Tort

Negligence - insurer's financial adviser - pensions mis-selling - negligent advice to customer as to pension and life cover - duty of care to potential beneficiariesGorham and Others v British Telecommunications Plc and Others: CA (Pill and Schiemann LJJ and Sir Murray Stuart-Smith): 27 July 2000

G sought advice from the insurer's financial adviser as to pension and life cover, making it clear that he wished to provide for his wife and children should he predecease them.

The adviser negligently failed to advise him that his employer's pension scheme might be better and sold him a personal pension plan.

The insurers later informed G that he would be better off in his employer's scheme, but G did not join the scheme and died within two years.

Even had he joined the scheme immediately upon receiving the correct advice, he would not have qualified for the lump sum death benefit payable after two years in the scheme.

G's wife among other things sued the insurers on her and her children's behalf for damages for loss of pension rights including the lump sum death benefit on the basis that the insurers owed them an additional duty of care as potential beneficiaries.

The judge held that the insurers were in breach of duty of care, but that they were not liable for any loss arising after the correct advice was given.

The judge awarded the claimants the agreed value of the loss of pension rights, but not the lump sum.

The wife appealed as to damages, and the insurers cross-appealed on the ground that they owed the claimants no duty.

Michael Crane QC and James Griffiths (instructed by Burningham & Brown, Bridgwater) for the claimants; Mark Warwick (instructed by Cartwrights, Bristol) for the insurers.

Held, dismissing the cross appeal, that it was fundamental to the giving and receiving of advice upon a scheme for pension provision and life assurance that the interest of the customer's dependants would arise for consideration and justice required that disappointed beneficiaries should have a remedy against an insurance company in circumstances like the present under the principle in White v Jones [1995] 2 AC 207, as stated by Lord Goff of Chieveley; that the adviser had a limited duty to the claimants not to give negligent advice to G which adversely affected their interests as he intended them and, in the circumstances, not to sell the insurer's policy; but, dismissing the appeal, that the breach of duty had not caused the loss occurring after G was given the correct advice.