Walker v Inter-Alliance Group Plc & Anor

Investment advice is not confined to an express recommendation to buy or sell a defined investment. It includes communication which, in context, goes beyond neutral factual information and is objectively likely to influence the client’s decision whether to undertake the transaction. Advice about an associated transaction may fall within the statutory concept of investment advice even where that transaction is not itself an investment. For causation, a breach is sufficient if it was an efficient cause of the claimant’s decision. It need not be the sole or principal cause. Loss may include the reasonable cost of restoring the claimant to the position that would have existed had the unsuitable transfer not occurred.

The claimant transferred substantial benefits from an occupational final-salary pension scheme into a personal pension drawdown arrangement. He alleged that an independent financial adviser and an employee of the product provider advised him to make the transfer. The claim against the product provider was principally for breach of statutory duty arising from breach of the regulatory principle of polarisation.

The action against the first defendant was stayed following its entry into administration. The trial therefore concerned only the claim against the second defendant. The central issues were whether the product provider’s employee had given investment advice, whether that advice caused the transfer, and how any resulting loss should be assessed.

1. Breach of statutory duty. The product provider’s employee gave investment advice at the two relevant meetings. His comparisons between the occupational scheme and drawdown, his promotion of drawdown, and his answers stating what he would do in the claimant’s position went beyond factual information and were objectively persuasive. They therefore breached the regulatory restrictions imposed by the principle of polarisation.
2. The statutory concept of advising under paragraph 15 of Schedule 1 to the Financial Services Act 1986 includes advice about an associated or ancillary transaction. The surrender or transfer of occupational pension rights could therefore be considered alongside advice concerning the personal pension arrangement. The approach in Martin v Britannia Life Ltd [2000] Lloyd's Rep 412 was accepted and applied.
3. Causation. The statutory words as a result of embody the ordinary negligence test. The claimant succeeds if the advice was an efficient cause of the transfer. Applying the but-for test, the court found that, without the employee’s advice, the claimant would probably have remained in the occupational scheme. The fact that other advice also contributed did not prevent causation.
4. Quantum. Loss was to be assessed by reference to the cost of securing equivalent future pension benefits, together with appropriate compensation for past loss. The court held that the loss accrued from the claimant’s actual retirement date, that he would probably have taken higher pension benefits rather than tax-free cash, and that he would probably have used his additional voluntary contributions to purchase further benefits under the occupational scheme. Certain pension-management and investigation fees were recoverable as damages, but not again as costs.