Who is the client? A simple question but in the context of claims against professionals it can prove rather more involved than you would think. In the recent judgment in Horton v The Hetherington Partnership (unreported - Sheffield County Court - 28 May 2020) we see the consequences of the failure to get that right in the context of a claim against defendant solicitors involving the purchase of storage pods as an investment.
“Regrettably for the claimant not only was he not the client but no duties at all were owed to him by the solicitors against who there was no finding of negligence in any event.”
The claimant had a fully paid up defined pension scheme worth just over £100,000. Persuaded by promotional material received from Store First Ltd he decided to invest in self-storage pods utilising that pension fund. The investment vehicle was a Self-Invested Personal Pension (SIPP) scheme – so the pension fund is transferred into the SIPP which then makes the investment. Although the claimant was an unsophisticated investor he took no independent investment advice.
SIPP provider Stadia Trustees Ltd was engaged by the claimant as his SIPP trustee; Stadia instructed the defendant firm of solicitors to act in the purchase of the storage pods. Throughout the defendant reported to Stadia (not to the claimant direct) including a Report on Sublease (the lease of the storage pods by Store First to Stadia) and a report on Option Agreement (providing for a buy-back by Store First – which was at its absolute discretion). The purchase of seven storage pods was completed in February 2012 and largely exhausted the claimant’s pension fund.
The claimant now says that the storage pods are worthless. In his claim against the defendant he alleged that he was the defendant’s client with Stadia acting as his agent and / or the defendant owed him a duty of care as to the investment in the storage pods. He asserts that in both / either case the defendant was in breach of the duties owed to him as to the advice given on various elements of the purchase and sought to recover his losses.
We successfully defeated the claimant’s claim which was pleaded at over £150,000.
Over the course of the claimant’s evidence at trial it emerged the literature he received in 2011 had previously been lost and that on which he relied in making his claim had been obtained via internet searches in around 2016. Based on the evidence available the judge concluded it was likely and so found that the material the claimant received in 2011 was different and referred to a buy-back option as being subject to conditions and not guaranteed as the claimant alleged. These findings proved to be crucial as to the conclusions reached on the defendant’s advice.
The judge found it was Stadia, as the SIPP trustee, who was the defendant’s client – not the claimant; this was so even though but for the need for the investment to be via a SIPP wrapper the claimant would have been the direct client. He was unpersuaded by argument that various references to client in the documents were to the claimant or specific naming of the claimant in the documents meant he was the client – these references were simply to identify the claimant as the particular investor on this transaction.
Nor did the defendant owe the claimant a duty of care in tort – despite the claimant’s efforts to establish such a duty the judge concluded none of the routes argued for applied. To the extent that advice was given it was correct – the judge describes the Report on Sublease as …an admirable summary, in clear language, of the effect of the sublease to Stadia… and the Report on Option as being …in plain and simple language…[writing] explicitly of the weaknesses in the Option Agreement from the investor’s point of view.
Those reports were sufficient to discharge any duty to Stadia. There was no duty to provide investment advice and no duty to provide copies of the Reports to the claimant direct – any such latter duty rested only with Stadia.
Throughout the defendant’s position was that the appropriate claimant here was Stadia as trustee - the trustee administers the trust fund (here the pension) as principal not as agent for the beneficiary (here the claimant). It was accepted that in certain circumstances the beneficiary might be able to bring a derivative claim – where the beneficiary brings a claim in their own name on behalf of the trust. No determination was made as to whether that course that would have been available to the claimant as the limitation period claim for such a claim had expired.
What this means for you
It’s crucial in claims against professionals to get the claimant right – and that might not necessarily be the entity that has ultimately suffered the loss. There was a finding here that on balance of probabilities had the claimant read the Report on Option and understood that the buy-back option was at the sole discretion of Store First he would not have gone ahead with the investment. But that was not enough for the claim to succeed; the claimant was not the client and no duties of care were owed to him.
Clarity in what promotional literature was seen by the claimant and when is also vital in claims as to failed investments – that the true picture only emerged in the course of the trial and differed from the way his claim had previously been put did not help the claimant’s cause. And in the midst of all this too there was no negligence – the defendant solicitors did discharge their duty to their client albeit that client was the claimant’s trustee Stadia not the claimant himself.
Ben Parks acted for the successful defendant firm of solicitors who can be contacted for further information or to receive a copy of the judgment.