A claim for negligent pension advice on behalf of a deceased

It is not unusual for one person within a marriage to take sole responsibility for the planning of the family’s financial affairs.  This can often result in pension funds and investments being in that individual’s sole name. Sadly, it may be only after that individual’s death that it transpires the advice they received was negligent, to the detriment of their spouse and the beneficiaries of their estate.   In those circumstances, what rights does the spouse or beneficiary have to bring a claim in negligence? This was the situation in which one of our clients found herself when her husband passed away.

The facts

Mr A consulted a financial adviser under a retainer for around ten years from 1997.  Mr A wanted a reasonably cautious investment strategy that could provide an income for himself and his wife during their retirement and told his adviser that he wanted to avoid any erosion of the capital within his pension. From 1997 to 2002, Mr A’s investment portfolio consisted mainly of life office funds.  Despite Mr A’s cautious attitude to risk, his adviser consistently advised him to take a more aggressive approach to his investments and advised him to move towards investment into equities.

Mr A was diagnosed with terminal cancer in 2001. Nonetheless, the adviser continued with aggressive investment strategies, advising Mr A to sign a ‘sophisticated investor’ declaration, enabling the adviser to actively promote unregulated investments to him.  Mr A was not a sophisticated investor.  Substantial investments were made into sophisticated and high-risk investments and a large portion of commercial property. 

It was not until 2012 that Mr A realised the severity of his losses from investing in high risk products.  Mr A complained to the Financial Ombudsman Service (‘FOS’) in 2013 which determined that the advice Mr A had received was negligent.  It provided a detailed formula to calculate Mr A’s losses and to restore his finances to the position in which they would have been if appropriate investments had been made. 

Sadly Mr A passed away in 2014 before bringing a claim against his adviser.

In 2015, Mrs A, the executrix of Mr A’s estate, instructed Wright Hassall to help her recover the losses she had suffered from the financial adviser.  Mrs A brought a claim both as executrix of her husband’s estate and in her personal capacity against the financial adviser for negligent advice. 

The legal issues

The two key legal issues with the claim were that:

  1. Mr A’s claim (brought on his behalf by Mrs A as executrix of his estate) was potentially out of time; and
  2. Mrs A had no direct relationship with the financial adviser and therefore, arguably, no legal standing to bring the claim.

Out of time

The defendant adviser argued that the claims were out of time because:

  • all the advice pre-dated 2008
  • the losses had been suffered by 2008
  • Mr A had knowledge of the losses by 2008

This placed Mr A’s claim outside the standard 6 year limitation period for bringing a claim, and the extended period of 3 years from the date of the claimant’s knowledge (for information about the time limits for bringing a claim click here).

Wright Hassall argued that Mr A’s claim was in time because he did not have the requisite knowledge to bring a claim before 2012. Prior to that, Mr A had no reason to believe that the losses were attributable to the negligent advice of his adviser, who had repeatedly reassured him by informing him that the decline in the value of his pension fund was due to the general decline in the equity markets.

With regard to Mrs A’s knowledge of the claim, Wright Hassall argued that:

  • Mrs A was not aware of the losses suffered  until after her husband’s death when the pension fund was transferred into a SIPP in her name pursuant to her husband’s Letter of Wishes;
  • Alternatively, Mrs A could not have been aware of the potential claim until December 2012 when her husband complained to FOS;
  • Mrs A’s claims were therefore, in either instance, within the 3 year limitation period from the date of her knowledge.

No liability to Mrs A

The defendant adviser accepted that it owed a duty of care to Mr A but rejected owing any duty of care to Mrs A because:

  • it had no direct relationship with her
  • it was not aware that Mrs A was a beneficiary under Mr A’s will and financially dependent on the performance of Mr A’s pension following his death

Wright Hassall argued it did owe Mrs A a duty of care because: 

  • the adviser did know that Mrs A would be wholly dependent on the pension fund to support herself following Mr A’s death; and
  • the adviser’s duty of care to Mr A extended to Mrs A due to her dependency on the advice given to Mr A to protect her position in accordance with the decision in White v Jones [1995] 2 AC 465.

Successful result

A claim was issued at court and both sides prepared for trial. The case was settled out of court in Mrs A’s favour.

About the author

Matthew Goodwin Associate - Solicitor-Advocate

Matthew regularly acts for corporates and individuals, dealing with a variety of disputes relating to investments, negligent tax planning, tax avoidance schemes, pensions and HMRC enquiries and negotiations. In addition, Matthew advises financial institutions and FCA regulated firms on their regulatory obligations.