Goldstone & Anor v Becque Wayman Investments Ltd & Ors

An appointed representative is not automatically the agent of its authorised principal for contractual purposes. The contractual effect depends on the objective construction of the parties’ documents and circumstances. Disclosure of the authorised principal and appointed representative status may impose statutory responsibility on the principal without replacing the appointed representative’s contractual liability. An investment adviser must provide a clear overall assessment of risk. Identifying individual risks is insufficient where the investment is presented as low risk but is in fact high risk. A breach causing the investor to enter the investment entitles the investor to recover losses that would have been avoided by proper advice.

The claimants, trustees of a settlement, invested approximately £592,417 in viatical and life settlement policies marketed through Mutual Benefits Corporation. They alleged that Mark Wayman, acting through Endowment Surrender Plus, negligently and contractually advised that the investment was low risk. The investment later failed after fraud was discovered at MBC.

The issues included the identity of the contracting parties, the effect of appointed representative status under the Financial Services and Markets Act 2000, breach of contractual and tortious duties, causation and damages.

1. Contracting parties. On an objective reading of the documents, the contract was between the claimants and Endowment Surrender Plus. The disclosure that it was an appointed representative of Becque Wayman Investments Ltd did not make Becque Wayman the contracting party. If the appointed representative wished to exclude personal contractual liability, it had to make that clear.
2. Statutory responsibility. Section 39(3) of the Financial Services and Markets Act 2000 imposed additional liability on Becque Wayman for acts and omissions of Endowment Surrender Plus in carrying on the business for which responsibility had been accepted. It did not displace the existing contractual arrangements or the appointed representative’s own liability.
3. Breach. Mr Wayman had effectively recommended the investment as low risk. A reasonably competent adviser should have given an overall quantified assessment of risk, rather than merely identifying individual risks or creating an impression that they were manageable. The investment was high risk. Known information indicating possible fraud and the absence of independent verification should also have been disclosed.
4. Causation and disposal. With proper advice, the claimants would not have invested. They would have sought recovery during the contractual rescission period or before MBC invested the funds. Endowment Surrender Plus and Mr Wayman were liable in damages for breach of contract, and Becque Wayman was liable under section 39(3). The claimants succeeded, subject to credits and deduction of £3,887.94, with interest to be addressed separately.