Gorham v British Telecommunications Plc
| Jurisdiction | England & Wales |
| Judgment Date | 27 July 2000 |
| Judgment citation (vLex) | [2000] EWCA Civ J0727-11 |
| Docket Number | 1999/0245/A2 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 July 2000 |
[2000] EWCA Civ J0727-11
Lord Justice Pill
Lord Justice Potter and
Sir Murray Stuart-smith
1999/0245/A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
(HIS HONOUR JUDGE JACK QC SITTING AS A HIGH COURT JUDGE)
ON APPEAL FROM THE QUEENS BENCH DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr A. Palmer QC (instructed by Buringham & Brown, Bridgewater, Somerset) appeared for the Appellants
Mr N Warren QC and Mr T Lowe (Instructed by Cartwrights, Bristol) appeared for the Standard Life Assurance Company
Pill LJ:
This is an appeal against the judgment of His Honour Judge Raymond Jack QC sitting as a High Court Judge in the Bristol Mercantile Court on 29 January 1999. It raises the question whether an insurance company which owes a duty of care to its customer when giving advice in relation to insurance provision for pension and life cover also owes a duty of care to potential beneficiaries other than himself. Also in issue are the extent of the duty owed, if one exists, causation and contributory negligence.
The background
The customer was Mr Paul Gorham who died on 5 September 1994 aged 35. He left a widow and two young children. Mrs Gorham sued on her own behalf and on behalf of the two children as well as executrix of the estate of her deceased husband. The judge ordered that £114,282.61p be paid to her. A part of that sum was said to be paid to her in respect of the claim of each of the children. In this appeal, Mrs Gorham claims that a further sum should have been paid to her to bring the total sum to £233,037. The judge noted that he had not been addressed as to any separate claim on behalf of the estate and it is agreed that the position of the estate need not be considered in this appeal. Any benefit is that of the dependants and not the estate. Reference in this judgment to the plaintiffs or claimants is to Mrs Gorham and the children. The sum awarded was paid to Mrs Gorham on the basis that she would have been paid that sum, as to part of it as trustee for her children, had her husband become a member of the British Telecommunications plc ("BT") occupational scheme to which reference will be made. The rules of the BT pension scheme would, it is agreed, have had that effect, and it is not necessary to consider those rules in more detail.
By a cross-appeal, Standard Life Assurance Company ("Standard Life") seek to set aside the judgment and, in the alternative, claim that the sum should be reduced by reason of the negligence of Mr Gorham. There were also claims against BT and the trustees of the BT pension scheme. These were dismissed and those parties do not feature in the present appeal. Standard Life have no intention of taking the sum awarded by the Judge back from Mrs Gorham. They contest the appeal and pursue the cross-appeal with the object of establishing that they do not owe the claimants a legal duty.
The case is put by Mr Palmer QC, on behalf of the beneficiaries, as a classic case of pensions misselling. Mr Gorham was sold a Standard Life personal pension policy when he would obviously have been better off in the scheme operated by his employers BT. By the time Standard Life informed him of this, in October or November 1992 (I adopt November for further reference), it would have been too late, had he then joined the BT scheme, for his dependants to qualify for pension benefits, the rules of the scheme requiring two years membership and he died in September 1994. Had he joined the BT scheme in November 1992, which he did not, his dependants would have been entitled to the lump sum death benefit payable to the claimants under the scheme. The judge awarded a sum representing the agreed capital value of the loss of pension rights, plus interest. He declined to award the lump sum death benefit which would have amounted, including interest, to almost £120,000.
The facts and the code
Mr Gorham became an employee of BT, as an account manager, on 2 April 1991, having previously been employed by Cable & Wireless and, while so employed, a member of their occupational pension scheme. He was told by BT that he was eligible to join the BT occupational pension scheme. He was told that, if he wished to opt out of membership of the scheme, he could and he was sent the opting-out booklet which included the statement that, if he did not complete the form at the back of the book, he would be "automatically joined to the scheme and deductions will be taken from your first salary payment". Mr Gorham did not complete the form but pension contributions were not deducted from his pay and he did not join the scheme. BT did not follow up with him his failure to return the form. The absence of deductions from salary would have been obvious from the pay slip issued to Mr Gorham monthly. There had been deductions for pension contributions while he was employed by Cable & Wireless.
In the autumn of 1991 Mr & Mrs Gorham contacted Mrs Gorham's brother, who was employed by Standard Life, with a view to transferring Mr Gorham's pension rights with Cable & Wireless to Standard Life. The matter was passed to Mr Cornwell, a customer services consultant with Standard Life. Mr Gorham understood Mr Cornwell to be "a company representative of the Standard Life Assurance Company" and confirmed that by signing on 3 January 1992 and sending to Standard Life a pro forma letter which also confirmed that he did not "wish to use an Independent Financial Adviser" with regard to his application. He also acknowledged that a company representative "can only recommend contracts from [his] company's product range". No criticism is made or Mr Cornwell's conduct in sending the proforma letter or in obtaining the signatures upon it of Mr Gorham.
The dealings between Mr and Mrs Gorham and Mr Cornwell are relied on by Mr Palmer in support of his submission that a duty of care was owed in the circumstances by Standard Life to Mrs Gorham and the children. Following telephone conversations, Mr Cornwell, on 24 January 1992, wrote a letter addressed to both Mr and Mrs Gorham enclosing a client "Personal Information Questionnaire". He had filled it in on the basis of information supplied by them. The information provided by Mr & Mrs Gorham included a statement of their priorities in relation to nine specified matters. They put "Provision for family" first, with "Retirement planning and house purchase" joint second. He asked them both to sign it in the appropriate place. The signature on the form was back-dated to 3 January but nothing turns upon that. A pension quotation was included with the letter.
Mr Gorham, described as "client", and Mrs Gorham as "spouse", signed a declaration: "We confirm that all the relevant information made available is shown on this form, and we confirm that Standard Life should offer 'best advice' on the basis of the data supplied". Those signatures were followed on the form by a section entitled "Best advice procedure" in which Mr Cornwell set out his "best advice recommendations". Beneath that section, both Mr & Mrs Gorham, again described as client and spouse respectively, signed a declaration: "We confirm that the above 'best advice' recommendations have been received and understood". In his recommendations under the heading "Retirement planning", Mr Cornwell had stated: "To consider advisability of pensions transfer, to consider further pension provision and also contracting out". Under the heading "Action", he stated: "Decided to transfer to personal pension. Start personal pension plan for £80 per month w.p. [with profits] as wanted steady growth. Didn't want W.O.P. [waiver of premium] as had job security. Also wants … life cover of £14,700 costing £5 per month".
Under the heading "Protection —spouse", the recommendation was: "To look at life cover within pension provision: to investigate cost of life cover on wife". In the action column it is stated: "To take some life cover within pension". The question of life cover for Mrs Gorham was not pursued.
The significance of Mr Cornwell making clear that he was a company representative and not an independent financial adviser becomes clear upon a consideration of the LAUTRO code of conduct for members and company representatives, adopted by Standard Life. It appears at Schedule 2 to the Rules of LAUTRO. Under paragraph 3(3)(b) of the code (February 1990), a company representative shall "explain the contracts the sale of which he is authorised to arrange or procure, and as to the merits which he may advise investors, are those offered by the member whose company representative he is or by other members of the same marketing group, and no others". This duty is specific and is narrower than the duty owed by an independent financial adviser.
More detailed consideration of the differences between the duties of a company representative and those of an independent financial adviser is unnecessary for the determination of this appeal. It is conceded by Standard Life that Mr Gorham was not advised, as he should have been in early 1992, that an occupational pension scheme might be superior to a personal pension. Breach of duty is admitted on the basis that Mr Gorham should have been advised about the differences between an occupational scheme and a personal pension and that Mr Cornwell was under a duty to refuse to sell to Mr Gorham a Standard Life policy unless satisfied that Mr Gorham had made an informed choice between the Standard Life scheme and the occupational scheme. Standard Life...
To continue reading
Request your trial
-
Fiona Lorraine Philipp v Barclays Bank UK Plc
...the customer's consent.” 107 Mr Sims QC countered my observation by relying upon the decision of the Court of Appeal in Gorham v British Telecommunications Plc [2000] 1 W.L.R 2129, 2141E-F, where the court said that silence within a detailed regulatory code, upon the existence or otherwise ......
-
Angela Lenderink-Woods v Zurich Assurance Ltd and Others
...But I am not dissuaded from my view by that submission. I consider the issue to have been addressed in Gorham v British Telecom [2000] 1 WLR 2129. At p.2141 Pill LJ is reported as holding (in the context of considering a third party claim to recover for admittedly negligent advice):- "In my......
-
Vinton and Others v Fladgate Fielder (A Firm) and another
...the testator of the need to serve a notice of severance so as to render the property capable of disposition by the will. In Gorham v British Telecommunications PLC [2000] 1 WLR 2129 negligent advice by an insurance company to a customer could be sued upon by the customer's family. In Richar......
-
Antonio Caliendo and Another v Mishcon De Reya (A Firm)and Another
... ... in QPR, Mr Kaenzig referred to "having learnt from various sources as well as the British media about your interest in inviting new investors-partners to Queens Park Rangers FC". It is also ... v Jones [1995] 2 AC 207 at 256 and 268 (at [36]) and the judgment of Schiemann LJ in Gorham v British Telecommunications plc [2004] 4 All ER 867 at 881 (at [39]). I shall not lengthen this ... ...
-
Restitution, Rectification, and Mitigation: Negligent Solicitors and Wills, Again
...of Shanahan essayed in that piece, cp PunjabNational Bank vde Boinville [1992] 1 WLR 1138 (CA); Gorham vBritish Telecommunications plc[2000] 1 WLR 2129 (CA); noted M. A. Jones, ‘Practical Justice, Financial Planning and theDisappointed Beneficiary’ (2001) 17 PN 190; G. McMeel ‘Victims of Pe......
-
When is a Subsidiary's Negligence the Parent Company's Problem?
...189 At 268 per Lord Gof. 190 At 259–260 per Lord Gof. 191 Allen, above n 173, at 393. 192 See Gorham v British Telecommunications plc [2000] 1 WLR 2129 (CA) at 2140; and Rhind v heodore Goddard [2008] EWHC 459 (Ch) at [37]. 193 James Hardie Industries , above n 1. 194 Allen, above n 173, at......
-
Extent of common law duty of care owed in pensions misselling. Gorham & Others v British Telecommunications plc, Trustees of the BT Pension Scheme, & Standard Life Assurance Company
...& Standard Life Assurance Company Court of Appeal, Civil Division: Pill LJ, Schiemann LJ, Rt Hon Sir Murray Stuart-Smith Reported at: [2000] 4 All ER 867 FACTS The claimants who were the Appellants in this case were a Mrs Gorham, widow of Mr Gorham, and her two young children. Mr Gorham had......