A landmark case by an investor in a collapsed property investment has lost a £300,000 claim blaming a SiPP pension provider for the loss by failing to conduct proper due diligence.
The case was rejected by The Pensions Ombudsman – shutting the door on similar claims from hundreds of other investors that lost money in the same scheme.
Investor Julian Holy accused pension provider Hornbuckle Mitchell of lax due diligence checks on property investments recommended by IFA Bentley-Leek Financial Management (BLFM) through sister company Bentley-Leek Properties (BLP).
Mr Holy’s claim has been rejected by the Pensions Ombudsman, which treated the complaint as a test case for hundreds of other SiPP investors seeking compensation following BLP falling in to liquidation.
Decision stops claims from 142 investors
Mr Holy invested via a Hornbuckle SiPP in two BLP UK property investments and a BLP Dubai investment.
BLP failed to deliver an intended 10% annual return to 142 SiPP investors in the ventures. Despite taking a £1.3 million loan to fund the developments, the investments have yet to see a return.
Deputy Pensions Ombudsman Jane Irvine said Hornbuckle did enough by checking the investment would not attract a tax charge, despite taking a ‘less conservative’ view on which investments to include in a SiPP.
“Different and specific due diligence processes are necessary for some asset classes such as overseas property, which are subject to their own regulations, however, Hornbuckle are only interested in the views of HM Revenue & Customs because their SiPP is a UK pension fund,” said Irvine.
Evidence falls short
“Consequently they look at the foreign structure and apply that back to the SiPP rules applicable in the UK. In my view, this approach does not seem an unreasonable one to take with overseas investments in Mr Holy’s SiPP.
“The evidence therefore falls short of establishing that injustice was caused to Mr Holy as a result of any failure on the part of Hornbuckle to exercise due care and diligence in the conduct of business with him.”
In his claim, Mr Holy said: “I had no questions or concerns regarding the structure or security of the investments as they were presented to me. I relied on Hornbuckle to carry out due diligence, but it was not until years had passed after the investments were made that Hornbuckle woke up to the true nature of the various schemes set up by BLFM.”
The judgment comes just a day after the Financial Services Authority issued a damning review of SiPP providers, claiming many failed to manage their schemes adequately and some may have been ‘conduits for financial crime’.