Shore v Sedgwick Financial Services Ltd
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE BEATSON,Mr. Justice Beatson |
| Judgment Date | 20 December 2007 |
| Neutral Citation | [2007] EWHC 2509 (QB),[2007] EWHC 3054 (QB) |
| Docket Number | Case No: HQ 05 X 02873 |
| Court | Queen's Bench Division |
| Date | 20 December 2007 |
[2007] EWHC 2509 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
the Honourable Mr. Justice Beatson
Case No: HQ 05 X 02873
Mr. M. Soole QC and Mr. B. Elkington (instructed by Messrs. Irwin Mitchell) for the Claimant
Mr. J. Wardell QC and MR. T. Seymour (instructed by Messrs. Kirkpatrick & Lockhart Preston Ellis Gates Ellis) for the Defendants
Hearing dates: 10, 11, 12, 13, 16, 17, 18, 19, 20 July 2007
Approved Judgment
Mr. Justice Beatson
Part 1: Introduction
In this case Mr. Clifford Shore, now aged 66, seeks damages for negligence and breach of statutory duty under section 62 of the Financial Services Act 1986 from the first defendant, Sedgwick Financial Services Ltd (“SFS”). He claims to have sustained loss as a result of transferring from his occupational pension scheme (the “Avesta scheme”) arising out of his employment with Avesta Sheffield Distribution Ltd. to a personal pension fund withdrawal scheme (“PFW”) with Scottish Equitable during March and April 1997. He also transferred from two other smaller occupational pension schemes, but the claim primarily concerns the transfer from the Avesta scheme.
Mr. Shore's primary claim is that Mr. Ormond, the SFS financial adviser who dealt with him, was negligent and in breach of statutory duty in advising him in January 1997 to transfer his accrued benefits in the Avesta scheme into the Scottish Equitable's PFW scheme. It is claimed that he would have followed such advice and taken his pension benefits at the age of 60. It is also claimed that Mr. Ormond failed to advise Mr. Shore as to his options, to prepare an adequate personal financial report, and to give adequate advice about the risks of PFW schemes, in particular where more than 75% of the maximum income permitted was taken. As well as breaching SFS's common law duty of care, it is claimed these failures breached the regulatory rules made by the Investment Management Regulatory Organisation (“IMRO”), then the relevant regulatory body at the time. Those rules required a fair and clear comparison between the benefits that would be retained by staying with the Avesta scheme and those under the PFW and that a transfer analysis be made and discussed with the client. Mr. Shore's secondary claim is that, having transferred his benefits to the Scottish Equitable's PFW scheme on 28 April 1997, he should, because of his changed income needs as a result of no longer having a prospect of consultancy income, have been advised by SFS to purchase an annuity and that he would have followed such advice. It is common ground that any claim for breach of contract is barred by the Limitation Act 1980.
By its defence, SFS:—
(a) admits the existence of a duty of care in tort owed by it in relation to advice given by Mr. Ormond to Mr. Shore;
(b) denies that the advice given was negligent, and claims the advice Mr. Shore received was appropriate to his circumstances, wishes and intentions at the time as communicated to Mr. Ormond;
(c) raises defences of limitation, causation, and contributory negligence; and
(d) maintains that it is not open to the Court to determine the case on the basis of breaches of regulatory rules made by IMRO.
A claim against the second defendant, Barclays Financial Planning Ltd., trading as Sedgwick Independent Financial Consultants Ltd. (“SIFC Ltd”), which took over the business of SFS on 1 January 2000 in respect of events after that date, has been settled. Mr. Soole QC, on behalf of Mr. Shore, and Mr. Wardell QC, on behalf of SFS, provided helpful written opening and closing submissions.
Since 1981 Mr. Shore has been employed by companies in the Avesta group and has been a member of its pension scheme. In 1984 he was appointed managing director of Avesta Sheffield Distribution Ltd. (formerly Avesta Johnson Stainless Ltd.). In 1997 his salary was about £120,000 pa, about £5,000 pm net. The bulk of his pension rights were in the Avesta scheme. He was also entitled to smaller pensions from his former employments at Wilmot Breeden and Woodlock Marketing. He transferred his rights under these to Scottish Equitable on 20 March and 6 April 1997. He transferred his rights under the Avesta scheme on 28 April 1997. The transfer value of the Avesta rights was £637,507. On 28 May he entered into a PFW scheme with Scottish Equitable.
PFW schemes (also referred to as “income drawdown” schemes) provide flexibility as to the tax-free sum, the income taken (including enabling a capital withdrawal to be used as income), and how the fund is invested. However, PFW schemes expose the beneficiary to stock market risks and substantial withdrawals could reduce the fund. Because of this they are not suitable for all. In May 1996 SFS Ltd circulated guidance by a Mr. Dawson to advisers stating that the maximum income withdrawn “should not exceed 75% of the maximum permitted by the Government Actuaries Department (GAD)” and that “if the client's on-going income requirement is in excess of this percentage, then PFW is probably not appropriate” and the purchase of an annuity with a higher guaranteed income should be considered as an alternative. Further guidance in February 1999, which (save in respect to “an insistent customer”) it was accepted broadly accorded with the position in 1996 and 1997 stated “…generally our advice will be that no more than 75% of the GAD maximum be withdrawn as income. This protects the investor against depletion of the fund”. SFS also required financial advisors who wished to recommend a PFW to obtain approval from its pension transfer unit.
The extent of the exposure of a person with a PFW policy depends on the amount of income taken; the larger the sum, the greater the exposure. In Mr. Shore's case he was very exposed because he took both the maximum tax-free lump sum and the maximum permitted income. Market movements, the sustained fall in gilt yields, and the fall in the annuity rates set by the Government Actuary's Department mean that the maximum annual withdrawal open to Mr. Shore fell from £35,915 net in 1997 to £15,671 in 2003. In 2006 the figure was £22,065.
Part 2: Issues
(1) The 'duty' issue: What was the extent of the common law duty of care in tort owed by SFS Ltd to Mr. Shore regarding the advice given to him by Mr. Ormond?
(2) The 'breach of duty' issue: Did the advice Mr. Ormond give breach his duty of care? This is a mixed question of fact and law. What advice Mr. Ormond gave, and the basis on which he gave it, are questions of fact. Whether the advice he gave fell below the required standard is a question of law.
If the advice Mr. Ormond gave did breach his duty of care, the following issues arise:—
(3) The 'causation' issue: Did the giving of the negligent advice cause any damage to Mr. Shore?
(4) The 'contributory negligence' issue: Assuming Mr. Ormond was in breach of duty and his negligent advice caused damage to Mr. Shore, was the damage caused or contributed to by relevant contributory negligence on the part of Mr. Shore?
(5) The 'breach of statutory duty' issue: Is Mr. Shore entitled to damages under section 62 of the Financial Services Act 1986? This provides that a contravention of the provisions of the statute or rules made pursuant to it and a contravention by an authorised person of the applicable regulatory rules “shall be actionable at the suit of a person who suffers loss as a result of the contravention subject to the defences and other incidents applying to actions for breach of statutory duty”. At the relevant times SFS was regulated by the Personal Investment Authority (“PIA”) and was obliged to comply with the principles of the Securities and Investments Board (“SIB”) and certain IMRO rules which were adopted by the PIA. As a result of the regulatory changes introduced by the Financial Services and Markets Act 2000 IMRO's regulatory functions were transferred to the Financial Services Authority in 2001.
(6) The 'limitation' issue: Are Mr. Shore's damages in any event barred by the Limitation Act 1980?
Part 3: The Factual Evidence
Factual evidence in support of the claim was given by Mr. Shore, his wife Judith, and his brother Michael, and on behalf of SFS by Mr. Ormond. The statements of Mr. Clark, formerly Finance Director of Avesta and a trustee of the pension scheme, Mrs Earle, from 1988 Avesta's Human Resources Manager who looked after pensions matters, and Mr. Alexander Miller were read. Mr. Miller held senior positions in the stainless steel industry before retiring. His statement deals with Mr. Shore's prospects of obtaining consultancies in 1997.
Over ten years have passed since the crucial events and it is not easy to decide where truth and accuracy lie. Inevitably the recollections of those involved will differ to some degree. It would be surprising if it were otherwise. In these circumstances, as HH Judge Jack QC, as he then was, said in Loosemore v Financial Concepts [2001] 1 Lloyd's Rep. PN 235, at 237
“…memory, where it is unsupported by documents, must inevitably be suspect. Things which occurred can be forgotten. Things can apparently be remembered which did not in fact occur. What did occur can be remembered with a false slant to it. All of that can happen without dishonesty. So, unless the documents are clear the court's task is difficult”.
In the present case the differences between the parties are fundamental and go beyond what can be explained as normal given the passage of time. The key documents are in part unclear on the issues between the parties or, as in the case of the Scottish Equitable illustrations, needed to be explained. The...
To continue reading
Request your trial
-
Gallagher v ACC Bank Plc
... ... - Accrual of action - Claim that induced to enter unsuitable financial transaction - Whether claim in tort statute barred - Whether actual loss ... (A FIRM) & ORS 2006 2 AC 543 2006 2 WLR 1091 2006 3 AER 401 SHORE v SEDGWICK FINANCIAL SERVICES LTD & ANOR 2009 BUS LR 42 2008 PNLR 37 ... ...
-
Gallagher v ACC Bank Plc (No 1)
... ... of cause of action - Contingent liability - Damage - Function of Financial Services Ombudsman - Issue estoppel - Additional claim - Abuse of ... ; Darby v Shanley [2009] IEHC 459, (Unrep, HC, Irvine J, 16/10/2009); Shore v Sedgwick Financial Services Ltd [2008] EWCA Civ 863, [2009] Bus LR 42; ... ...
-
Eagle v Redlime Ltd
...the authorities establish that the word "attributable" means here "capable of being attributed" rather than "caused by". 29 In Shore v Sedgwick Financial Services [2008] PNLR 244, Beatson J summarised these principles at paragraphs 225–226 of his Judgment, in terms approved by the Court of ......
-
Pegasus Management Holdings SCA v Ernst & Young
...for professional negligence being dealt with at first instance, I do not consider that there is much help to be derived from this case. Shore 100 The final case to which I should refer is the recent decision of the Court of Appeal in Shore v Sedgwick Financial Services Ltd [2008] PNLR 37.......