Financial planning of one’s affairs usually takes place over a number of years, revisiting investments, considering tax relief, and possibly transferring from one pension scheme to another. As with all walks of life, sometimes mistakes are made and the advice received is wrong. The continuing nature of obtaining and receiving financial advice and the restructuring of financial firms, however, can make it difficult to pinpoint when a claim arises and who is responsible.
When does a claim arise?
A cause of action accrues in negligence from the moment a negligent act or omission has occurred and caused loss. Usually a claimant has 6 years from this moment to bring a claim, however, the nature of financial advice means that it can be a long time before the error is discovered.
The law provides for an extension of the usual 6 year period where a claimant does not have the necessary knowledge to bring a claim. In pension cases, individuals may not know for some time:
- that they have suffered a loss
- that an error was made which caused the loss; or
- the identity of the negligent adviser/company
In these circumstances the law provides a further 3 years from the date of knowledge to bring the claim. This can have the effect of extending the limitation period for bringing a claim for a significantly longer period, however, there is a long-stop for all cases of 15 years from the date of the negligence, after which time a claim cannot be brought, regardless of whether or not the individual had the requisite knowledge.
What is knowledge?
A person’s knowledge is not limited to what they actually believed, but includes what they might be reasonably expected to know based on the facts available to them and which they might reasonably seek through professional advice. What is not necessary is knowledge that the advice was negligent. Knowledge of the material facts about the damage suffered can suffice and will start time running for the date of knowledge extension.
Our article ‘When is it too late to sue for negligence?’ provides more information on the time limits for bringing a claim in negligence, the test for date of knowledge, and how to stop limitation from expiring.
Leaving it too late
Claimants that wait until they know the advice was negligent may find themselves out of time, as did Mr Davy in the recent case of Davy v 01000654 Ltd  EWHC 353 (QB). In this case, the claim fell at the first hurdle because the claim was time barred under the rules of limitation. Whilst Mr Davy maintained that he did not realise the advice he received was negligent, the court found that the knowledge he did have was sufficient for the limitation period to start to run in respect of his claim, and dismissed the claim for being out of time. For more information see the case study on our pension disputes page.
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, however, they do mean that individuals need to ensure that as soon as they are aware there is a problem they seek legal advice. Otherwise they run the risk of being out of time.
How to protect your position
- Retain copies of correspondence that you send to your adviser and that you receive from them – they will help to evidence what advice you received and what facts are within your knowledge.
- Ensure that you read the information you receive from your adviser carefully – it may alert you to a problem upon which you need to take action.
- Speak to a pension disputes specialist as early as possible if you have concerns about the advice you have received and its impact on the performance of your pension