME had recommended transfer and R had done so. Although the firm argued that there had been a respectable school of thought among financial advisers that would have agreed with their advice to R, the witness statement they on relied on indicated the contrary. The Ombudsman considered that to be consistent with good industry practice, the firm should have assumed a growth rate of less than 9%. There was, however, no evidence in the file that the consequences of a lower growth rate had been explained to R. instead, HME had made repeated references to higher growth rates achieved in previous years. He also took the view that HME had not explained the investment risk in terms that R would have understood properly. He concluded that the overall risks associated with the income drawdown arrangement were greater than was advisable for R in his circumstances, and that had this been given sufficient prominence in the firm’s advice that R would not have transferred his pension funds. The most suitable advice would have been to remain in his employer’s pension scheme.
HME made detailed submissions on these findings. Its arguments were considered and dismissed in the Ombudsman’s final decision of 9 February 2007.
The firm argued first that it had received legal advice that R’s complaint would not have been accepted in a court of law. Noting that a copy of this advice had not been forwarded to him, nor its content explained to him, the Ombudsman stated that he had had regard to the relevant law, as well as to what was fair and reasonable in all of the circumstances of the case.
HME maintained there was no causal link between its advice and R’s decision to transfer his pension fund. The Ombudsman reiterated the position taken in the provisional decision.
Regarding R’s attitude to risk, the Ombudsman held that R’s pension fund, which constituted a very significant part of his overall wealth, should not have been placed at risk, there being no need to do so in the particular circumstances. The fact that R had signed the checklist did not make the transfer more suitable, nor did it negate HME’s duty to explain very clearly the risks involved.
The Ombudsman reiterated that HME had not acted consistently with good industry practice when it used the rate of 9% for its projections. While this did not necessarily make the firm’s advice more or less suitable, it incorrectly made the option of transferring look more attractive than it would otherwise have been. Although R was concerned to make adequate provision for his son in the eventuality of the untimely death of himself and his wife, the Ombudsman was not satisfied that this should have been given greater weight than the security of their retirement income. Other arrangements could have been made to ensure their son’s welfare, such as life insurance. In light of these considerations, he concluded that the appropriate advice should have been not to transfer his pension fund. He directed HME to arrange for a loss assessment to be carried out. R accepted the decision, making it binding on HME. In August 2010 the firm paid out the statutory maximum amount (£100,000) to R.
HME applied to High Court for judicial review of the Ombudsman’s decision. The application was rejected on the papers on 10 March 2009. The firm renewed its application, which was heard and dismissed by Judge Davis on 18 September 2009. Two grounds were relied on – the Ombudsman’s refusal to hold a hearing, and a lack of independence and impartiality on the part of the FOS. On the first ground, the judge noted that comprehensive written evidence of the parties’ dealings had been available to the Ombudsman. It would have been pointless to cross-examine R on what action he would have taken had HME advised against transfer, it being probable that he would not have left his employer’s scheme. The procedure followed by the Ombudsman had been a fair one, allowing HME to put its case fully in writing. A hearing would not have added anything. Although the firm alleged that the Ombudsman’s decision contained errors, judicial review was essentially concerned with procedural fairness. Moreover, it did not appear that any facts had been plainly ignored.
On the second ground, the judge rejected HME’s arguments about the supervisory role of the Financial Services Authority (FSA) in relation to the FOS, and its reference to evidence in another case in which the FOS was found by an independent assessor to have effectively solicited complaints against companies. The judge was satisfied that the FOS scheme involved an independent and impartial tribunal.
HME applied for leave to appeal. This was refused on the papers by Stanley Burnton LJ, following which the firm renewed its application, which was dealt with orally and dismissed by Aikens LJ on 25 March 2010. He noted that Davis J found both grounds to be without merit and agreed with that view. On the issue of an oral hearing, he stated that whether the facts were or were not as alleged by the firm was beside the point. Rather the issue was whether the refusal of a hearing before the Ombudsman was procedurally unfair or unreasonable. He did not consider it so, or that the will of Parliament had been subverted in this respect. Regarding the second ground, he found it to be without substance.
B. Relevant domestic law
The relevant provisions of domestic law, as they stood at the material time, are set out in the Court’s decision in Heather, Moor and Edgecomb v. the United Kingdom (dec.), no 1550/09, 14 June 2011.
The following provision of the FOS dispute resolution rules (DISP), as formulated and numbered at the material time, is also relevant to the present case:
“3.9.15 R The Ombudsman must maintain a register of each money award and direction made.”
COMPLAINTS
The applicant complains under Article 6 of the Convention that the Ombudsman’s decision was not pronounced publicly. It also complains that the Ombudsman refused its request to hold an oral hearing and to allow cross-examination of R. The applicant further complains that the Ombudsman lacked structural independence and impartiality, in light of the close link between the FOS and the FSA, with the latter having a supervisory role over the former. Lastly, relying also on Article 1 of Protocol No. 1, the applicant complains that the FOS does not operate compatibly with the rule of law, its case-law being neither accessible nor foreseeable.
QUESTION TO THE PARTIES
Was judgment in the present case pronounced publicly, as required by Article 6 § 1 of the Convention?