Shore v Sedgwick Financial Services Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Dyson,Lord Justice Keene,Lord Justice Buxton
Judgment Date23 Jul 2008
Neutral Citation[2008] EWCA Civ 863
Docket NumberCase No: A2/2008/0043

[2008] EWCA Civ 863

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION

Mr Justice Beatson

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Buxton

Lord Justice Keene and

Lord Justice Dyson

Case No: A2/2008/0043

HQ 05 X 02873

Between:
Shore
Appellant
and
Sedgwick Financial Services Limited
Respondent

Michael Soole QC and Ben Elkington (instructed by Messrs Irwin Mitchell) for the Appellant

John Wardell QC and Thomas Seymour (instructed by Messrs K & L Gates) for the Respondent

Hearing dates: 24, 25 and 26 June 2008

Lord Justice Dyson

Outline of the case

1

In these proceedings which were started on 29 September 2005, Mr Shore claims damages for negligence and breach of section 62 of the Financial Services Act 1986 in relation to advice given by Sedgwick Financial Services Limited (“SFS”) to him in 1997 in respect of his pension. He advances two distinct claims. In outline, the first (“the primary claim”) is that SFS were in breach of duty in (i) failing to advise him in early 1997 to remain in his occupational pension scheme (“the Avesta scheme”) and defer drawing his pension until the age of 60 rather than transfer his accrued benefits into a personal pension income withdrawal scheme with Scottish Equitable (“the PFW scheme”) and (ii) failing to provide him with information to enable him to make a proper comparison between the Avesta scheme and the PFW scheme. I shall refer to the first of these duties as “the advice duty” and the second as “the information duty”. The transfer was effected on 29 April 1997. The second claim (“the secondary claim”) in summary is that SFS were in breach of duty in failing to advise Mr Shore by 31 July 1997 to purchase an annuity in place of the PFW scheme.

2

In relation to the primary claim, Beatson J held that (i) there was no breach of the advice duty or the information duty by SFS; (ii) if there was a breach of the advice duty, Mr Shore suffered no loss because, even if he had been advised to defer taking his benefits under the Avesta scheme until the age of 60, he would not have accepted the advice (the judge made no separate finding as to causation in relation to the information duty); (iii) the claim was statute-barred because Mr Shore first suffered loss no later than about the beginning of 1999 when annuity rates (which had fallen since he entered into the PFW scheme) reached a new low; and (iv) Mr Shore could not take advantage of the knowledge provisions of section 14A of the Limitation Act 1980 to extend the limitation period because he had the requisite knowledge before 29 September 2002.

3

In relation to the secondary claim, the judge held that (i) there was a breach of the advice duty by SFS; (ii) if Mr Shore had been advised to purchase an annuity in place of the PFW scheme, he would have acted on that advice; (iii) the claim was statute-barred for the same reasons as the primary claim; and (iv) section 14A did not avail Mr Shore for the same reasons as in relation to the primary claim.

4

Mr Shore sought permission to appeal all of the judge's decisions in relation to the primary claim and his decisions on the limitation issues in relation to the secondary claim (although not the judge's decision on s.14A of the Limitation Act 1980). He was given permission to appeal by Gage LJ, but only on the secondary claim, on the grounds that it was arguable that the judge's decision as to when Mr Shore first suffered loss in relation to that claim was wrong. In relation to the primary claim, Gage LJ said that it was arguable that the judge's decisions on liability and limitation were wrong. But he refused permission to appeal, since there were no real prospects of a successful challenge to the finding that, even if Mr Shore had been advised to defer taking his benefits under the Avesta scheme until the age of 60, he would not have accepted the advice.

5

By a respondent's notice, SFS seeks to uphold the judge's decision on various grounds including that (i) in relation to the primary claim there were additional grounds on which the judge's decision on causation should be upheld; (ii) in relation to the secondary claim, the judge was wrong to find (a) a breach of duty by SFS and (b) that Mr Shore would have chosen to purchase an annuity in July 1997 if advised to do so; and (iii) the judge was right to hold that both claims were statute-barred, but should have held that Mr Shore first suffered loss (a) in relation to the primary claim when he transferred to the PFW scheme and (b) in relation to the secondary claim when he could not have remedied the failure to purchase an annuity in July 1997 without incurring additional cost.

6

Before this court, Mr Shore has renewed his application for permission to appeal on the issues of liability and limitation in relation to the primary claim. For reasons that I shall explain, I am of the view that the judge reached the right conclusion on the limitation issues (although my reasons differ from his). In these circumstances, I do not propose to address the other issues that have been raised. In dealing with the limitation issues, I shall proceed on the basis (most favourable to Mr Shore) that all his allegations of breach of duty and causation are established in relation to both the primary and secondary claims.

7

For the purpose of resolving the facts and the issues that arise in this case, it is important to understand the nature of income drawdown policies (of which the PFW scheme is an example). These policies permit the investor to delay the purchase of an annuity until his 75 th birthday and allow him to withdraw some of his pension fund each year as income. There are restrictions on the amount of income that he may withdraw each year. The maximum and minimum amounts are determined at triennial intervals and are determined by applying rates published by the Government Actuaries Department (“the GAD rate”). The GAD rate sets the maximum amount that an investor may withdraw as income from his fund each year. The minimum amount of income that can be taken each year is 35% of the maximum. The income withdrawal facility is not available to members of occupational pension schemes. Accordingly, in order to take out an income withdrawal policy, a member of an occupational pension scheme must transfer his benefits to a personal pension plan.

The facts

8

Mr Shore was born on 7 October 1940. Since 1981, he had been employed by companies in the Avesta Group. In 1984, he was employed as managing director of Avesta Sheffield Distribution Limited (“Avesta”). He was a member of the Avesta occupational pension scheme. This was a two-thirds final salary scheme which, if taken at age 60 (7 October 2000), would have entitled Mr Shore to a tax-free lump sum of £155,000 and a pension of £54,900 pa gross. Most of the annual pension would not have been index-linked. Mr Shore was entitled to take early retirement and to elect to start drawing benefits under the Avesta scheme before the age of 60, but the benefits that he received before the age of 60 would have been reduced at a compound rate of 12% pa. Thus, if he retired in January 1997, he was entitled to a tax-free lump sum of £140,400 and a pension of £34,300 pa gross; if he retired in November 1997, he was entitled to the same tax-free lump sum and a pension of £39,900 pa gross.

9

In June 1996, British Steel acquired effective control of Avesta and decided that the Avesta scheme would be wound up from 1 December 1996. Members of the Avesta scheme were given three options the first of which had to be exercised by 31 January 1997: (i) transfer their benefits to the British Steel scheme; (ii) transfer the value of these benefits into a personal pension plan; and (iii) leave their benefits in the Avesta scheme for eventual transfer to the British Steel scheme. Under (iii), all members of the Avesta scheme would receive a pension exactly equal to that which they would have received had the Avesta scheme not been wound up, the only difference being that the benefits would be paid by British Steel.

10

Mr Shore had sought advice about his pension from SFS from time to time from October 1995. The SFS advisers with whom Mr Shore dealt were (or at least included) Mr Ormond and Mr Fry. At a meeting on 14 January 1997, Mr Shore told Mr Ormond that he had decided that he would prefer to leave his benefits in the Avesta scheme rather than transfer into the British Steel pension scheme. Mr Ormond suggested that Mr Shore might wish to consider an income drawdown policy.

11

There was a further meeting on 20 January. Mr Ormond had obtained illustrations from Scottish Equitable of an income drawdown scheme on the basis of assumed growth rates of 6%, 9% and 12%. At or shortly after the meeting, a financial needs analysis questionnaire was completed by Mr Ormond for Mr Shore. Approval by the SFS Pension Transfer Unit was required before a SFS adviser could recommend any investor to purchase an income drawdown policy. On 22 January, Mr Ormond obtained approval of his recommendation that Mr Shore should purchase such a policy.

12

Mr Ormond then prepared a personal financial report for Mr Shore. It is dated 23 January. The report recorded that Mr Shore intended to take early retirement and that his objective was to take the maximum tax-free cash sum. It is unnecessary to consider the detail of the report. In view of the assumptions that I am making in favour of Mr Shore, it is sufficient to say that it recommended an income withdrawal plan.

13

On 28 January, Mr Shore signed an “authority to proceed”. By 14 February, Mr...

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