Time barred claim for negligent pension advice
Davy v 01000654 Ltd  EWHC 353 (QB)
The case of Davy v 01000654 Ltd  EWHC 353 (QB) illustrates how claimants can lose the opportunity to claim against their financial adviser for losses suffered simply because they are out of time.
In this case Mr Davy sought professional financial advice in 2001 regarding switching his pensions. He was advised to transfer out of his occupational pension scheme with British Airways into a personal pension scheme with Skandia Life. The transfer was to a high risk investment but Mr Davy was not told this at the time. A high-risk investment did not accord with Mr Davy’s attitude to risk. In 2006 Mr Davy consulted the financial adviser again in respect of the transfer as part of a continuing retainer to provide investment advice. At that time, it was brought to Mr Davy’s attention that the new pension scheme was high risk. In 2011, Mr Davy received independent financial advice regarding his pensions.
Mr Davy’s position was that it was not until this meeting that he became aware that the advice he received in 2001 was negligent. He argued that the information he was given in 2006 was designed to conceal the negligence in 2001 by indirectly alerting him to the issue in order to start time running for bringing a claim, without advising him to seek independent advice.
The defendant’s position was that Mr Davy was aware that the Skandia Life pension scheme was high risk as early as 2002 and that he was out of time for bringing his claim. Its position was that there was no concealment of the negligence in 2006 and that the advice given at that time was to highlight the error.
A standstill agreement (temporarily pausing any limitation period that was still running at that time) was entered into and Mr Davy issued a claim against the defendant adviser in 2015.
The case did not run to a trial and was instead disposed of in the early stages at a summary judgment hearing. The judge found that Mr Davy was out of time for bringing his claim. He concluded that Mr Davy knew that the new pension scheme was a high-risk product and was not performing as expected in 2002. The 2006 meeting was found to have highlighted the errors in the advice given, rather than concealed them.
Mr Davy had the requisite section 14A knowledge in respect of a claim against the Company over its advice in 2001 by no later than August 2006. By that time he knew that the investment he had made on the Company's advice was a risky one (relative to the level of certainty provided by the BA scheme) and that the level of risk was attributable to the heavy equity-based nature of the pension fund investments
In reaching this conclusion the judge referred to correspondence between Mr Davy and his financial advisers in which Mr Davy had raised concerns about the poor performance of his investment, its volatility and the losses suffered. With regard to the 2011 meeting which appeared to have prompted Mr Davy to bring court proceedings, the court found that the only new information Mr Davy received at this meeting was that another individual, in a similar position, had made a complaint to the Financial Ombudsman Service and had successfully recovered his losses.
If Mr Davy drew from his research into that other case the conclusion that ... its advice to him in 2001 was also negligent..... then that is the one piece of knowledge that is not required before section 14A knowledge can be said to exist.....
We will never really know exactly why Mr Davy did not bring a claim sooner. He clearly knew that there were problems with his investment more than 10 years prior to issuing his claim and yet he did not take legal action. It could have been that Mr Davy simply did not realise that the advice itself was negligent and that someone was accountable for his losses.
The judge’s comments regarding what constitutes ‘knowledge’ for the purposes of extending the limitation period highlight why in this case Mr Davy was found to have the requisite knowledge even though he appeared not to appreciate that he had a claim in negligence.
the state of knowledge required is … sufficient confidence to justify embarking on the preliminaries to a claim such as taking advice, collecting evidence or submitting a claim to the proposed defendant…
the court must have regard to the characteristics of a person in the position of the claimant as opposed to characteristics peculiar to the claimant
whether or not it is known at the time that, as a matter of law, the act(s) or omission(s) constitute negligence is irrelevant in determining whether or not section 14A knowledge exists
The case highlights the need for individuals to seek legal advice at an early stage if they have concerns regarding their pension. The limitation rules are there for a very good reason, avoiding stale claims and allowing professional advisers to put in place archive systems and insurance for a defined period of time, but waiting to see if an investment improves without taking action, could mean that individuals lose the opportunity to recover losses caused by negligent pension advice.