England and Wales Court of Appeal (Civil Division) Decisions

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Cite as: [2000] EWCA Civ 234

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JISCBAILII_CASE_TORT

1999/0245/A2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEENS BENCH DIVISION
(HIS HONOUR JUDGE JACK QC SITTING AS A
HIGH COURT JUDGE)
Royal Courts of Justice
Strand
London
WC2A 2LL
27 JULY 2000

Before:
LORD JUSTICE PILL
LORD JUSTICE POTTER
and
SIR MURRAY STUART-SMITH
__________________________
Gorham & Others
CLAIMANTS/
APPELLANTS
-and-
British Telecommunications Limited plc
The Trustees of the BT Pension Scheme
Standard Life Assurance Company
DEFENDANTs/
RESPONDENTs
_________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
_________________________
Mr A. Palmer QC (instructed by Buringham & Brown, Bridgewater, Somerset) appeared for the Appellants
Mr N Warren QC and Mr T Lowe (Instructed by Cartwrights, Bristol) appeared for the Standard Life Assurance Company
_________________________
Judgment
As Approved by the Court
Crown Copyright ©
Pill LJ:
This is an appeal against the judgment of His Honour Judge Raymond Jack QC sitting as a High Court Judge in the Bristol Mercantile Court on 29 January 1999. It raises the question whether an insurance company which owes a duty of care to its customer when giving advice in relation to insurance provision for pension and life cover also owes a duty of care to potential beneficiaries other than himself. Also in issue are the extent of the duty owed, if one exists, causation and contributory negligence.
The background
The customer was Mr Paul Gorham who died on 5 September 1994 aged 35. He left a widow and two young children. Mrs Gorham sued on her own behalf and on behalf of the two children as well as executrix of the estate of her deceased husband. The judge ordered that £114,282.61p be paid to her. A part of that sum was said to be paid to her in respect of the claim of each of the children. In this appeal, Mrs Gorham claims that a further sum should have been paid to her to bring the total sum to £233,037. The judge noted that he had not been addressed as to any separate claim on behalf of the estate and it is agreed that the position of the estate need not be considered in this appeal. Any benefit is that of the dependants and not the estate. Reference in this judgment to the plaintiffs or claimants is to Mrs Gorham and the children. The sum awarded was paid to Mrs Gorham on the basis that she would have been paid that sum, as to part of it as trustee for her children, had her husband become a member of the British Telecommunications plc ("BT") occupational scheme to which reference will be made. The rules of the BT pension scheme would, it is agreed, have had that effect, and it is not necessary to consider those rules in more detail.
By a cross-appeal, Standard Life Assurance Company ("Standard Life") seek to set aside the judgment and, in the alternative, claim that the sum should be reduced by reason of the negligence of Mr Gorham. There were also claims against BT and the trustees of the BT pension scheme. These were dismissed and those parties do not feature in the present appeal. Standard Life have no intention of taking the sum awarded by the Judge back from Mrs Gorham. They contest the appeal and pursue the cross-appeal with the object of establishing that they do not owe the claimants a legal duty.
The case is put by Mr Palmer QC, on behalf of the beneficiaries, as a classic case of pensions misselling. Mr Gorham was sold a Standard Life personal pension policy when he would obviously have been better off in the scheme operated by his employers BT. By the time Standard Life informed him of this, in October or November 1992 (I adopt November for further reference), it would have been too late, had he then joined the BT scheme, for his dependants to qualify for pension benefits, the rules of the scheme requiring two years membership and he died in September 1994. Had he joined the BT scheme in November 1992, which he did not, his dependants would have been entitled to the lump sum death benefit payable to the claimants under the scheme. The judge awarded a sum representing the agreed capital value of the loss of pension rights, plus interest. He declined to award the lump sum death benefit which would have amounted, including interest, to almost £120,000.
The facts and the code
Mr Gorham became an employee of BT, as an account manager, on 2 April 1991, having previously been employed by Cable & Wireless and, while so employed, a member of their occupational pension scheme. He was told by BT that he was eligible to join the BT occupational pension scheme. He was told that, if he wished to opt out of membership of the scheme, he could and he was sent the opting-out booklet which included the statement that, if he did not complete the form at the back of the book, he would be "automatically joined to the scheme and deductions will be taken from your first salary payment". Mr Gorham did not complete the form but pension contributions were not deducted from his pay and he did not join the scheme. BT did not follow up with him his failure to return the form. The absence of deductions from salary would have been obvious from the pay slip issued to Mr Gorham monthly. There had been deductions for pension contributions while he was employed by Cable & Wireless.
In the autumn of 1991 Mr & Mrs Gorham contacted Mrs Gorham's brother, who was employed by Standard Life, with a view to transferring Mr Gorham's pension rights with Cable & Wireless to Standard Life. The matter was passed to Mr Cornwell, a customer services consultant with Standard Life. Mr Gorham understood Mr Cornwell to be "a company representative of the Standard Life Assurance Company" and confirmed that by signing on 3 January 1992 and sending to Standard Life a pro forma letter which also confirmed that he did not "wish to use an Independent Financial Adviser" with regard to his application. He also acknowledged that a company representative "can only recommend contracts from [his] company's product range". No criticism is made or Mr Cornwell's conduct in sending the proforma letter or in obtaining the signatures upon it of Mr Gorham.
The dealings between Mr and Mrs Gorham and Mr Cornwell are relied on by Mr Palmer in support of his submission that a duty of care was owed in the circumstances by Standard Life to Mrs Gorham and the children. Following telephone conversations, Mr Cornwell, on 24 January 1992, wrote a letter addressed to both Mr and Mrs Gorham enclosing a client "Personal Information Questionnaire". He had filled it in on the basis of information supplied by them. The information provided by Mr & Mrs Gorham included a statement of their priorities in relation to nine specified matters. They put "Provision for family" first, with "Retirement planning and house purchase" joint second. He asked them both to sign it in the appropriate place. The signature on the form was back-dated to 3 January but nothing turns upon that. A pension quotation was included with the letter.
Mr Gorham, described as "client", and Mrs Gorham as "spouse", signed a declaration: "We confirm that all the relevant information made available is shown on this form, and we confirm that Standard Life should offer `best advice' on the basis of the data supplied". Those signatures were followed on the form by a section entitled "Best advice procedure" in which Mr Cornwell set out his "best advice recommendations". Beneath that section, both Mr & Mrs Gorham, again described as client and spouse respectively, signed a declaration: "We confirm that the above `best advice' recommendations have been received and understood". In his recommendations under the heading "Retirement planning", Mr Cornwell had stated: "To consider advisability of pensions transfer, to consider further pension provision and also contracting out". Under the heading "Action", he stated: "Decided to transfer to personal pension. Start personal pension plan for £80 per month w.p. [with profits] as wanted steady growth. Didn't want W.O.P. [waiver of premium] as had job security. Also wants ... life cover of £14,700 costing £5 per month".
Under the heading "Protection -- spouse", the recommendation was: "To look at life cover within pension provision: to investigate cost of life cover on wife". In the action column it is stated: "To take some life cover within pension". The question of life cover for Mrs Gorham was not pursued.
The significance of Mr Cornwell making clear that he was a company representative and not an independent financial adviser becomes clear upon a consideration of the LAUTRO code of conduct for members and company representatives, adopted by Standard Life. It appears at Schedule 2 to the Rules of LAUTRO. Under paragraph 3(3)(b) of the code (February 1990), a company representative shall "explain the contracts the sale of which he is authorised to arrange or procure, and as to the merits which he may advise investors, are those offered by the member whose company representative he is or by other members of the same marketing group, and no others". This duty is specific and is narrower than the duty owed by an independent financial adviser.
More detailed consideration of the differences between the duties of a company representative and those of an independent financial adviser is unnecessary for the determination of this appeal. It is conceded by Standard Life that Mr Gorham was not advised, as he should have been in early 1992, that an occupational pension scheme might be superior to a personal pension. Breach of duty is admitted on the basis that Mr Gorham should have been advised about the differences between an occupational scheme and a personal pension and that Mr Cornwell was under a duty to refuse to sell to Mr Gorham a Standard Life policy unless satisfied that Mr Gorham had made an informed choice between the Standard Life scheme and the occupational scheme. Standard Life understandably wish to make clear that under the code of practice Mr Cornwell, as a company representative, was not entitled to advise Mr Gorham to join the BT scheme. LAUTRO rule 3(4)(a) provides that the member's company representatives are not permitted to sell the investment contracts "of any person other that that member or any body which belongs to the same marketing group as the member otherwise than on an execution only basis."
Paragraph 8(1) of the code of conduct provides:
"A company representative shall, in advising an investor as to the suitability for that investor of any investment contract, have regard, in particular, to the investor's financial position generally, to any rights he may have under an occupational pension scheme or the State earnings-related pension scheme, (if such rights are relevant in the particular case) and to all other relevant circumstances, and he shall use his best endeavours to ensure --
(a) that he recommends only that contract or those contracts which are suited to that investor ..."
The superiority, from the point of view of Mr Gorham and his dependants, of the BT occupational scheme he could have joined over the Standard Life personal pension policy offered to him is set out by the judge and is not disputed:
"(a) A personal pension is funded solely by contributions from the employee. An occupational pension is funded also by contributions from the employer. These will vary from scheme to scheme. Under the BT scheme the employee contributes 6% of salary. The contributions required from BT are assessed every three years by an actuary. At the time of Mr Gorham's employment in 1991 BT contributed 12% of salary. It is now 9%. So in 1991 total contributions were three times the employee's contribution. They are now two and a half times.
(b) On retirement the BT scheme provides for a pension of 28/60s of final salary, index linked. For a contribution which was some £2.88 gross, or £2.30 net of tax per month less, the Standard Life policy would have provided a pension of the order of £4,610 per annum, which is less than one quarter of Mr Gorham's salary in 1991. The figure of £4,610 is based on an assumed rate of growth of funds which, of course, may be exceeded or may not be met.
(c) On early retirement through ill health or redundancy the BT scheme provides a pension dependant on salary and length of service. A separate policy would have been required from Standard Life to provide such benefits.
(d) On death in service the BT scheme provides a lump sum payment of three times salary, raised in October 1991 to four times by an additional scheme with different trustees. Annuities are payable to dependants. A wife's annuity is calculated as one half of the early retirement pension her husband would have received. It is here £2,463 p.a. Where there are a two or more dependant children there is an annuity for them equal to the mother's pension; with one it is half. Mr Gorham paid a premium of £5 per month (included in the cost difference of £3.88 per month gross referred to above) for life insurance with Standard Life. This provided a lump sum on death of £14,700 with annuities for dependants determined by the amount of contributions paid."
Mr Gorham could not be a member both of the occupational scheme and the personal pension scheme. At that stage, he knew, as the judge found, that he was not a member of the BT scheme.
In a letter of 29 January 1992, addressed to both Mr and Mrs Gorham, Mr Cornwell expressed the view that "We ought to keep the life cover under review on an annual basis". In a further letter of 30 April 1992, Mr Cornwell stated that he understood that Mr and Mrs Gorham had decided to leave the decision on life cover until the end of the year. He added: "Please bear in mind that the life cover of £14,700 (on Mr Gorham) is far less than the cover he had under his previous employers' scheme. If on reflection you agree with me that this leaves you dangerously exposed in the intervening period, please give me a ring as soon as possible".
In November 1992, Mr Gorham ceased making contributions to the Standard Life scheme. There was evidence that he rang the Standard Life helpline and was told that the BT scheme was better. He did not respond to reminders from Standard Life about premiums.
Findings of fact
The judge found as a fact that at that time Mr Gorham read the BT booklet and realised that he could not have a personal pension with Standard Life as well as membership of the BT scheme. The judge found that Mr Gorham concluded, wrongly, that he had never opted out of the BT scheme because he had not completed the opting-out form. The judge found that Mr Gorham, notwithstanding his earlier belief, understood from the autumn of 1992 onwards that he was a member of the BT scheme. That finding of fact is not challenged in this appeal. The judge considered, and rejected, the argument that Mr Gorham must have realised he was not a member of the BT scheme because no deductions were being made from his salary.
The judge put it in this way:
"The time to be considered is October 1992 because until then Mr Gorham had rightly thought that he was not a member of the BT scheme. I have found that he must then have decided that because he had not returned the opting out form was still a member of the scheme. He decided this despite the fact that his oral instruction had been acted on and so no contributions had been deducted during his employment".
Mr Gorham did not request repayment from Standard Life of his premiums on his policy with them or of the Cable & Wireless rights which had been transferred to Standard Life.
Procedure
The case has achieved procedural complexity by reason of a change in stance by the parties, responsibility for which is disputed. At the start of the second day of the trial, it was admitted on Standard Life's behalf that they owed the claimants, and not just Mr Gorham, a duty to take reasonable care in giving advice when the Standard Life policy was taken out. It was also conceded that Mrs Gorham had a right of action for breaches of the LAUTRO rules. Near the end of the trial, they sought to withdraw the admission that the duty was owed to the plaintiffs as well as to Mr Gorham. This was brought about, in the view of the judge, by the submission of the plaintiffs that, although an allegation of contributory negligence might have been possible against Mr Gorham and his estate, it was not available against the plaintiffs. The admission of the existence of the duty depended on that point not being taken. The judge permitted the concession to be withdrawn, giving reasons, and there is no appeal against that ruling.
The practical importance of the point, submits Mr Palmer for the plaintiffs, is that allegations of breach of duty by Standard Life might have been put on a broader basis had the extent of the duty of care been in issue at the trial rather than being conceded. The pleaded case (paragraph 26 of the re-amended statement of claim) is that "in advising its dealings with the deceased as mentioned in paragraphs 14 and 15 above, by its servant or agent, Alan Cornwell, or otherwise the third defendant [Standard Life] owed to the plaintiffs a duty to take reasonable care in giving such advice in connection with the existing or prospective pension rights in the BT scheme and his other financial arrangements ... ." The material passage in paragraph 14, states that it was "the deceased, upon advice, [who] took out a personal pension with or through Standard Life". Had the duty to the plaintiffs not been conceded, application might have been made to amend the statement of claim to refer to Mrs Gorham's role in the discussions which led to the commencing of the Standard Life pension plan.
Mr Warren QC, for Standard Life, submits that any direct duty to Mrs Gorham would involve establishing that she had relied on the advice of Mr Cornwell (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465). Reliance had not been alleged or canvassed at the trial.
Leave further to amend the statement of claim was sought and refused in the course of the hearing in this Court. Mr Palmer had sought to allege that the duty was owed to Mrs Gorham, on behalf of herself and the children, directly, by reason of her taking part in the negotiations, as well as in consequence of the duty owed to the deceased. On the pleaded case, the Court considers itself confined to considering whether a duty of care to Mrs Gorham and the children arose because they were potential beneficiaries of the arrangements for insurance cover which were subject to Standard Life's duty of care to Mr Gorham. The Court would have preferred to deal with the issue comprehensively and is reluctant to place in different compartments the different components of the duty in tort which may be owed by an insurance company when giving advice to a customer. As will appear, I do not however consider Mrs Gorham's participation in the negotiations to be an essential component of the duty of care to her which, in my view, arises.
It was also alleged before the judge, and indeed admitted at least until near the end of the trial, that the plaintiffs had a cause of action under section 62 of the Financial Services Act 1986, read with section 62A. It is now conceded, on a consideration of the sections and the regulations made under them, that no cause of action exists because Mrs Gorham cannot bring herself within the meaning of the word "investor" in the rules. Section 62(1) provides a cause of action at the suit of a person who suffers loss as a result of the contravention of the relevant rules or regulations, but section 62A(1) provides that "no action in respect of a contravention to which 62 above applies shall lie at the suit of a person other than a private investor".
Judge's conclusions
The case against BT and the trustees of the BT pension scheme was based on their reaction to the failure to send to them the completed opting-out form and upon the allegedly misleading contents of their pensions literature. The judge rejected the claim, holding that "there was no need for the literature to say that, if he [Mr Gorham] failed to return the opting out form but his instruction to opt out was nonetheless acted on, he would not be a member". The judge did however hold that BT owed the plaintiffs a duty of care:
"In my judgment, where an employer provides information to an employee in connection with pension matters and the information is relied upon by the employee to the ultimate detriment of his dependants on his death, the law should recognise a duty to the dependants".
The judge cited the speech of Lord Browne-Wilkinson in White v Jones [1995] 2 AC 207 at 274.
The judge dealt with the case against Standard Life briefly:
"In my view there is a close similarity to the situation between BT and the plaintiffs where I have held that a duty existed. The situation with Standard Life may be the plainer. For the relationship related solely to financial arrangements desired to secure future benefits for Mr Gorham and his dependants. It is significant that Mrs Gorham was involved in the discussions with Mr Cornwell and that she signed the fact find as well as her husband. I hold that Standard Life did owe a duty to the plaintiffs".
(The judge described the questionnaire already mentioned as a "fact find".)
The plaintiffs' appeal is necessary because, having made that finding, the judge, on the pension element of the claim, found against the plaintiffs on causation, by virtue of Mr Gorham's conduct:
"In October or November 1992 Mr Gorham was told by Standard Life that the BT scheme was better than a personal pension with them. ... This is the advice which Mr Cornwell should have given some months earlier. It was then up to Mr Gorham to get his house in order with BT. Neither he nor the plaintiffs can claim in respect of loss which arose after the negligent advice had been corrected and which could then have been avoided".
As already stated, it was, by November 1992, too late to remedy the position with respect to the pension because unhappily Mr Gorham died in September 1994, that is within two years of the error being corrected.
The judge also found that Standard Life could not rely on the negligence of Mr Gorham to reduce the award to Mrs Gorham and the children. The judge noted that in claims by dependants under the Fatal Accidents Act 1976, it had been necessary to make statutory provision (section 5) for the reduction of awards by reason of the contributory negligence of the deceased. Standard Life do not seek, on the ground of contributory negligence, to reduce the sum in fact awarded by the judge. In the event of this Court reversing the finding of the judge with respect to the sum representing provision of pension, it is claimed that the resulting award should be reduced by reason of the contributory negligence of Mr Gorham.
White v Jones and the plaintiffs' case
The plaintiffs rely on the principle established in the House of Lords in White v Jones. The assumption of responsibility by a solicitor to his client, who had given instructions for the drawing up of a will for execution, extended to an intended beneficiary under the proposed will in circumstances where the solicitor could reasonably foresee that a consequence of his negligence might result in the loss of the intended legacy without either the testator or his estate having a remedy against the solicitor
Lord Goff set out the conceptual difficulties involved in accommodating a beneficiary within the ordinary principles of the English law of obligations. Lord Goff also identified the reasons of justice which had prompted judges and academic writers to conclude that a duty should be owed by the testator's solicitor to a disappointed beneficiary. At p 262C, Lord Goff stated that "in the absence of special circumstances, [the relevant work] cannot be said to be undertaken for the intended beneficiary. Certainly, again in the absence of special circumstances, there will have been no reliance by the intended beneficiary on the exercise by the solicitor of due care and skill; indeed, the intended beneficiary may not even have been aware that the solicitor was engaged on such a task, or that his position might be affected". Lord Goff concluded that:
"The real reason for concern in cases such as the present lies in the extraordinary fact that, if a duty owed by the testator's solicitor to the disappointed beneficiary is not recognised, the only person who may have a valid claim has suffered no loss, and the only person who has suffered a loss has no claim".
At p 265D, Lord Goff added:
"Here there is a lacuna in the law, in the sense that practical justice requires that the disappointed beneficiary should have a remedy against the testator's solicitor in circumstances in which neither the testator not his estate has in law suffered a loss".
Having expressed that conclusion, Lord Goff set out five beneficial consequences which the conclusion produced. The fifth was:
"I do not consider that damages for loss of an expectation are excluded in cases of negligence arising under the principle in the Hedley Byrne case [1964] AC 465, simply because the cause of action is classified as tortious. Such damages may in principle be recoverable in cases of contractual negligence; and I cannot see that, for present purposes, any relevant distinction can be drawn between the two forms of action. In particular, an expectation loss may well occur in cases where a professional man, such as a solicitor, has assumed responsibility for the affairs or another; and I for my part can see no reason in principle why the professional man should not, in an appropriate case, be liable for such loss under the Hedley Byrne principle."
For the reasons given by Chadwick LJ in his analysis of White v Jones in Carr-Glynn v Freirsons [1998] 4 All ER 225 at 231 to 233, it is the conclusion of Lord Goff, with whom Lord Browne-Wilkinson and Lord Nolan expressed their agreement, which should form the basis for the analysis for the present facts.
In its structure, the present situation is identical to that in White v Jones. Mr Gorham intended to create a benefit for his wife and children in the event of his pre-deceasing them. Under the BT scheme they would benefit substantially in that event. By the time the breach of duty to Mr Gorham was discovered, it was, with respect to the sum by way of death benefit awarded by the judge, too late to remedy the position in the dependants' favour.
Before leaving White v Jones, I mention the inter vivos gift which Lord Goff contemplated at p 262D when considering the conceptual problems involved. As a result of a solicitor's negligence, the instrument conferring the gift is not effective for its purpose and the mistake comes to light during the lifetime of the donor, after the gift to the intended donee should have taken effect. In such circumstances, Lord Goff concluded, the intended donee would not have any claim against the solicitor because the donor is able to put matters right, if he sees fit. In putting it in that way Lord Goff was, as I understand it, dealing with causation. The prospective donee has no claim because the donor had the opportunity to perfect the gift but chose not to do so. What Lord Goff regarded as the real reason for concern, namely that "the only person who may have a valid claim has suffered no loss and the only person who has suffered a loss has no claim" did not arise. It does however arise in the present case.
The defendants' case
For Standard Life, Mr Warren QC, submits that the principle in White v Jones should be construed narrowly. It was established to fill a lacuna in the law, the absence of a remedy against a professional man, a solicitor, who may be taken to have assumed a responsibility to an intended beneficiary. The principle does not extend to an insurance company whose customer intends to create a potential benefit for a third party.
Mr Warren also submits that in an area where there is extensive regulation and Parliament has intervened to create a remedy, the duty of care at common law must be modelled upon the statutory remedy and there can be no room for an extension of the principle. The principle amounted to judicial legislation to fill a lacuna in the law. The principle was quite exceptional and depended on the special position of the solicitor as a professional man. It had no place in a situation involving insurance company, customer, and intended beneficiary. Mr Warren referred to the "hugely detailed rule book" which had followed the Financial Services Act 1986. Provision is made in the Act for self-regulating organisations and for their recognition. Schedule 2 to the Act imposes detailed requirements for recognition. An elaborate and comprehensive code of conduct has followed the Act.
It is submitted that there is no duty of care other than and beyond that provided by the statute and the rules and codes which have followed it. The common law duty is co-extensive with that provided in the rules (unless advice is given which goes beyond that permitted by the rules). The suggestion that third parties can benefit finds no support in any of the rules and it follows that no duty of care is owed to third parties.
Conclusions
In my judgment, the stress placed upon the statutory code as a decisive ground for refusing a remedy is misplaced. Mr Palmer rightly accepts the pressing need which developed in the 1980's for a statutory framework within which financial services could be provided. I do not however discern a Parliamentary intention to eliminate the power of courts to decide whether a duty of care arises in a particular situation and, if so, what its extent is. Had Parliament not intervened, remedies for the abuses which existed in this field would almost certainly have been developed by the courts. The courts now do so in the context, and with the benefit of, rules and codes of practice laid down by those concerned with the maintenance of proper standards. The courts can be expected to attach considerable weight to the content of codes drafted in these circumstances but are not excluded from making their own assessment of a situation.
In particular, the silence of the codes on the subject of the rights of beneficiaries does not exclude the power of the court to consider whether a duty of care exists. The present question does not appear to me to have been addressed by Parliament or by LAUTRO and the issue is to be decided according to common law principles. The claimants are not seeking to extend the scope of the duty admittedly owed by Standard Life; they argue only that the duty is owed to them as well as to Mr Gorham. In my judgment, the principle in White v Jones, as expressed by Lord Goff, covers the present situation.
It is fundamental to the giving and receiving of advice upon a scheme for pension provision and life insurance that the interests of the customer's dependants will arise for consideration. In my judgment, practical justice requires that disappointed beneficiaries should have a remedy against an insurance company in circumstances such as the present. On the facts, Mr Cornwell can have been in no doubt about his customer's concern for Mrs Gorham and the two children. First amongst Mr Gorham's list of priorities was "provision for family". Mrs Gorham, as spouse, was expected to sign a form confirming the information she and her husband had made available and confirming that Mr Cornwell's recommendations had been received and understood. Advice was expected and was directed not only to the interests of Mr Gorham but to the interests of his dependants should he pre-decease them. The advice was given on the assumption that their interests were involved. Moreover, the provision for them was not merely a windfall in the sense that a legacy may be a windfall; it was central to the purpose of the venture into insurance.
Inevitably in insurance contracts of this kind, there is a potential conflict of interest between the customer and his dependants. One customer will wish to do the best he can for himself, by way of a pension during his lifetime. Another will sacrifice, to the full extent he can, his interests to those of his dependants. The existence of the duty cannot in my view depend on the category into which the customer falls or on how far along the spectrum of providing for his dependants he travels. I do not see the conflict of interest as an obstacle to the creation of a duty of care to the dependants however. The duty is not one to ensure that the dependants are properly provided for. It is, in the present context, a duty to the dependants not to give negligent advice to the customer which adversely affects their interests as he intends them to be. The advice in this case was given in a context in which the interests of the dependants were fundamental to the transaction, to the knowledge of the insurance company representative giving advice as well as to his customer, and a duty of care was owed additionally to the intended beneficiaries. I will consider the extent of the duty to them more fully under the heading "causation".
In relation to the sum awarded by the judge, a point has been raised on causation which was not taken at the trial. It was by reference to Mr Cornwell's letter of 30 April 1992 in which he referred to Mr and Mrs Gorham being "dangerously exposed" with respect to life cover. The letter was not mentioned in the skeleton argument. It is now submitted that the warning given in that letter broke the chain of causation.
I do not accept that argument. Mr Gorham should not have been permitted to be in the Standard Life scheme at all. Mr Cornwell caused him to be in it. Pointing out to Mr Gorham one of the limitations of the scheme he had been permitted on advice to join does not break the chain of causation.
At the very end of the hearing, it was for the first time contended that there might be a duty to Mrs Gorham without there being a duty to the infant children. Even if that argument is permitted, I see no merit in it on the present facts and upon an application of the principle in White v Jones. The widow and the infant children were equally dependant and their position cannot be distinguished.
I would dismiss Standard Life's cross-appeal.
Appeal: causation
The judge distinguished between the claim based on the pension entitlement and that based on the lump sum death benefit on the basis of the conduct of Mr Gorham. The judge held that the chain of causation between the breach of duty and the loss was broken:
"In October or November 1992 Mr Gorham was told by Standard Life that the BT scheme was better than a personal pension with them. ... This is the advice which Mr Cornwell should have given some months earlier. It was then up to Mr Gorham to get his house in order with BT. Neither he nor the plaintiffs can claim in respect of loss which arose after the negligent advice had been corrected and which could then have been avoided."
While there is difficulty in reconciling the judge's findings as to Mr Gorham's reliance or lack of reliance on the BT literature about their pension scheme, there is no doubt that the judge went on to find that Mr Gorham decided in November 1992 that, because he had not returned the opting-out form, he was a member of the BT pension scheme. There is no appeal against that finding of fact. Mr Gorham believed, and wrongly believed, from November 1992 that he was a member of the BT scheme. The judge also found that it was a situation which plainly required Mr Gorham to seek advice as to the solution.
Damage flowed from the breach of duty. Mr Palmer submits that the fact that Mr Gorham acquired knowledge that he should not have been in the Standard Life scheme when the BT scheme was on offer did not break the chain of causation. In any claim he would have had, or his dependants in fact have, damage continued to flow from the breach of duty. He had been badly advised by Standard Life. This was their chance to put matters right. They should at least have conducted a proper review and given written advice. Mr Gorham is not to be criticised for his misapprehension in November 1992 that he was a member of the BT scheme.
Reliance is placed upon the fact that Mr Gorham was told, only in a casual way, that the BT scheme was better, that is on the help line. Standard Life respond by submitting that, if he wanted further advice from Standard Life, Mr Gorham should have made a proper approach. He had a ready link in Mr Cornwell.
While eventually causation is a question of fact, it is important when considering the issue of fact to identify the scope of the duty owed. In White v Jones, Lord Browne-Wilkinson adopted the words of Lord Reid in Hedley Byrne at p 486. The defendant has "accepted a relationship ... which requires him to exercise such care as the circumstances require".
In Caparo Industries plc v Dickman [1990] 2 AC 605, Lord Bridge stated, at p627:
"It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless."
Lord Hoffmann expressed a similar view in South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191 at 211 adding that a duty of care does not exist in the abstract.
In my judgment, the limited nature of the duty owed by Standard Life is material to the issue of causation. There was no duty to advise comprehensively. There was a prohibition upon advising a customer to join the scheme of another company. The duty in the circumstances was, to put it at its simplest, not to sell a Standard Life policy to Mr Gorham.
That being so, the breach of the duty did not cause the loss which occurred after Mr Gorham had been told that the BT scheme was better. He clearly knew in November 1992 that he should not be in the Standard Life scheme. There was no duty to give him comprehensive advice in November 1992. The duty of Standard Life had been and remained a limited one and was discharged, belatedly, when he knew their policy was unsuitable in the circumstances. The earlier breach of duty ceased to have causative effect. The judge was in my view fully entitled to conclude that Mr Gorham ought reasonably to have checked with BT as his employers whether he was covered by their scheme. Against the background described, it was entirely reasonable to expect him to make that inquiry. His belief that he was a member of the scheme was not a reasonable or sensible one in the circumstances.
I would dismiss the appeal on this ground.
Contributory negligence of Mr Gorham
I see the force of the submission that the dependants should be in no better position than Mr Gorham would have been had he brought a claim based on a breach of duty to himself. The argument for limiting their cause of action to take account of his failure to take reasonable measures in his, and the dependants', interests has attractions. Given my conclusion on causation, however, I do not propose to make a finding on this further issue. The issue arises only upon a view of the facts which is very different from the one I have formed and I would prefer to leave it, if it arises, for consideration in another case.
Schiemann LJ:
I agree with Pill LJ that both the appeal and the cross appeal ought to be dismissed.
The position of an investor who goes to a financial adviser seeking investment or pensions advice in relation to making provision for his family after his death is analogous to that of a person who goes to a solicitor seeking advice in relation to making provision by Will for his family after his death. I agree with My Lords that in each of these cases, following the phraseology of Lord Goff in White v Jones at page 268, the adviser's assumption of responsibility towards the investor extends to the intended beneficiary who ( as the financial adviser can reasonably foresee) may, as a result of the adviser's negligence, be deprived of an intended benefit and who, in a very real sense, are dependent upon the dealings between the adviser and the person seeking advice to safeguard their position. Like Pill LJ, I am not troubled by Sir Murray Stuart-Smith's concern (to which he gives expression in paragraph 6 of his judgment) about a conflict of interest. This concern, I think, arises by approaching the question as one of a duty owed by the advisor to intended beneficiaries and then asking what is the scope of the duty owed by the advisor to the intended beneficiaries? However, the assumption of responsibility to beneficiaries in cases such as the present does not operate to widen the scope of the duty but merely to widen the number of those who can sue in respect of any breach. That was I believe the approach of Lord Goff, who at page 268 of White v Jones, states that the assumption of responsibility will of course be subject to the terms of the contract between the solicitor and the testator,
I agree with My Lords that the fact that the duties imposed by Statute on various classes of advisers vary does not affect the duty imposed by the Common Law. The restrictions imposed by Statute on what products the adviser can recommend do not have the effect of relieving him of the duty not to recommend his principal's products unless they are suitable.
So far as loss of pension rights is concerned no question of causation or contributory negligence arises since by the time that Standard Life spotted their mistake and advised Mr. Gorham to go to the British Telecom Scheme it was (as it turned out) too late for any action of his to prevent the loss of pension rights which followed from acting on their earlier advice.
The position is different so far as the lump sum death benefit is concerned. It follows from our holding in relation to the existence of a duty that, in advising Mr Gorham to invest in the Standard Lifer Scheme, Standard Life put themselves in a situation where Mrs. Gorham and the children might eventually be entitled to sue them. Had nothing further been done by Standard Life then they would have been liable for the loss of death benefit. However, something was done before the death of Mr. Gorham. Standard Life found out their error and advised him to take steps which would have safeguarded the position of Mrs. Gorham and the children so far as death benefit is concerned.
It is at this point that Pill LJ and Sir Murray disagree. Sir Murray starts from the fact that as a result of the defendant's earlier negligence the claimant failed to join the BT scheme and had this failure not occurred his dependants would have been better off. Sir Murray asks whether anything happened between the time of the negligence and the death of Mr Gorham which breaks the chain of causation and answers the question in the negative.
Like the judge I regard the subsequent giving of correct advice by the defendant at a time when it was open to Mr Gorham to act on it and before any damage had occurred as a result of the earlier negligence as relieving the defendants of liability for the earlier negligence. Standard Life put right their earlier negligence before any harm had occurred. They put Mr. Gorham in more or less the same position as that in which he would have been had they advised him in the first place that he should not invest in the Standard Life Scheme. They having eventually done that, I see no reason why thereafter they should be liable to him in respect of their earlier negligence which they had corrected.
As to the submissions on contributory negligence, I find myself in the same position as Pill LJ.
Rt Hon Sir Murray Stuart-Smith:
Three questions arise on the appeal and cross-appeal:

(i) Did Standard Life (SL) owe the Claimants, Mrs Gorham and the children, a duty of care? If it did, it is accepted that there was a breach of duty through Mr Cornwell. (The Duty of Care)
(ii) Did the action or inaction of Mr Gorham in about October 1992 break the chain of causation so that any loss thereafter was not caused by SL's negligence? (Causation)
(iii) If the answer to question (ii) is no, should the negligence of Mr Gorham in October 1992 be reflected in a lesser award to the Claimants? (Contributory negligence).
The duty of care
The judge applied the principle enunciated by the majority of the House of Lords in White v Jones [1995] 2 AC 207 and held that SL were under a duty of care to the Claimants. Lord Goff enunciated the principle in two passages in his speech. At 268D he said
"In my opinion, therefore, your Lordships' House should in cases such as these extend to the intended beneficiary a remedy under the Hedley Byrne principle by holding that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor's negligence, be deprived of his intended legacy in circumstances in which neither the testator nor his estate will have a remedy against the solicitor."
And at 269C he said:
"Let me emphasise that I can see no injustice in imposing liability upon a negligent solicitor in a case such as the present where, in the absence of a remedy in this form, neither the testator's estate nor the disappointed beneficiary will have a claim for the loss caused by his negligence. This is the injustice which, in my opinion, the judges of this country should address by recognising that cases such as these call for an appropriate remedy, and that the common law is not so sterile as to be incapable of supplying that remedy when it is required."
In Carr-Glynn v Frearsons [1998] 4 All ER 225 at p 233 Chadwick LJ (with whose judgment Butler-Sloss and Thorpe LJJ agreed) said that it was only this reasoning that formed the majority opinion in the House of Lords. The circumstances here are very similar. It is readily foreseeable by SL and Mr Cornwell that the Claimants will suffer loss if he is negligent. Mr Gorham, had he lived, would have had a claim for diminished pension rights: but he did not live and his estate has no claim. Unless Mrs Gorham has a claim for her loss of pension rights and the children's loss of benefit, there is no remedy. The class of beneficiaries is small and it is obvious that Mr Cornwell had them in contemplation at the time of the transaction of selling the SL policy. In a sense the case is even stronger than White v Jones because Mrs Gorham suffered a real loss; the premiums are paid out of what might be regarded as the family income, and her loss is a reduced pension. The beneficiary in White v Jones merely lost a windfall.
But Mr Warren QC on behalf of SL submits that the duty of care arose in the context of extremely detailed and complex financial services regulation and therefore any common law duty must be consistent with these rules which have come into existence following the Financial Services Act 1986 (the Act). Section 62(1) makes contravention of any rules or regulations made under the Act actionable at the suit of the person who suffers loss as a result of the contravention. But section 62A makes it plain, and Mr Palmer QC on behalf of the Claimant's accepts, that the action only lies at the suit of the private investor, who in this case was Mr Gorham. The fact however that no action for breach of statutory duty lies at the suit of the Claimants, does not mean that no action for breach of common law duty will lie, even if so far as Mr Gorham is concerned the extent of the statutory and common law duty is coterminous.
But Mr Warren further argues that a clear distinction is drawn by the Act and the rules and regulations made under it between an Independent Financial Adviser, who is under a duty to give best advice, and a tied agent (such as was Mr Cornwell) who cannot recommend products other than that he is authorised to sell, but whose duty is not to sell his principal's products unless they are suitable; and it is not suitable if an occupational scheme provides superior benefits. Mr Warren submits that this limited duty is imposed by the Act and Rules and therefor the extent of the duty is confined by the statute and the rules. Before the Act, he submits, a tied agent owed no duty of care to anyone, even the investor. An investor who wished to purchase a pension policy would simply do so by asking for it, rather like purchasing a bunch of bananas. If the premise was correct and the only duty was that created by the Act and Rules made under it, I would see much force in this submission. But I do not think it is correct. If a salesman before the Act was asked to advise whether his principal's product was suitable, and he knew or ought to have appreciated that the purchaser had or was likely to have an occupational scheme which was probably more favourable, I see no reason why he should not be under a duty to advise carefully. The truth is that the Act was passed in an attempt to control the mischief of misselling. If a duty of care in such circumstances was owed to the investor, it is a fiction of the law that it has always been as it was stated by the House of Lords in White v Jones. So that a duty was also owed at common law to the investor's dependants. I would therefore reject Mr Warren's submission.
There is one other aspect of this question which has caused me some concern. It is not difficult to imagine a situation where there is a conflict of interest between the investor and his dependants. For reasons of his own, which may be good or bad, he may wish to enhance his own pension at the expense of his wife's. In such a situation plainly someone in Mr Cornwell's position cannot owe a duty of care both to the investor (which he undoubtedly does) and also to the wife. But should not the possibility of such conflict deter the courts from imposing a duty of care towards the dependants? It is quite clear that there was no such conflict in this case. I think Mr Palmer is right when he submits that it will be reasonably clear on the facts of a particular case that there is such a conflict. There will perhaps be borderline cases where the factual decision is not easy; but I do not think that should deter the courts from imposing a duty where there is clearly no such conflict. Accordingly I agree with the judge that SL was under a duty of care towards the Claimants.
Causation
The Judge held that the chain of causation was broken by Mr Graham's actions or inaction in October or November 1992 when he was told by SL that the BT scheme was better than a personal pension with them. He put the matter succinctly; he said at p 35:
"It was then up to Mr Gorham to get his house in order with BT. Neither he nor the Plaintiffs can claim in respect of loss which arose after the negligent advice has been corrected and which could have been avoided."
But the judge also held that Mr Gorham when he read the BT literature in October 1992 thought that he was a member of the BT scheme because he had not returned the opt-out form. This is what the literature appeared to say. Though the judge also held that it was no breach of BT's duty not to word their literature so as to protect Mr Gorham from himself in the most unusual situation that arose.
I agree with Mr Palmer that it is readily understandable how Mr Gorham was misled by the literature, though he obviously ought to have taken the matter up with BT on something so important as this when he had previously thought that he was not a member of BT scheme. But if Mr Gorham had not allowed himself to be misled when he read the BT literature in October/November 1992, the issue of causation would never have arisen. SL had created the problem by their negligence; if Mr Gorham had not erroneously thought he was and always had been a member of the BT scheme, that negligence would have continued and
caused the whole of the Claimants' loss. It is true that Mr Gorham had an opportunity in October/November 1992 of putting his house in order, and I think that the judge's criticism that he failed to take proper advice from BT is justified. But the last opportunity rule is no longer good law. Can it really be said that Mr Gorham's failure was the whole cause of the loss, for that would be necessary to break the chain of causation? I think not. It is the Claimant's loss that has to be considered. It follows from the judge's finding in relation to the pension rights that Mr Cornwell's negligence caused the loss of £114,282.61 to the Claimant. It must therefore also have been a cause of the loss of the lump sum death benefit, unless it can be said that some action or inaction of Mr Gorham himself was the sole cause of that loss. If he had decided in November 1992 that he was not going to join the BT scheme, for whatever reason, I can quite follow that that would be an end of the matter. But on the judge's finding he did intend to join the BT scheme and thought he had done so, because he was misled by the BT literature. Granted that, he should have taken advice from BT to clarify the matter and not relied upon his own misreading of the ambiguous literature. But that does not mean that it was his clear decision not to join the BT scheme that caused the loss or his lack of prudence in taking proper advice that was the sole cause. It seems to me that the judge's conclusion on causation may have been influenced by his view on contributory negligence, namely that any fault on the part of Mr Gorham could not be relied upon under the Law Reform (Contributory Negligence) Act 1945 (the 1945 Act) against Mrs Gorham, since the fault was not hers. But had the claim been made by Mr Gorham in his lifetime, his negligence could have had the effect of reducing the amount of his claim.
In my judgment the example of the gift inter vivos given by Lord Goff at p 262D, and cited by Pill LJ in his judgment is not a true analogy. The reason why there is no causation in the case where the donor realises during his life time that the gift is imperfect and does nothing about it, is because it must be presumed that the donor changed his mind. He had the opportunity to perfect the gift and chose not to do so. At least on those facts alone the donee would be unable to prove that the donor intended to perfect the gift, but died before being able to do so. If it could be shown that the donor did intend to perfect the gift, after he learnt the true position, but through delay or some incompetence failed to do so before he died, the position would be analogous with this case, and I do not think the chain of causation would be broken.
In the same way I respectfully find myself in disagreement with Schiemann LJ on this aspect of the case. Mr Gorham did not ignore SL's advice in November 1992 (if indeed it can be dignified with that term). He intended to and thought that he had complied with it, but because he misunderstood the BT literature and carelessly did not ask BT to clarify the position, he failed to do so. I disagree therefore with the judge on this aspect of the case, and would allow the appeal.
Contributory negligence
The case seems to have been argued before the judge on the basis of the 1945 Act, namely that Mr Gorham's fault could be relied upon to reduce Mrs Gorham's damages. I think the judge was right to reject this submission, since the Act only applies where `Any person suffers damage as a result partly of his own fault and partly of the fault of any other person or persons'. Neither Mrs Gorham nor the children were at fault. But the result does not seem just. Why, it may be asked, should SL be liable for the full extent to the Claimants, when at least part of the loss was due to the fault of Mr Gorham?
Mr Palmer was inclined to accept that if the Courts were to fashion a remedy to avoid an injustice to the Claimant, it should be so fashioned as not to cause injustice to the defendants. We are in the realm of judge-made law here. In White v Jones the House of Lords was unable to apply existing principle to meet the facts of the case, because there was no reliance by the beneficiary on the solicitor, and hence the strict doctrine of Hedley Byrne & Co Ltd v Heller [1964] AC 465 did not assist the claimant. What the majority of their Lordships did was to fashion a remedy to meet the justice of the case. It may be noted that Lord Goff stated that the assumption of liability by the solicitor "would be subject to any terms of the contract between the solicitor and the testator which may exclude or restrict the solicitor's liability to the testator under the principle in Hedley Byrne." P 268G. Although Lord Goff is there expressly referring to contractual terms, I do not see why the same principle should not apply to contributory negligence on the part of the testator, since the beneficiary is not a party to the contract.
In the Carr-Glynn case it might be thought that the testatrix was negligent because she said she would obtain the relevant deeds to clarify the position, but failed to do so. The point however does not seem to have been argued. Where Parliament intervened to give a remedy to the dependants of a deceased killed by the negligence or breach of duty of the defendant, the amount recoverable is reduced by the contributory negligence of the deceased (Fatal Accidents Act 1976 section 5). This was obviously necessary to avoid injustice to the defendant, since strictly speaking, as the judge held in this case, without statutory intervention the 1945 Act could not be relied upon against the dependants.
If therefore the Courts are to fashion a remedy to meet the justice of the case, they must take care that it is not made so as to involve injustice to the defendant. That can be done by reducing the amount recoverable by the dependant claimants to take account of the negligence of the deceased which was a cause, but not the sole cause of the loss. I prefer this approach to the all or nothing solution of the judge. I would reduce the amount otherwise recoverable by the Claimants by 50%.
To this extent I would allow the appeal dismiss the cross-appeal.

Order: appeal and cross appeal dismissed; Standard Life to have the costs of appeal until 21 days after receipt of the Part 36 offer; the appellants to have costs of the cross appeal; after that date Standard Life to have 75% of the costs of the cross appeal; application for permission to appeal to the House of Lords refused.

(Order does not form part of approved judgment.)