Paul William Denning v Greenhalgh Financial Services Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Green |
| Judgment Date | 02 February 2017 |
| Neutral Citation | [2017] EWHC 143 (QB) |
| Docket Number | Case No: HQ14X05229 |
| Court | Queen's Bench Division |
| Date | 02 February 2017 |
[2017] EWHC 143 (QB)
Mr Justice Green
Case No: HQ14X05229
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Joshua Munro (instructed by Shakespeare Martineau) for the Claimant
Jonathan Hough QC (instructed by Plexus Law) for the Defendant
Hearing dates: 19 th December 2016
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
A. Introduction
There is before the Court an application pursuant to CPR 3.4(2)(a) that the Claimant's claim be struck out and judgment granted in favour of the Defendant upon the basis that the amended Particulars of Claim disclose no reasonable grounds for bringing the claim. There is further an application pursuant to CPR 24.2(a)(i) to award summary judgment to the Defendant upon the whole of the claim upon the basis that it has no real prospect of success and that there is no other compelling reason why the case should be disposed of at trial.
The claim concerns an allegation of professional negligence on the part of Greenhalgh Financial Services Limited ("GFS") upon the basis that GFS was in breach of a professional duty (in tort and/or contract) owed to the Claimant by not performing a detailed review of pension transfer advice given to the Claimant some eight years earlier by unrelated advisers. It is alleged that GFS breached its duty by failing to conclude that the advice given previously, by the unrelated advisers, was defective and by not in consequence advising the Claimant to pursue a complaint or claim against those former advisers and by not including advice about applicable limitation periods.
GFS seeks to strike out and/or summarily dismiss the claim upon the basis that there is no real prospect of the Claimant establishing that GFS owed or breached any of the duties pleaded. Further, that there is no real prospect of the Claimant establishing that any breach of duty on the part of GFS that was established caused him any loss. Finally, that in any event there is no real prospect of the Claimant establishing causation between any breach and any loss that was sustained by him.
B. The Relevant Facts
(i) The Blue Circle Occupational Pension: The August 2000 advice
The Claimant worked for Blue Circle Industries Plc ("Blue Circle") until 1994. During his period of employment with Blue Circle he acquired benefits in its final salary pension scheme. He then retired from Blue Circle and commenced a consultancy business.
In or about August 2000, then aged 55, the Claimant instructed Alexander Forbes Financial Services Limited ("AF") to provide advice in relation to the transfer of his deferred benefits from the Blue Circle final salary scheme (hereafter "the Occupational Pension") to a personal pension plan with Scottish Equitable (hereafter "the Personal Pension"). The detailed advice given by AF dated 12 th August 2000 was before the Court. The Claimant was advised of the options available to him. These included: leaving his pension benefits as a paid-up pension and remaining in the Occupational Pension; and/or transferring the cash equivalent to the Claimant's paid-up pension to a Personal Pension Plan or to an alternative personal contract (known as a Section 32 Buy-Out Plan). Insofar as the Claimant intended to move to new employment a further option was set out which involved transferring the cash equivalent of his paid-up pension to the new employer's pension scheme, assuming the existence of a suitable scheme. It was recognised however in the advice that given that the Claimant was not seeking fresh employment this particular option was not appropriate to him.
In relation to the transfer alternative (the option ultimately chosen by the Claimant) it was explained that when considering the transfer of pension benefits the most important aspect was whether such a transfer was likely to produce a higher pension at retirement age than the preserved benefits under the Occupational Pension: This was the "critical yield", i.e. the minimum amount of annual growth in a new scheme needed to match the existing benefits. The letter stated:
"To replace the above benefits provided by your former scheme to either a Personal Pension or Section 32 Buy-Out Plan, annual growth would be required of… 5.74% per annum to replace the pension benefits at retirement date of 62 into a Personal Pension Plan or Section 32 Buy-Out Plan. We do not consider that a critical yield of 5.74% pa to be excessive to match the benefits at age 62. If the average investment return following the transfer is in excess of this figure, then the likely pension benefits available at retirement may be higher than those from the former scheme. Conversely, lower investment returns will result in smaller benefits than the former scheme would have provided."
The advice continued to explain how the critical yield was calculated and as to the relevant assumptions used. These related to: annual annuity rates; national average earnings; the retail price index; and, the Limited Price Index. The assumptions were those determined by the Personal Investment Authority ("PIA").
In section 5 of the advice AF recommended that the Claimant: " … proceed with a transfer of your benefits into a Personal Pension Plan insured with Scottish Equitable who satisfy our core criteria of: financial strength, flexibility of contract, investment performance, competitive level of charges". The recommendation was that the investment return required to match the former scheme benefits of 5.74% pa was achievable over the longer term. AF recommended investing into Scottish Equitable's range of internal and external pension funds with the split of funds to be discussed and agreed at a meeting between AF and the Claimant. The advice emphasised that the Claimant needed to consider all relevant factors including the risks associated with transferring a guaranteed pension to a personal contract. It was emphasised that the advice, namely that a transfer was desirable, depended entirely upon the assumptions made.
Further advice was given on the 29 th August 2000. The letter included the following:
"Further to my report to you dated 12 August 2000 we talked through the issues relating to the potential transfer of benefits from Blue Circle and concluded that benefits at retirement, flexibility and control of 'your fund' and the issues on death all made the for the transfer to proceed. We discussed the loss of the 'guarantees' involved in the Blue Circle arrangement and accept that the benefits on transferring will outweigh these matters."
(ii) Transfer to Scottish Equitable — The First Transfer
A pension Transfer Value Analysis ("TVA") was prepared for the Claimant by Scottish Equitable on the 7 th August 2000.
Over the course of the next few years AF provided the Claimant with information about the performance of the Personal Pension. These reports establish that the Personal Pension was not achieving the critical yield of 5.74%. Data relating to movements in the FTSE show that following the events of "9/11", the market plummeted and it took some time for losses sustained at that time to be recovered.
On the 27 th October 2004 the Claimant wrote to AF in relation to the Personal Pension. The Claimant reminded AF that when the investment fund was set up in 2000 it assumed an annual growth rate of 5.74% to keep pace with the Occupational Pension. The Claimant stated:
"However, you will appreciate my concern that it seems for the past year the returns on investment were 1.79% for the protected fund and 3.49% for the portfolio of investments, with only Property showing significant growth of 15.78%.
The investment in September 2000 was £454,094 and four years on at £434,050 we have almost recovered the value of the original investment. At 5.74% per annum the fund should be in excess of £550,000."
Similar expressions were concerned to AF in a letter dated the 28 th January 2005. The Claimant referred to a " disappointing return on investments, some of which even produced a loss. You will be well familiar with the stories". The Claimant also observed that the Scottish Equitable fund was " … today almost back to the starting point of the investment five years ago". The Claimant stated that he recognised that " the prospects today for investment growth are far better". The Claimant sought an improved flow of information on investment performance from AF.
Further detailed concerns were sent by the Claimant to AF in an email dated the 23 rd May 2006. In this email he expressed the concern that the Personal Pension had achieved an actual return of approximately 3.2% over the course of the six years since it was set up. Towards the end of the email the Claimant stated as follows:
"I remain concerned having reviewed the year by year figures why the underperformance against the 5.74% target was not brought to my attention before with recommendations and would appreciate your comments on how the portfolio matched the original investment criteria and what immediate action is needed to recover the situation. I cannot recall that personal attitude to investment risk was discussed at the time of original funds transfer as being a factor for determining whether the 5.74% could be achieved. At that time it was considered to be a conservative return."
(iii) Transfer to Standard Life — The "Second Transfer"
In February 2007 the Claimant met with AF to review his present circumstances to enable the Claimant to plan for retirement. Various options were explained to the Claimant. A recommendation in the...
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