Angela Lenderink-Woods v Zurich Assurance Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Norris |
| Judgment Date | 19 December 2016 |
| Neutral Citation | [2016] EWHC 3287 (Ch) |
| Court | Chancery Division |
| Date | 19 December 2016 |
| Docket Number | Case No: A50MA133 |
[2016] EWHC 3287 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Mr Justice Norris
Case No: A50MA133
Richard Oughton (instructed by Bendles) for the Claimant
Gerard McMeel (instructed by DAC Beachcroft LLP) for the First and Second Defendants
The Third Defendant in person
Hearing dates: 18–21 July 2016
Angela Lenderink-Woods ("Mrs Lenderink-Woods") was born in 1920 in England. In 1944 she married a Dutch naval captain and under the law then current thereby acquired a domicile of dependency in the Netherlands. She moved to Holland and since 1948 she has never resided in the United Kingdom. Since 1980 she has lived in Costa Rica. She had four daughters – Amanda, Cherry, Annabelle and Birgit. There is a wide age gap between the first two, and the second two: and family circumstances meant that they were brought up separately. Mrs Lenderink-Woods had an investment portfolio (inherited from her mother in 1966) that was managed by the National Westminster Bank. By 2001 it had a value of £567,700 and (by virtue of its location in the United Kingdom and irrespective of Mrs Lenderink-Woods' domicile) carried a potential inheritance tax burden (said in this action to be £130,300 in amount).
In the spring of 2001 (aged 80) she was introduced by Amanda to Huw Davies ("Mr Davies") a financial planning consultant representing Allied Dunbar. On the advice of Mr Davies Mrs Lenderink-Woods converted her investment portfolio into three types of product marketed by Allied Dunbar, namely "a Gift and Loan Trust scheme", an offshore "Investment Bond" and "a Portfolio Bond" (the assets within which were managed by a discretionary fund manager). Mrs Lenderink-Woods says that these products were unsuitable for someone who was not domiciled in the United Kingdom. She says that the charging structure is unnecessarily burdensome, and that she was told by Mr Davies that it would be 2%; whereas, taking account of Mr Davies' commission, Allied Dunbar's charges, and the discretionary fund manager's charges, it has over the years been far more.
In December 2014 she commenced proceedings seeking damages for negligence and misrepresentation. She was assisted in the bringing of her claim by Mr Joseph Willows ("Mr Willows"), a director of Integer Financial Management Limited, independent financial advisers.
Mrs Lenderink-Woods accepts that in 2001 she wanted to alter the arrangements with the National Westminster Bank in some way, so she claims either (i) the difference between what she says would have been a sensible financial rearrangement (a balanced portfolio of equity and fixed interest funds held offshore) with the actual position that obtains under her Gift and Loan Trust and Bond arrangements ("the reconstruction basis"): or (ii) compensation for the excessive charges ("the re-imbursement basis").
The issues that arise for decision on her claim are:-
(a) Is she entitled to bring the claim if it is tainted by champerty?
(b) Is her claimed barred by limitation?
(c) Did Mr Davies give negligent advice or make negligent misstatements?
(d) If so, to what compensation is she entitled?
Mrs Lenderink-Woods was aged 96 when she gave her evidence: although given by video-link (and hence subject to a time lag and to occasional breaks in transmission) her evidence was in general impressively clear about the events of 2001 and subsequently until about 2009 (when she suffered a slight stroke); there were some deficiencies in her short-term memory. The other witnesses called on behalf of Mrs Lenderink-Woods were entirely sincere, straightforward and reliable. The evidence of Mr Davies required careful consideration: he is clearly not the man he was in 2001, and due allowance must be made for that. But his recollection of the events of 2001 and thereafter was plainly coloured by a desire to justify his decisions, and some of his rationalisation of his advice did not withstand scrutiny. These are the facts as I find them.
In 2001 Mrs Lenderink-Woods inherited investment portfolio was managed by the National Westminster Bank Ltd. It contained gilts and blue-chip equities (such as Shell, Marks & Spencer, Glaxosmithkline, BAE, RIT Capital Partners and other quality investment trusts). Mrs Lenderink-Woods was happy with it. The size of her portfolio derived in part from her careful and cautious approach to money. She ensured that she drew only income but (as she put it) "the principal had grown beyond my expectations": and she wanted to continue that, but without the need for her constant involvement. Since 1980 she had lived in Costa Rica, and communication with the bank was difficult. The post took up to a fortnight to arrive: and Mrs Lenderink-Woods was not computer literate. So Mrs Lenderink-Woods wanted someone local to London "to take responsibility if it should be necessary". But beyond purely administrative arrangements, Mrs Lenderink-Woods was also concerned about the inheritance tax liability she believed her daughters would suffer on the portfolio when she died.
Mr Davies was an appointed representative of Allied Dunbar (having had a career in the Army and then running a mountaineering/skiing business). As such he was a "tied adviser", able only to recommend Allied Dunbar products. If there was no suitable Allied Dunbar product to offer then Mr Davies was bound by the requirements of the Personal Investment Authority, his regulator, to make no recommendation, but only to introduce his client to an Independent Financial Adviser.
Mr Davies became Amanda's lodger. He helped Amanda to obtain a bridging loan. He became Amanda's friend (of about 10 years' standing at the time of his introduction to Mrs Lenderink-Woods) and attended her wedding. So Amanda introduced Mr Davies to Mrs Lenderink-Woods, and they met for the first time in May 2001. On 26 April 2001 Mr Davies prepared a "Pre-review Statement", in which he identified his role as financial adviser in these terms:-
"I advise you of potential problems or challenges, after finding out your needs and objectives for now and the future. I then present all the available alternatives to solve or achieve them. Further, I will point out what I believe is the best for you with explanations of why."
In my judgment that may safely be taken as defining the nature of the retainer in the present case.
The Pre-Review Statement was endorsed with an Agenda in these terms:-
"1. Reduce inheritance tax
2. Improve tax-free growth and income
3. Offshore banking
4. AOB…."
It is probable that this derived principally from Amanda communicating what she believed her mother's wishes to be. In my judgment that may safely be taken as a defining the "needs and objectives for now and the future" in the present case (subject to any modification at the meeting itself arising from the fourth item on the agenda). In relation to these Mr Davies was to advise of potential problems or challenges, present all available alternatives to solve or achieve them and explain what was best.
The meeting itself appears to have taken place on 2 May 2001 at Amanda's house. Mrs Lenderink-Woods proved her identity by producing a Dutch passport. Immediately after the meeting Mr Davies prepared a Personal Financial Plan which identified as Mrs Lenderink-Woods' main financial objectives:-
"1. Invest capital for income now
2. Invest existing capital for growth
3. Reduce Inheritance Tax
4. Set up Bank Accounts."
In my judgment this may safely be taken as recording the outcome of the meeting and as further defining the objectives to which Mr Davies' advice was to be directed, and the matters in relation to which he would consider all available alternatives, and advise what was best for Mrs Lenderink-Woods with explanations of why. It is likely that the first two items reflect Mrs Lenderink-Woods' attitude to investment (which I have summarised in paragraph [7] above).
Mr Davies insisted in oral evidence that it was a principal objective of Mrs Lenderink-Woods to obtain a regular income, and that she did not like the sporadic nature of dividends and coupons. I do not accept this evidence. It is not to be found recorded in any contemporaneous document. It is an after-the-event rationalisation aimed at presenting as attractive the 5% per annum withdrawal facility provided by the Bonds (which was, in any event, a withdrawal from capital, not a regular income). The point was not put to Mrs Lenderink-Woods: and her evidence in cross-examination was entirely to the contrary effect, namely:-
"I wanted someone in London to watch my interests, not to change my investments. They were very good."
At the meeting Mr Davies identified that Mrs Lenderink-Woods had a gross estate of £586,677 for inheritance tax purposes. It is very difficult to see where that figure came from given the terms of the Investment Analysis which Mr Davies prepared. It is £72,000 less than Mrs Lenderink-Woods' total estate as estimated by Mr Davies in the sum of £658,677, whereas the nil rate band was then £242,000: but it undoubtedly includes within the scope of the potential charge to UK Inheritance Tax at least some of Mrs Lenderink-Woods' offshore assets. However it was accepted at trial that in 2001 there was a potentially sizeable bill for inheritance tax about which Mrs Lenderink-Woods was concerned. At the time Mr Davies advised that that potential bill was £137,871: subsequently a lower figure of £130,300 has been suggested. How either estimate was calculated is not apparent. But £130,300 has been agreed between experts.
As the inclusion of Mrs Lenderink-Woods' offshore estate in the inheritance tax calculation shows, Mr Davies proceeded...
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