Scottish Equitable Plc v Derby
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ROBERT WALKER,LORD JUSTICE KEENE,LORD JUSTICE SIMON BROWN |
| Judgment Date | 16 March 2001 |
| Neutral Citation | [2001] EWCA Civ 369 |
| Docket Number | Case No: A2/2000/0418 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 March 2001 |
[2001] EWCA Civ 369
Lord Justice Simon Brown
Lord Justice Robert Walker and
Lord Justice Keene
Case No: A2/2000/0418
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (HARRISON J)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr B Weatherill QC and Mr P Emerson (instructed by Chivers Easton Brown for the appellant)
Mr S Moriarty QC and Mr R Handyside (instructed by Addleshaw Booth & Co for the respondent)
Introduction
This is an appeal from an order of Harrison J made in the Queen's Bench Division on 1 October 1999. He gave judgment in favour of the claimant, Scottish Equitable plc, for a principal sum of a little over £162,000, and accrued interest, in its claim against the defendant, Mr Gordon Derby. The judge's judgment is reported at [2000] 3 AER 793. The case raises questions of some general interest and importance as to claims for money paid under a mistake and the defences of change of position and estoppel.
The facts
Neither the appellant's notice nor the respondent's notice attacks any of the judge's findings of primary fact. There is however some criticism of his characterisation of some of the facts (for instance, whether Scottish Equitable was guilty of mere carelessness or, as Mr Derby contends, gross and repeated negligence) and there is an issue as to how broad a view the judge should have taken on change of position. It is therefore necessary to set out the facts as found by the judge in some detail. Further detail can be found in the reported first-instance judgment.
At the beginning of 1988 Mr Derby was aged 57. He was a married man with two stepchildren at fee-paying schools. He and his wife lived in Kent in a house then worth about £90,000 subject to a mortgage of about £35,000. He was employed by a company called Baltic Sawmills. His wife (who is fifteen years younger) had her own business, running two clothes shops, but the business was not prospering (and it was to get worse rather than better).
In the spring of 1988 Mr Derby was made redundant. On his redundancy he received a total sum of £125,000 of which £90,000 seems to have been a transfer payment under his occupational pension scheme. The transfer payment went into a single-premium pension policy with Scottish Equitable. As an alternative source of earned income Mr Derby went into partnership as a recruitment consultant to the timber trade but until 1998 (when the partnership came to an end) he never derived more than about £13,000 a year from it. In 1989 his wife's business difficulties increased and he and his wife were under pressure from their bank.
In these circumstances Mr Derby considered, and eventually decided on, exercising an option to take early retirement benefits under his policy with Scottish Equitable. What happened (and it helps to explain, although it does not excuse, the mistakes which were later made) was that in August 1989 Mr Derby asked for figures to be quoted for the option, decided to take it, and then changed his mind; and then in February 1990 he again asked for a quotation, decided to take it, and this time did not change his mind. The option which he took was for a tax-free lump-sum payment of £36,588 and an immediate single-life pension of £4,655 a year, escalating at 3 per cent per annum. (I follow the judge in disregarding odd pence throughout.) In fact through another quite separate error the escalator was not applied for several years, but Mr Derby has been compensated for that and there is no issue on it. After exercising the option Mr Derby thought, correctly, that his remaining rights under the policy were worth about £50,000.
Mrs Derby's retail business came to an end and in 1991 she took employment with the Kent Probation Service. She was still in that employment at the time of the trial although she had had nearly a year off with ill-health during 1993–4.
In April 1995 Mr Derby was approaching his 65 th birthday (1 May 1995) and he telephoned Scottish Equitable (at its Customer Services Division in Edinburgh) to inquire what would happen to his pension when he became entitled to the state pension. On 22 May 1995 there was another more important telephone conversation which was recorded in a manuscript note made by an employee of Scottish Equitable (and subsequently annotated, it seems, by another employee). The judge's findings about this were as follows:
"It would appear from the claimant's memorandum of that conversation that the defendant probably told the claimant that he was already receiving an annuity from them. The defendant cannot recall that conversation although his telephone bills show that he made a call to the claimant on that day. Another entry on the memorandum contains an internal instruction that a quotation should be prepared. A subsequent annotation on the memorandum suggests that the defendant's records were checked, but that it was concluded, wrongly, that the defendant had not received early retirement benefit, because the person checking the records had only looked at the defendant's cancelled decision to take early retirement benefit in August 1989, without looking at the rest of the microfiche."
On 25 May 1995 Scottish Equitable sent Mr Derby a print-out statement showing that his policy had a value of £201,938. Mr Derby's evidence was that he was very pleasantly surprised by this (since the fund value appeared to have increased by a factor of four within five years) but that he was naive in pension matters. The judge said that he had initially been sceptical about Mr Derby's evidence, especially as he had engaged a financial consultant, Mr Colin Donald of Fairmount Trust plc, to advise him. But having seen and heard Mr Derby give evidence the judge accepted him as an honest witness:
"I find, on the balance of probabilities, that he did inform the claimant that he was already receiving a pension from them, and that he was nevertheless assured by them that the figures quoted in the statement of retirement benefits were correct. I am surprised that the mistake was not discovered by Mr Donald, his financial advisor, but I feel I must accept the defendant's evidence that Mr Donald did not tell him that a mistake had been made."
Mr Donald raised various queries with Scottish Equitable and on 9 June 1995 Scottish Equitable issued a further statement of retirement benefits with four options. These were permutations on the choice between taking part of the benefits in the form of a tax-free lump sum or taking them all in the form of a retirement pension and widow's pension, and the choice between taking the benefits from Scottish Equitable or from some other provider. On 16 June Mr Derby, acting on Mr Donald's advice, chose option 3, which was to take a lump sum of £51,333 from Scottish Equitable and to have £150,604 (referred to as the 'balance open market option') paid to Norwich Union.
On 20 June 1995 Scottish Equitable sent Mr Donald a cheque for £51,333 in favour of Mr Derby and a separate cheque for £150,604 in favour of Norwich Union. The fact that there were two separate payments is relied on in the respondent's notice. Norwich Union had quoted for a (non-escalated) pension of £13,521 for Mr Derby and a widow's pension of half that amount. So from June 1995 Mr Derby was receiving a pension at the annual rate of £4,655 from Scottish Equitable (the 3 per cent escalator having been overlooked) and a pension at the annual rate of £13,521 from Norwich Union.
In quoting a fund value of £201,938 Scottish Equitable had made a serious error. It had not taken account of the early retirement benefits which Mr Derby had taken (after a false start) in 1990. Evidence about the mistake was given by Miss Phyllis Duncan, a project team manager in Scottish Equitable's data quality department in Edinburgh. The judge's findings were as follows:
"when the defendant was paid his early retirement benefits in February 1990 his computer records should have been amended to show that only his residual fund necessary to pay his guaranteed minimum pension remained. That residual fund should have been £29, 486, producing the guaranteed minimum pension of £2,637. That had not been done, as a result of which the claimant mistakenly paid to the defendant the amount to which he would have been entitled had he not taken the early retirement benefits under the policy in February 1990.
The mistake should have come to light in December 1992, when Miss Duncan was working as an assistant manager in the claims department on a project to check that the files were correct for the end of year valuation. When she was carrying out that exercise, she noticed that the records did not tally, in so far as the annuity payment system for the defendant in 1992 showed that an annuity had been set up, but the VPR record did not show that a tax-free lump sum had been paid. As a result, Miss Duncan sent a memorandum dated 11 December 1992 to Mr Clark, her section manager, requesting his department to alter the VPR records for the defendant's policy. If that had been done, the record would have been updated to show that the defendant had received early retirement benefit in 1990 and, therefore, show the true value of his remaining fund. Miss Duncan did not take any further action to check if the record had been corrected because she moved to another department. Mr Clark, in his evidence, said that he had no recollection of that memorandum, but it would have been his procedure to have passed such a memorandum to someone in his section to...
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Table of cases
...2 O.W.N. 514, [1911] O.J. No. 704 (Div. Ct.) ............................................... 281 Scottish Equitable plc v. Derby, [2001] 3 All E.R. 818 (C.A.) ............................ 304 Seaboard Life Insurance Co. v. Bank of Montreal (1999), 48 B.L.R. (2d) 77, [1999] B.C.J. No. 1598 (......