QB-2020-000092 - [2025] EWHC 002154 (KB)

Abuse of the process – cause of action not vested in the relevant claimants

This arises primarily in the context of the Standard Life defendants’ application to strike out Mr Sedgley’s claim. But the James Hay & AJ Bell defendants also rely on it in relation to the first, fourth and seventh claimants whose relief from sanctions application they submit should be refused on this ground (and others).

Without making a final determination, it seems to me that Mr Sedgley and the other claimants have, at the very least, a real prospect of showing that the assignments to the FSCS were equitable as opposed to legal assignments (and the defendants did not strenuously argue otherwise). This is because the formal requirements of section 136 of the Law of Property Act 1925 were not fulfilled. The assignments arguably were not “absolute” but, rather, to use Mr McMeel’s characterisation, “security assignments”. Notice to the debtor was not given – at least in the cases of Mr Sedgley and Mr Lee. Finally, no doubt reflecting considerations such as these, it is relevant that in Investors Compensation Scheme Ltd v Cheltenham & Gloucester PLC [1996] 2 BCLC 165 it was not argued by the FSCS’s statutory predecessor (represented, I note, by Mr Geoffrey Vos QC) that the assignments were legal assignments.

Even as equitable assignments, it would still be an abuse of process to start proceedings “knowing that the cause of action was vested in someone else”; see Pickthall v Hill Dickinson LLP [2009] EWCA Civ 543, [2009] PNLR 31. But Pickthall and other cases have acknowledged that the position is otherwise “if the claimant does not know, or is uncertain, as to whether he has title to the relevant cause of action”; see at paragraph 15. Further, in Munday v Hilburn [2014] EWHC 4496 (Ch), [2015] BPIR 684, Nugee J (as he then was) observed that the burden of proving knowledge was on the party alleging abuse of process and that “the fact that [the claimant] ought to have known is not enough”; see at paragraph 20.

The claimants in this case are former professional footballers. They are completely unsophisticated litigants. None of them signed, and there was not, a formal deed of assignment. The principal piece of paperwork they completed was in each case a FSCS claim form, the primary purpose of which was to obtain compensation up to the statutory limit of £50,000. The claim form was, in each case, directed against their financial adviser not these defendants; (see Boxes C & D of the form). I consider it very unlikely that they appreciated that the wording of the form meant that they had also assigned their rights against these defendants. It seems to me that at the very least they would have been “uncertain” as to their title to sue. Subject to the requirement set out in the next paragraph, they appear to me to have a real prospect of showing that there was no abuse of process on their part.

If the assignments were equitable it follows that the defect in title to sue “was curable but required swift resolution”; see Smith and Leslie on Assignment, 3^rd Ed at para 26.105. Has it been swiftly resolved? The point was taken in the Defences, acknowledged in the Replies and the relevant claimants then obtained re-assignments of their causes of action from the FSCS – to which they were entitled as of right. That had been done by October 2023, which was before the date of the ninth and tenth defendants’ application to strike out. Taken in the overall context of this litigation, I think that that was “swift” – or, to use the terminology of CPR rule 24 – that there is at least a “real prospect” of showing that that requirement has been met.

Limitation

The relevant sections of the 1980 Act are sections 32 and 14A.

Section 32 provides:

… where in the case of any action for which a period of limitation is prescribed by this Act, either –

…

any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant;

… the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it …

For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”

Section 14A applies only to claims in negligence. Where facts relevant to the cause of action are not known at the date of accrual, it provides for a limitation period of three years from the date the claimant had both “the knowledge required for bringing an action for damages in respect of the relevant damage” and “a right to bring such action”, if such period expires later than six years from the date of accrual: see section 14A(3)-(5). The “knowledge required” means, relevantly: knowledge of “the material facts about the damage in respect of which damages are claimed”, being “such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment” (see sections14A(6)(a) and (7)); and knowledge (a) “that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence” and (b) of “the identity of the defendant” (see section14A(6)(b) and (8)). Such knowledge includes “knowledge which [a person] might reasonably have been expected to acquire – (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek”: see section14A(10). Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant: see section14A(9).

In Potter v Canada Square Operations Ltd [2023] UKSC 41, [2024] AC 679 the Supreme Court emphasised that section 32(1)(b) made sense without elaboration. It required simply: (i) a fact relevant to the claimant’s right of action; (ii) the concealment of that fact from the claimant by the defendant, either by a positive act of concealment or by a withholding of relevant information; and (iii) an intention by the defendant to conceal the fact in question. Section 32(2) was to be understood according to its natural construction, such that recklessness (as opposed to deliberation) will not suffice. The “relevant fact” under section 32(1)(b) had to be “a fact without which the cause of action is incomplete”, not merely a fact which improves prospects or which is not a necessary ingredient of the cause of action: Arcadia Group Brands Ltd v Visa Inc [2015] EWCA Civ 883 at [49].

Notwithstanding that the primary limitation period expired on 29 April 2015, Mr Sedgley, the eighth claimant, relies upon section 32 and/or section 14A as having postponed that period until, at earliest, January 2017.

Section E of the first witness statement of Sarah Jayne Price dated 6 June 2024 contains a detailed exposition of the Standard Life defendants’ case on section 32. It sets out the information that the defendants supplied as to the value of the investments and their responses to numerous enquiries as to the appropriateness of the investments and Mr Neal’s role in recommending them. It includes reference to a letter dated 5 April 2013 which was sent by an investment claims management company, Financial Services Redress (UK) Limited (“FSR”), on Mr Sedgley’s behalf. The author of the letter was a Mr Alasdair Sampson, a qualified lawyer. The letter raised a “formal complaint” about the investments into which Mr Sedgley’s funds had been placed, viz the Aegon Portfolio, Fortress and Quadris. It alleged that Fortress and Quadris were unregulated collective investment schemes (“UCIS”); that as a retail client, to whom none of the relevant statutory exemptions regarding the promotion and sale of UCIS applied, Mr Sedgley should not have been advised or permitted to invest in Fortress or Quadris; that both Fortress and Quadris were high risk investments and therefore unsuitable for him; that by investing in Fortress and Quadris via the Aegon Portfolio within the SIPP Mr Sedgley had incurred unnecessary and excessive product provider fees and charges; and that as a result of his investment in Fortress and Quadris via the Aegon Portfolio he had suffered loss, comprising both losses in the market value of Fortress and Quadris and fees and charges deducted by Aegon.

The material in Section E of the witness statement and the allegations in the letter did not go to the role played by the Standard Life defendants as the SIPP provider and trustee. As to this, Ms Price devoted paragraphs 44 and 45 of her witness statement. I have italicised the key passages:

The only material element of the present claim that did not feature in FSR’s letter of 5 April 2013 is the allegation that, on the basis of various constructed duties of due diligence, Standard Life and the SL Trustee are liable for Mr Sedgley’s alleged losses. Given the matters of which by April 2013 Mr Sedgley clearly had knowledge, however, there can be no substance to his assertion that by that stage he was not also aware, and could not reasonably have been expected to have been aware, of this alleged liability – or that he was unaware of, and could not with reasonable diligence have discovered, such matters as he now seeks to allege were concealed from him. If by April 2013 he knew that Fortress, Quadris and the Aegon Portfolio were, on his case, inherently flawed and unsuitable (as he did), and that this had caused him loss as alleged (as, again, he did), he must also have known by this point that this loss could (on his case) have been attributed to Standard Life and the SL Trustee, as respectively the provider and the trustee of the SL SIPP who had permitted him to make these allegedly flawed investments. Indeed, it is to be inferred from FSR's letter of 12 July 2016 to Standard Life and the SL Trustee to which I referred at paragraph 37.9 above, that Mr Sedgley had by this point specifically considered the possibility of bringing a claim against Standard Life and the SL Trustee but had decided not to do so.

There is nothing in any of the valuations provided to Mr Sedgley in 2017 or afterwards that changes the position. Those valuations represent a consequence, not the cause, of the matters at issue, recording as they do only a further decrease in the value of the SL SIPP, additional to the decreases it had already experienced by 2013 and subsequently, as a consequence of Fortress', Quadris' and the Aegon Portfolio's alleged inherent flaws and unsuitability, which formed the basis of the complaints Mr Sedgley previously made to Mr Neal and of the claim he lodged with the FSCS.”

I am not prepared to attribute knowledge or constructive knowledge to Mr Sedgley on the basis contended for. To phrase that in the language of the rules, I am not prepared to say that the claimant has “no real prospect of succeeding” on these issues or that he has “no reasonable grounds for bringing the claim”.

The regular valuations which he received from Standard Life showed that his SIPP had substantial (though declining) value up to 7 September 2016, when the valuation was £90,158.35. Then, in January 2017, he learned that the Fortress Fund was in fact worth zero, which must have come as a bombshell to him. That went on to be reflected in the 7 September 2017 valuation he received from Standard Life, which was £4,731.85 – a loss of £85,426.50. (The residual value comprised a small, retained cash balance.) In the intervening period, the well-known footballer and pundit, Alan Shearer, had settled his case against Mr Neal and Suffolk Life. The settlement was well-publicised. Of these events, Mr Sedgley has said:

“… it was not until 2017 that I became alert to the fact that my pension might have become worthless. It was reported in June 2017 that Alan Shearer had agreed a settlement with Suffolk Life and Mr Neal in relation to his pension claim. It was not until I read this in the news that that I became aware that my losses could be attributable to Standard Life and/or SL Trustee.”

Spanning a longer period were the various rules, HMRC requirements and regulatory guidance as to the applicable standards for SIPP operators which are pleaded at paragraph 123 of the Particulars of Claim and of which, for present purposes, the most significant was the letter dated 21 July 2014 from the FCA addressed to the CEOs of SIPP providers. This stated that due diligence required:

correctly establishing and understanding the nature of an investment

ensuring that an investment is genuine and not a scam, or linked to fraudulent activity, money-laundering or pensions liberation

ensuring that an investment is safe/secure (meaning that custody of assets is through a reputable arrangement, and any contractual agreements are correctly drawn-up and legally enforceable)

ensuring that an investment can be independently valued, both at point of purchase and subsequently, and ensuring that an investment is not impaired (for example that previous investors have received income if expected, or that any investment providers are credit worthy etc.).

Mr McMeel submitted, and I agree, that the following propositions are reasonably arguable. The Standard Life defendants had chosen to provide annual valuations to the claimant based on information which was provided by third parties and/or was historic. They withheld from Mr Sedgley the fact that they did not have any means of providing realistic or accurate valuations either from the outset or at any time subsequently, including on annual reviews. The valuations were in fact valueless, or, worse, positively misleading. But Mr Sedgley did not know and was not to know that. The Standard Life defendants had also ceded any meaningful control of his pension assets at the outset and that remained the case throughout the life of the investment because the assets had been transferred to an offshore bond. Mr Sedgley did not know and was not to know that this meant, in practical terms, that his investment was neither safe nor secure. These failings amounted to or were in pursuance of what amounted to a policy and hence the “deliberate commission of a breach of duty in circumstances in which it [was] unlikely to be discovered for some time” (the wording of section 32(2)). The policy was not reversed or partially reversed until 2017 when, for the first time, a realistic valuation of the flawed assets was given. In the meantime, there must have been internal discussions about Standard Life’s response to the letter of 21 July 2014. But no details of any such discussions had been given and no documents, of which there must have been many, had been disclosed.

It is in these circumstances difficult to say when Mr Sedgley acquired knowledge. It would require more detailed investigation, disclosure of documents (principally by the Standard Life defendants) and oral evidence and cross-examination. But it is reasonably arguable, at the very least, that that date was not before January 2017.

As to constructive knowledge, I think that there is a real prospect of Mr Sedgley showing that he was not put on notice of the need to investigate. The authorities on section 32 of the 1980 Act provide for a claimant to be treated as becoming aware of the things that a reasonably attentive person in his position would learn. (The test under section 14A is similar.) I have already referred to the characteristics and position of the claimant. I do not think that there is any sufficient basis, on a paper application, to conclude that he was put on notice, still less that it is to be inferred that “he specifically considered the possibility of bringing a claim against [the Standard Life defendants] but decided not to do so”; (see paragraph 44 of Ms Price’s statement). There is no real evidence at all to support the latter proposition. (But even if there were, I might add that it would not necessarily and without more be inconsistent with his case on section 32 and section 14A.)

It follows that I do not agree with paragraphs 44 & 45 of Ms Price’s statement (which were developed by Mr Day in his written and oral submissions). She has proceeded from the standpoint that because the investments were “inherently flawed and unsuitable” and had “caused [the claimant] loss”, he “must have known” that he had a case against the Standard Life defendants who “had permitted him to make these allegedly flawed investments”. That is to attribute to him antecedent knowledge of duties that were not made explicit by the FCA until July 2014 and not, as I understand it, within his knowledge until after these proceedings had commenced. It is also to overlook the two duties to which the concealment is principally relevant, namely the valuation duty and the custodian duty. These duties do not relate so much to the Standard Life defendants having “permitted” the investments as to their inability to value them and keep them secure.

In applying the foregoing analysis, I have had some regard to the remarks set out at paragraphs 12 – 16 and 64 of the speeches of the House of Lords in Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682. These remarks recognise that there is not always a bright line distinguishing between facts and duties and that a claimant “may know the basic facts but not know what, to an expert, they add up to”.

Mr Day had an ancillary point, which was that if the claim was to survive and go forward then that could only be on the basis of the pleaded valuation and custodian duties – because these were the ones that were affected by the concealment. No authority was offered for this proposition. Whilst it is true that the Particulars of Claim articulate eight “specific duties of SIPP operators and trustees”, these are all contractual or tortious duties derived from or analogous to the much more general, overarching rules set out in the FCA’s Conduct of Business Sourcebook (“COBS”). It would be odd if the effect of section 32 and/or section 14A was to allow a claim to go forward on the basis of breach of a general duty but to circumscribe or limit the claimant in the way he was entitled to express that duty as it has particularly affected him. I can see nothing in the wording of the sections which would provide a statutory basis for Mr Day’s proposition. Section 32 refers variously to “any action” and “any fact relevant to the plaintiff’s right of action”. Section 14A refers variously to “any action for damages” and “facts relevant to the current action”. These words refer to the whole action or right of action. They do not appear to me to envisage the sort of slicing or fragmentation of the action which Mr Day suggested. Lastly, quite apart from these legal considerations, I am not sure that I accept Mr Day’s factual proposition. Although the evidence of the claimant was indeed principally directed at the valuation and custodian duties, I do not think it is necessarily correct these were the only ones affected by the concealment. Again, that is not an issue easily resolved on paper.