Investors in a Standard Life cash fund that was comprised of 80% of securities and separate toxic debt from Northern Rock are expected to queue up for compensation following a small claims court defeat for the insurance giant.
Pensioner John Petrie, 66, was one of almost 100,000 investors who lost money in the company’s £2.4 billion Pension Sterling Fund.
In January, the fund lost 5% of value that led to Standard Life compensating fund members with £100 million in February.
In November, the fund dropped another 0.5% but refused to pay compensation.
Mr Petrie took Standard Life to the small claims court in Milton Keynes, and at yesterday’s hearing the firm was ordered to pay more compensation, court fees and interest.
Judge Hickman pointed out that the marketing literature stating that the investment was 100% in cash without any ‘explicit mention’ of asset-backed securities until November 25, 2008.
He said: ‘I regret to say that I can accordingly place no reliance on what Standard Life tell me about what they made publicly known, and when, save where it is corroborated by contemporaneous documentary evidence.’
‘If Standard Life had made it clear that nearly half the fund was actually made up of asset-backed securities, what would have been the likely reaction of the average investor or indeed the average financial journalist?
‘I bear in mind that this was more than a year after the run on Northern Rock and the start of the U.S. sub-prime crisis.’
Judge Hickman concluded by criticising the firm for attempting to ‘frighten’ Mr Petrie with ‘hints of adverse orders for legal costs should he lose’.
‘Even if Mr Petrie’s case had failed, it was plainly arguable and one which it was reasonable for him to advance, and for large organisations to attempt to bully litigants in this way is unattractive,’ he said.
A Standard Life spokesman said: ‘While Standard Life was disappointed in the verdict, we have decided not to appeal and will abide by the court judgment, and have borne all costs in this case. We have no further comment to make.’
A small claims court ruling does not set a legal precedent. However, others can cite the case in similar actions against Standard Life that could cost up to another £10 million in compensation.
