| FINANCIAL SERVICES — Regulator — Powers — Rules in financial services compensation scheme providing for assignment of third party claims — Whether ultra vires — Financial Services and Markets Act 2000, ss 156(2), 213(1)
Financial Services Compensation Scheme Ltd v Abbey National Treasury Services plc (Financial Services Authority intervening) [2008] EWHC 1897 (Ch); [2008] WLR (D) 277
Ch D: David Richards J: 31 July 2008
The Financial Services Authority had power under the Financial Services and Markets Act 2000 to include rules in the financial services compensation scheme which provided for the assignment of third party claims.
David Richards J sitting in the Chancery Division so held at the trial of two preliminary issues in an action brought by the claimant, Financial Services Compensation Scheme Ltd, against the defendant, Abbey National Treasury Services plc. The claimant sued as legal assignee of the claims of 1,800 retail investors whom it had compensated under the terms of the financial services compensation scheme (“the scheme”). The scheme was established by the Financial Services Authority (“the FSA”) pursuant to Part XV of the 2000 Act.
DAVID RICHARDS J said that the legal assignment of claims against the defendant had been effected pursuant to the express terms on which the claimant offered compensation to investors, in accordance with an express power in the scheme. The defendant submitted that the inclusion of the express power in the scheme was ultra vires, being beyond the express or implied powers of the FSA and that the assignments themselves were therefore void. On the first preliminary issue the basic issue was whether by reason of ss 213(1) or 156(2) of the 2000 Act the FSA had power to include provision in the scheme rules for the assignment of third party claims. It clearly did have such power. While such a provision was not an essential component of a compensation scheme, it was an obvious provision and one which could properly be regarded as integral, rather than peripheral, to it. There was a clear connection between the payment of compensation where defendant A was unable to meet the claim and the assignment to the scheme manager not only of the claim against defendant A but also of claims for the same or largely the same loss against defendant B. It was a provision which any reasonable person would regard as an obvious way in which the scheme could seek to recoup some or all of the compensation which it had been required to pay. The power to make such provision fell within s 213(1), but if his Lordship were wrong about that, it was an incidental or supplemental matter within s 156(2). Therefore the FSA had power to include the rules in the scheme which provided for the assignment of third party claims. It followed that the claimant had power to agree the assignments and the assignments of investors’ claims against the defendant were not void and ineffective on the grounds of a lack of such power. On the second preliminary issue there were no circumstances in which the pursuit of the assigned claims against the defendant for the gross loss suffered by investors would lead to double recovery. There was no reason in principle, on the terms of the scheme rules or agreements with investors, why the assigned claims should be restricted to the net loss, giving credit for the compensation already paid by the claimant to investors. Accordingly, the compensation paid by the claimant to investors was not to be taken into account in the calculation of the loss recoverable by the claimant as assignee of the investors’ claims against the defendant.
|
Appearances: David Railton QC and Richard Handyside (Denton Wilde Sapte) for the claimant; Jonathan Crow QC, David Foxton QC and Andreas Gledhill (Travers Smith) for the defendant; Andrew Hochhauser QC and Siddharth Dhar (Financial Services Authority) for the FSA, intervening.
|
