Beary v Pall Mall Investments (A Firm)

Conventional causation applies to claims for negligent financial advice. Where the breach consists of failing to explain an alternative course, the claimant must show that proper advice would probably have led to that course. The court need not invariably ask what the adviser would have done if non-negligent. The exceptional, policy-based modification of causation principles in medical informed-consent cases does not create a general rule for pension or other financial advice. A materially different case, such as reliance on an index-linked annuity, may be refused when introduced too late and without adequate evidential support.

The claimant had received retirement and investment advice from the defendant firm. The High Court dismissed his annuity claim because he had not shown that he would have bought an annuity if properly advised. It found that advice to invest part of the tax-free cash in a Lombard bond was negligent, but assessed loss by comparison with the loss that would have resulted had the money remained in the existing pension fund. The claimant appealed on grounds concerning causation, the application of exceptional causation principles, an index-linked annuity, and the assessment of the Lombard loss. Permission was granted on the first two grounds and considered on the remainder.

Lord Justice Dyson gave the judgment, with Lord Justice Keene and Mr Justice Wilson agreeing.

1. Conventional causation. The claim as pleaded and tried was that the adviser negligently failed to explain the possibility of an immediate annuity. The claimant had to prove that, if told of that option, he would probably have bought one. The trial judge’s finding that he would have continued with the drawdown arrangement was not challenged. The failure to give the advice therefore caused no recoverable loss.
2. Bolitho. Bolitho v City & Hackney Health Authority [1998] AC 232 did not require every negligence case to examine what the defendant would have done if non-negligent. That question is relevant only where the defendant’s hypothetical conduct supplies the causal link. In the present case the proper advice was to explain the annuity option, and the hypothetical conduct of the adviser added nothing to the causation analysis.
3. Chester. The majority decision in Chester v Afshar [2004] UKHL 41; [2005] 1 AC 134 involved an exceptional, policy-based departure from ordinary causation principles in the context of informed consent to medical treatment. The reasoning, as applied in Benedict White v Paul Davidson & Taylor [2003] EWCA Civ 1511 and reflected in Gregg v Scott [2005] UKHL 2; [2005] 2 WLR 268, did not support a general departure for negligent financial advice.
4. Other grounds. The index-linked annuity argument was a materially different case, raised too late and not explored in the evidence. The judge was entitled to refuse it. Since the case at trial did not challenge the suitability of the PMI fund itself, the proper comparator for the Lombard bond loss was the loss that would have occurred if the £180,000 had remained invested in that fund.
5. The appeal was dismissed on the two grounds for which permission had been granted. Permission to appeal on the remaining grounds was refused.

• Court of Appeal (Civil Division) The appeal was dismissed on the two permitted grounds, and permission to appeal was refused on the other grounds: [2005] EWCA Civ 415.
• High Court of Justice, Chancery Division Sir Donald Rattee dismissed the annuity claim, found negligent advice concerning the Lombard bond, and ordered an inquiry into damages on a comparative-loss basis.