Angela Lenderink-Woods v Zurich Assurance Ltd & Ors

A champertous funding arrangement, even if established, does not provide a defence to the underlying claim. For limitation purposes, the claimant must have the knowledge required by section 14A of the Limitation Act 1980; reliance on a trusted adviser and lack of knowledge of the material facts may prevent time running. A financial adviser’s duty is defined by the retainer and requires reasonable skill and care in considering the available alternatives and selecting what is best suited to the client’s objectives. A regulatory code does not displace the common-law duty. Damages are confined to loss caused by the breach, including unnecessary charges and the disadvantage of being placed in an unsuitable structure, but not investment underperformance outside the adviser’s retainer.

The claimant, a non-UK-resident and non-UK-domiciled investor, sued Zurich Assurance Ltd, Zurich Advice Network Ltd and the adviser who had recommended Gift and Loan Trusts and offshore bonds. She alleged negligence and negligent misstatement in the advice given in 2001, including failure to consider her domicile, unsuitable products and inaccurate disclosure of charges.

Zurich contended that the claim was champertous and out of time. On liability, it argued that the advice fell within the range of suitable professional advice and that expert evidence was required. The issues were whether the claim was barred, whether the adviser was negligent, and what loss the advice caused.

1. Champerty. The retainer with the claimant’s assisting adviser related to redress obtained through Zurich’s complaints process and did not entitle him to a share of damages awarded by the court. In any event, even if the arrangement had been champertous, it would not have been a defence to the claim. The judge followed Martell v Consett Iron Co Ltd [1955] 1Ch 363, as applied in Abraham v Thompson [1997] 4 All ER 362.
2. Limitation. The claimant and her daughters lacked the actual or constructive knowledge required by section 14A of the Limitation Act 1980 before 10 December 2011. They did not know that domicile affected the inheritance-tax advice or understand the multiple charges. The claim in tort was therefore not time-barred. Contractual claims were too late.
3. Standard of care. The applicable standard was that of the ordinary skilled financial adviser, assessed against the actual retainer. The adviser had undertaken to identify problems, consider available alternatives and explain the best course. A tied adviser who could not competently perform that task had to refer the client to an independent adviser. The judge applied the principles discussed in Midland Bank v Hett, Stubbs and Kemp [1979] Ch 384 and Sansom v Metcalfe Hambleton [1998] PNLR 542, while recognising the established exceptions where expert evidence is unnecessary.
4. The adviser was negligent. He failed to appreciate the critical relevance of domicile, gave materially incorrect tax reasons, recommended pointless and duplicative trust and bond structures, failed to consider suitable alternatives and inaccurately described the charges as 2%. The judge was entitled to reach those conclusions despite the absence of direct claimant expert evidence on professional practice. The views of an expert may be considered as evidence of practice, consistently with Kennedy v Concordia [2016] UKSC 6.
5. A statutory or regulatory code did not determine or exclude the common-law duty of care. The court applied the reasoning in Gorham v British Telecom [2000] 1 WLR 2129.
6. Damage and result. The adviser caused the claimant’s income-producing portfolio to be converted into fixed, non-income-producing loan obligations dependent on the co-operation of her daughters, while imposing unnecessary charges. Poor investment performance by the discretionary fund manager was outside the scope of the retainer and was not recoverable. Damages were assessed broadly at £223,000. Judgment was entered for the claimant.