Seymour v Ockwell
| Jurisdiction | England & Wales |
| Judge | HIS HONOUR JUDGE HAVELOCK-ALLAN Q.C |
| Judgment Date | 13 May 2005 |
| Neutral Citation | [2005] EWHC 1137 (QB) |
| Docket Number | Case No: BS350625 |
| Court | Queen's Bench Division |
| Date | 13 May 2005 |
[2005] EWHC 1137 (QB)
His Honour Judge Havelock-Allan Q.c.
Case No: BS350625
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(QB) BRISTOL DISTRICT REGISTRY
MERCANTILE LIST
Gerard McMeel (instructed by Bevans) for the Claimants.
Augustus Ullstein Q.C. and Jess Connors (instructed by Hennah & Co.) for the First Defendant/Part 20 Claimant.
John Virgo (instructed by ZIFA Legal Dept.) for the Second Defendant/Part 20 Defendant.
Hearing dates : 20 th to 24 th September and 25 th November 2004
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.
The claim in this action is one for damages for negligent financial advice. It is brought by the claimants, Mr and Mrs Seymour, against the firm founded and run by their friend and financial adviser, Miss Caroline Ockwell. The Seymours also seek to bring a direct claim against Zurich IFA Limited ("ZIFA"). Miss Ockwell consulted ZIFA about suitable investments for Mr and Mrs Seymour and ZIFA, through Miss Ockwell, provided certain information to the Seymours about the investment they decided to make. On the strength of Miss Ockwell's advice, and the information supplied by ZIFA, the Seymours invested a sum of £500,000 in the Imperial Consolidated Alpha + Fixed Income Fund ("the Alpha Fund"). The investment was made at the end of 2000. Within weeks doubts began to surface about the administration of the Alpha Fund. In July 2002 the Fund collapsed and was placed into administrative receivership. The Seymours lost all of their money.
The claimants allege that Miss Ockwell acted in breach of the contractual and tortious duties of care which she admittedly owed to them. They allege that ZIFA owed them a similar duty of care in tort: but this is strongly disputed. In addition there are claims against Miss Ockwell and ZIFA for breach of statutory duty under sections 62 and 76 of the Financial Services Act 1986 ("the Act").
If she is found liable to the claimants, Miss Ockwell seeks an indemnity or contribution from ZIFA by way of Part 20 claim on the ground that ZIFA's representatives were negligent in recommending to her the Alpha Fund as appropriate for the Seymours. The Part 20 claim is resisted on a number of grounds.
The Facts
Mr Seymour is now 51. He has been a farmer all his working life. He and his wife married in 1976 and have four children ranging in age from 23 to 15 years. Until 2000, Mr and Mrs Seymour owned a farm called Round Robin Farm in Wiltshire. They farmed it in partnership. In the summer of 2000 they sold Round Robin Farm for a sum of £1.7 million. Contracts were exchanged on 4 th July and completion took place on 29 th September. A principal reason for the sale was that Mr Seymour had contracted rheumatoid arthritis and was beginning to find the physical demands of farming difficult to cope with. The farm was not profitable. There was a mortgage and a business overdraft. After these had been repaid, the claimants were left with about £1.4 million.
They decided not to purchase another property straight away, but to invest most of the money. They did not need to buy another house because in September 2000 they had become tenants of a bungalow on nearby land, called Longleaze Farm, where they had a licence for grass keep. They moved their equipment from Round Robin Farm to Longleaze Farm bungalow and carried on farming at Longleaze Farm until September 2002. However this period coincided with the foot and mouth disease outbreak in 2001. They made a loss of about £72,495 in the first year. Mr Seymour's arthritis was also getting worse. So in September 2002 they gave up farming altogether.
In October 2000, Mrs Seymour contacted Miss Ockwell to ask her advice. Mrs Seymour contacted Miss Ockwell because she was an old friend. They had first met in about 1976 when Mrs Seymour was working as a secretary at the Swindon offices of Grant Thornton (then Thornton Baker). Miss Ockwell had recently qualified as a chartered tax adviser by passing the Associateship exams of the Institute of Taxation. The Swindon office of Thornton Baker closed in about 1980, but the personal friendship between Miss Ockwell and Mrs Seymour continued. Miss Ockwell became a firm friend of the Seymour family and also, from around 1991, the claimants' tax adviser. The claimants engaged an accountant who specialised in farm accountancy to do the partnership accounts, but Miss Ockwell advised them on tax issues relating to their farming business and dealt with their personal tax affairs. It is an unhappy feature of this case that the claimants are suing a business run by an old friend. It is to be hoped that nothing said in this judgment will add to the strain which has inevitably been placed on their friendship with Miss Ockwell by the present dispute.
Miss Ockwell began trading on her own account under the name of Caroline Ockwell & Co. sometime early in 1999. After leaving Thornton Baker in 1980 she had a short spell in the corporate tax department of Thorn EMI and then spent 6 or 7 years with a firm of accountants with offices in Gloucestershire and Wiltshire. In 1988 she established her own tax consultancy business and joined a firm of accountants operating in the Wiltshire area. The firm owned a financial services company called Financial Intermediaries Limited. Through that company, which was registered with FIMBRA, Miss Ockwell began to gain experience of giving financial advice. She was chiefly concerned with advising on the purchase of investment bonds, PEPs and personal pensions. The transactions were not large. Sums up to £100,000 were the norm.
In 1997 Miss Ockwell passed the exams for a Financial Planning Certificate. She then passed the remaining exams necessary to obtain personal registration with the PIA ("Personal Investment Authority") as an independent financial adviser ("IFA"). In November 1998 she became a member of the PIA. Having done so, she was able to go into business as an IFA on her own account. She acquired some high earning executives as clients and she began to handle some larger transactions involving as much as £250,000. In 2001 the functions of the PIA were taken over by the FSA ("Financial Services Authority"). On 1 st December 2001, Miss Ockwell became authorised to give investment advice by the FSA.
Caroline Ockwell & Co. was, and is, in reality a "one-man", or rather "one-woman", band. I shall refer to the business as Miss Ockwell's "firm", although it is not in law a partnership because Miss Ockwell has no partners. The firm's office is in Swindon. The majority of the income of the business has always come from taxation and accountancy work. Miss Ockwell saw the investment side of the business as incidental to her accountancy and tax practice. It existed largely for the benefit of the existing clients of that practice. Mr and Mrs Seymour were in that category.
For about 12 months prior to the autumn of 2000, Miss Ockwell had had regular dealings with ZIFA. ZIFA is the holding company of a group of companies concerned with insurance-related and investment products. The group includes the Eagle Star companies and various Allied Dunbar companies, including Allied Dunbar International companies based in the Isle of Man. ZIFA has an office in Swindon close to Miss Ockwell's office. Miss Ockwell was accustomed to consulting ZIFA about financial products for her clients. She dealt in particular with one of ZIFA's executive consultants called Christine Clarke. When the Seymours sought Miss Ockwell's advice in October 2000, Miss Ockwell telephoned Mrs Clarke because she thought that an investment product such as the Eagle Star Maxi Bond might be what the Seymours needed.
Miss Ockwell passed on to Mrs Clarke an outline of her clients' personal circumstances and their requirements. She told Mrs Clarke that the Seymours had just sold their farm and had up to £1.2 million to invest. They had a capital gains tax (CGT) liability on the sale which they were hoping to defer by reinvesting in another business within 3 years. Any investment they now made therefore needed to be short term and low risk, and needed to produce an income. In addition the Seymours were looking for life cover to protect them against their potential inheritance tax (IHT) liability.
Miss Ockwell rang Mrs Clarke on 1 st November. Mrs Clarke replied by letter on 3 rd November in the following terms:
"Following our recent telephone conversation, as requested please find a proposal to help you design a solution for a couple who are looking to make an investment to potentially reduce their Inheritance Tax Liabilities."
The letter was very detailed. It dealt first with the potential IHT liability and recommended that Mr and Mrs Seymour make Wills containing an Interest in Possession Trust (Will Trust) linked with investment in a Bond. Mrs Clarke suggested that Miss Ockwell might like to consider the Eagle Star Maxi Bond, the Sterling Investment Bond or the Allied Dunbar Managed Portfolio Bond. She summarised the key features of the first two, which were "onshore bonds", and then suggested that since the Seymours were "non-taxpayers" they might like to consider moving their money off-shore for "gross rollup" of income and Capital Gains Tax as opposed to paying tax in the onshore bonds.
The letter continued:
" What is the Allied Dunbar Offshore Managed Portfolio Bond?
The Bond is a single premium Unit-Linked "Wrapper" which allows the client to invest in a range...
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