Law Report: Investors' claims can be pursued after death: Regina v Investors Compensation Scheme Ltd, Ex parte Bowden and others - Queen's Bench Divisional Court (Lord Justice Mann and Mr Justice Tuckey), 16 February 1993

Matters of judgment by the board of the ICS in respect of claims for other than a basic compensatable claim by investors who entered into home income plans with authorised brokers could not be impugned. However, claims by deceased eligible investors could be pursued by their personal representatives.

The Divisional Court granted a declaration that the Financial Services (Compensation of Investors) Rules 1990 enable, first, an application for compensation to be made by the personal representatives of a deceased eligible investor when no application was made by the investor during his lifetime and, second, an application by a deceased eligible investor to be pursued by his personal representatives. The court dismissed the application for judicial review based on other grounds.

The Financial Services 1986 Act regulates investment business by limiting its conduct to defined authorised persons. Under the Act a scheme was established and administered by the board of ICS under the 1990 rules to compensate investors where authorised persons are unable to satisfy claims for civil liability.

Nine authorised persons, acting as brokers, advertised a home income plan under which an investor, who usually would be elderly and living in mortgage free accommodation, raised money on a mortgage of his house. In a rising market the scheme was attractive but if the market value of the house fell while investment performance declined when interest rates rose, the investor's house became exposed to repossession.

The applicants were investors who entered into such home income plans and suffered losses. They were persuaded to enter into such schemes in contravention of the rules governing the conduct of financial advisers and exposed the brokers to actions for damages under the 1986 Act. The brokers were worthless and in default. The applicants applied for compensation under the scheme.

The applicants applied for judicial review of the board's decision relating to the quantification of compensation under the rules, its refusal to admit certain items, its decision relating to the terms of an assignment of rights and its decision not to entertain claims made by the personal representatives of a deceased investor.

Nicholas Strauss QC and Neil Kitchener (Barrett Sampson) for the applicants; Michael Beloff QC and Presiley Baxendale QC (Wilde Sapte) for the ICS.

LORD JUSTICE MANN, giving the judgment, said that the first issue was whether ICS was bound by the rules to assess the amount of compensation as being equal to the amount of the defaulting firm's civil liability and to pay that compensation subject only to expressed qualifications in the rules. ICS maintained the position that it could meet a claim at a level below that which would be recoverable in a civil action because it was only bound to meet the claim to the extent that it considered it 'essential in order to provide fair compensation', the concluding words of rule 2.04 1.

The concludings words were a limiting provision to the effect that ICS might decide how much it would meet of an application in respect of a claim which was not a basic compensatable claim where ICS considered that a meeting was not essential in order to provide fair compensation. The consideration was a matter for a judgment which could be impugned if it were irrational, but not otherwise.

The issue regarding ICS's refusal to admit certain items, such as professional fees and costs, was whether its decision was either irrational or reached without regard to a relevant consideration. ICS' decision to impose a ceiling on professional fees and costs was neither indefensible nor absurd.

ICS, relying on Watts v Morrow (1991) 4 All ER 937, refused to compensate for illness, distress and anxiety. Unless the very object of the contract was to provide pleasure, relaxation, peace of mind, then a contract breaker was not liable to compensate for mental and physical distress consequent on his breach of contract.

The object of the contracts with the brokers was to release capital so as to generate income. Income was enjoyable. However, the enjoyment was consequent upon the achievement of the contract and was not the object of the contract. The object was that of releasing capital. Any contract relating to personal investment had an inherent capacity to result either in happiness or distress. There was no mistaken appreciation of the law in ICS's decision.

The board decided that it was premature to agree, on the assignment of rights which the investor was required to agree as a condition of compensation, to indemnify against all costs if the applicants were joined as parties to any action which the board decided to take. Since any subsequent payment or agreement to pay an investor's costs would not be ultra vires the scheme. The board's decision was not illegal or irrational.

The scheme was for the compensation of small investors and ordinarily they would have regarded their savings as a benefit for their family. They would be surprised if the moment of death was to injuriously affect the inheritance. The law did not require so unjust a conclusion.

An eligible investor was vested by the rules on default of an authorised person both with the right or power to apply for compensation and with an expectation that his application would be determined. On an investor's death his right or power and his expectation were a right and an expectation which were transmissible to his personal representatives. The layman would have regarded his right and expectation as assets and there was no reason why the law should not accord with his view. A declaration to that effect would be granted.

Ying Hui Tan, Barrister

Suggested Topics
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
sportDidier Drogba returns to Chelsea on one-year deal
Have you tried new the Independent Digital Edition apps?
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
Tovey says of homeless charity the Pillion Trust : 'If it weren't for them and the park attendant I wouldn't be here today.'
Rhys Williams
commonwealth games
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Employment Solicitor

Highly Competitive Salary: Austen Lloyd: MANCHESTER - Senior Employment Solici...

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

Commercial Litigation Associate

Highly Attractive Package: Austen Lloyd: CITY - COMMERCIAL LITIGATION - GLOBAL...

Systems Manager - Dynamics AX

£65000 - £75000 per annum + Benefits: Progressive Recruitment: The client is a...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little