England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Sir Donald Rattee
HC03C00370

		Royal Courts of Justice Strand, London, WC2A 2LL
		19 April 2005

LORD JUSTICE DYSON :

1. The defendant is a partnership carrying on the business of independent financial advisers. Mr Beary had been advised by Mr Jefferies, a partner of the firm, since about 1978. Prior to his retirement at the age of 52 on 16 July 2000, Mr Beary was managing director of a company owned by him which carries on a successful electrical engineering business. For some time before his retirement, he and his wife were members of a small self-administered pension scheme ("SSAS"), which he set up and administered on the advice of Mr Jefferies. Mr and Mrs Beary had no particular expertise or interest in financial matters.
2. Some time in 1999, Mr Jefferies advised Mr Beary that, in the light of his intention to retire, his share of the assets held in the SSAS should be transferred into a broker-managed fund with Scottish Equitable called the PMI Global Growth Fund ("the PMI fund") and that he should take a tax-free cash lump sum and a yearly drawdown income on his retirement.
3. By a letter dated 12 January 2000, Mr Jefferies explained that the PMI fund had had an excellent performance in recent times and that Mr Beary could draw on the fund both for income and/or tax free cash.
4. Relying on this advice, on 16 July 2000 Mr Beary withdrew £231,477 from the fund as a tax-free lump sum, and the balance (£1,096,392) remained subject to a drawdown plan invested in the PMI fund. Of the tax-free lump sum, Mr Beary spent about £51,000 on a cruise and invested the balance of £180,000 (again following the advice of Mr Jefferies) in a Luxembourg bond with a company called Lombard International SA ("the Lombard bond"). Mr Beary was advised to, and did, draw down the maximum available income from the fund of about £66,000 per annum.
5. It was common ground at the trial below before Sir Donald Rattee that the investment strategy adopted in the management of the fund was "medium risk".
6. It was admitted that, in breach of the duty he owed to Mr Beary, Mr Jefferies failed to advise him as to alternative methods of dealing with his pension fund. In particular, he failed to advise on the possibility of using the money to buy an immediate annuity.
7. On 20 April 2001, Mr Jefferies reported to Mr Beary that there had been a substantial fall in the value of the Lombard bond. Alarmed by this, Mr Beary consulted his accountant, Mr Slater. Mr Slater advised Mr Beary to obtain expert advice, which he sought from a Mr Black. Mr Black advised Mr Beary that he had a good claim in negligence against the defendant. On 2 April 2002, on the advice of Mr Black, Mr Beary gave instructions to reduce the income he took from the fund to £33,000 per annum, and to transfer the capital out of the PMI fund into other funds. By the date of the transfer, the value of the fund had fallen to £650,000 and was unable to support income drawings at the level previously made by Mr Beary. The Lombard bond was not realised until 13 March 2003, when it produced about £80,000.
8. These proceedings were commenced on 27 January 2003. There were three distinct heads of claim: the annuity claim, the Lombard bond claim and the mortgage claim. It is unnecessary to say anything more about the mortgage claim. There is an issue as to how the annuity claim was presented in the court below. On behalf of the defendant, Mr Roger Stewart QC submits that the sole allegation was that Mr Jefferies was negligent in failing to advise Mr Beary on the possibility of using the SSAS monies to purchase an immediate annuity: if he had been advised of that possibility, that is what he would have done. On behalf of the claimant, Mr Oliver Ticciati accepts that this was the principal thrust of the claim below, but he says that it was also part of Mr Beary's case that Mr Jefferies was negligent in advising investment in the PMI fund at all. The Lombard bond claim was advanced on the footing that Mr Jefferies was negligent to advise Mr Beary to purchase the bond.
9. It will be necessary to examine the judgment in some detail later. At this stage it is sufficient to summarise the judge's conclusions. In relation to the annuity claim, he held that, if Mr Jefferies had explained the possibility of purchasing an immediate annuity (but not advised him to do so), Mr Beary would not have purchased an annuity. Causation was, therefore, not established. He refused to allow Mr Ticciati to put forward for the first time in his final speech the case that Mr Jefferies should have advised Mr Beary to purchase an index-linked annuity. He therefore dismissed the annuity claim. In relation to the Lombard bond claim, the judge found that Mr Jefferies was negligent in advising Mr Beary to purchase the Lombard bond. He found that Mr Jefferies knew that Mr Beary had no desire to take a cash lump sum from his pension fund at the outset, and held that the proper course would have been to leave the cash in the fund. The judge, therefore, held that Mr Beary was entitled to any amount by which his actual loss on the Lombard bond exceeded what would have been his loss if the £180,000 had remained invested in the PMI fund. He ordered an inquiry as to damages if they could not be agreed.

The grounds of appeal

10. Mr Beary seeks to raise the following grounds of appeal.

(i) Having found (as he was entitled to do) that Mr Beary would have accepted and acted upon the advice of Mr Jefferies, and that the answer to the question of causation depended on the hypothetical conduct of the defendant, the judge should (applying Bolitho v City and Hackney HA [1998] AC 232) have asked two questions:

a) what advice would Mr Jefferies have given as a matter of fact if he had not been negligent?

b) If as a matter of fact Mr Jefferies would still have advised the drawdown arrangement as opposed to an immediate annuity, would that advice have been negligent?

The judge did not answer either of these questions. Instead, he simply found that Mr Jefferies could without negligence have advised against an annuity. He thereby applied the wrong test of causation on conventional principles.

(ii) Even if the judge was right to find that Mr Beary had not proved that he would not have entered into the drawdown arrangement if he had been properly advised, he ought nevertheless to have found that Mr Beary was entitled to recover the loss incurred as a result of entering into the drawdown arrangement on the basis of the reasoning in Chester v Afshar [2004] UKHL 41, [2005] 1 AC 134.

(iii) If the judge found that Mr Jefferies could without negligence have advised Mr Beary to enter into the drawdown arrangement, he erred in doing so.

(iv) The judge was wrong not to allow Mr Beary to put forward an alternative case that he would have purchased an index-linked annuity if so advised.

(v) The judge adopted the wrong approach to the Lombard claim.

11. Mr Beary was given permission to appeal on grounds (i) and (ii) by Carnwath LJ who adjourned the question of permission in relation to the remaining grounds to the full court so that they could be dealt with at the same time as the appeal. We heard full argument on all five grounds of appeal.

The annuity claim

The case advanced at trial

12. At para 14 of the Particulars of Claim, it was pleaded that, in advising investment in the PMI fund, Mr Jefferies was negligent in that (a) the PMI investment was "neither a risk free nor a suitable investment (for the reasons given in Appendix 2 to Mr Royall's report dated 19 July 2002)", and (b) he failed to advise Mr Beary that in June 2000, with the sum of £1,096,392 he could have purchased an annuity of £71,309 which would have been risk free. The pleading alleged that, if he had been so advised, Mr Beary would have decided to purchase an annuity rather than invest in the PMI fund.
13. It is clear from this pleading that it was being alleged that Mr Jefferies had been negligent in failing to advise Mr Beary of the possibility of purchasing an annuity ((b) above). What was less clear from paragraph 14 was whether it was being alleged that he was negligent to advise investment in (i) any managed drawdown fund such as the PMI fund, or (ii) the particular managed drawdown fund that he recommended because its investment strategy was high-risk and therefore unsuitable. The schedule of loss, however, makes it clear that the complaint was not about the particular make-up or investment strategy of the PMI fund. Rather it was that Mr Jefferies should not have recommended a drawdown managed fund at all. The first step in the calculation was to take the whole of the sum that was in fact transferred (£1,327,870), deduct the tax-free lump sum (£231,477) and show the resultant sum as being available for the purchase of an annuity. The next step was to plead the cost of purchasing an annuity of £71,309 at 29 April 2002 (the date of transfer out of the PMI fund) (£1,176,722) and compare it with the value of the PMI fund at that date. No alternative calculation was made comparing the value of other managed funds at 29 April 2002.
14. Nevertheless, Mr Ticciati submits that the case as in fact presented to the judge was that Mr Jefferies was negligent in recommending the particular PMI fund that he recommended. Counsel draws attention to the fact that Mr Royall's evidence was that a pension fund withdrawal contract is a complex and inherently high-risk arrangement, especially in cases (such as the present) where there are high income withdrawals which may not be sustainable during the deferral period. At Appendix 2 to his report, Mr Royall explained how, with monthly withdrawals at the rate of £5494 and a triennial target of £1,033,769, there was a 31% chance that the strategy would fail to meet its target by more than 10%. This led him to conclude at para 3.4.10 of his report that this strategy was "entirely unacceptable for a low risk investor let alone a zero risk investor as was the case with the claimant."
15. I am not persuaded that Mr Ticciati made it clear to the judge that his case was that Mr Jefferies was negligent to recommend the drawdown contract that was actually recommended. It is true that certain passages in the evidence of Mr Royall were consistent with such a case. But they were equally consistent with the allegation that, having regard to Mr Beary's financial circumstances and attitude to risk, it was negligent to recommend any drawdown contract to him. I accept the submission of Mr Stewart that the whole emphasis at trial was on the relative merits of drawdown contracts and annuity contracts for someone in Mr Beary's position. During his cross-examination, Mr Skene (the defendant's expert) said that independent financial advisers who deal with high worth individuals may find that 80% of their cases are drawdown. He did not accept that drawdown contracts were high risk. He said:

"….I don't accept in all circumstances that draw-down is a more risky alternative than buying an annuity. It is usually, but it's by no means in all the circumstances, and particularly where you have younger people retiring in their early 50s the risks begin to come together very much, in my opinion - in my opinion, and in many other people's opinion as well."

16. In this respect, Mr Skene disagreed with Mr Royall. Mr Ticciati relies on the fact that during his cross-examination of Mr Royall, Mr McMaster suggested that it would have been possible to diminish the risk of the PMI fund by reducing the proportion of equities held in the fund, and, unsurprisingly, Mr Royall agreed. Mr McMaster also put to Mr Royall that one could not "rule out the possibility that it might have been the right advice to go for a drawdown arrangement, albeit differently structured." Mr McMaster might have been better advised not to ask these questions, but I cannot accept that they show that he appreciated that one of the issues before the court was whether Mr Jefferies had been negligent to recommend the particular drawdown contract that he recommended.
17. We have been shown the written note prepared by Mr Ticciati for his closing submissions. This document makes clear that the case being advanced on behalf of Mr Beary was that, if he had been properly advised, he would have purchased an annuity. At para 3 of the note, Mr Ticciati writes: "Further as to whether C might, if properly advised, have opted for a drawdown contract…." (emphasis added). There follow reasons why no drawdown contract would have been suitable for Mr Beary.
18. We have also been provided with a transcript of part of Mr Ticciati's oral submissions to the judge. This includes the following:

"What Mr Royall is saying there [in his report] is that the drawdown that was, in fact, advised was entirely unacceptable for a low risk investor."

19. This is a reference to the passage in Mr Royall's report in which he refers to his analysis in Appendix 2 to which I have already referred. But it is quite clear that the case being advanced on behalf of Mr Beary was simply that it was negligent to recommend a drawdown contract rather than an annuity contract. That this was the case was reinforced by the production of revised schedules of loss after the close of the evidence. This was done by Mr Ticciati after the judge had made it clear that he was not prepared to find that it would have been negligent to leave the tax-free lump sum in the fund. The revised schedules of loss (like their predecessor) made the comparison between the position that occurred and the position that would have occurred if Mr Beary had purchased an annuity, and no other comparison.
20. In these circumstances, the judge cannot in my view be criticised for not dealing with a case based on an allegation of negligence in recommending investment in the particular PMI fund that was recommended rather than a different structured fund. The shape of this trial was that the contest was between the PMI contract that was recommended and an annuity contract. He was therefore fully justified in saying at para 66:

"Throughout the pleadings and the trial the only case put forward by Mr. Beary in relation to Mr. Jefferies' advice to put the whole of his pension fund in the drawdown plan invested in the PMI Growth Fund units was that Mr. Jefferies negligently failed to advise him instead to use the whole in the purchase of an immediate fixed rate annuity on his life. No claim has at any stage been made by Mr. Beary for any loss that might have arisen from the investment of the whole of the fund in the PMI Growth Fund as opposed to any other investment or investments."

21. He made the same point at para 75: "Mr Beary makes no claim based on the proposition that that investment in that fund should not have been made."

The judgment

22. The judge started the section of the judgment in which he dealt with the annuity claim as follows:

"51. (1) The Annuity Claim. It is common ground that this claim depends upon Mr. Beary proving on the balance of probabilities that had he been properly advised he would have decided, instead of setting up the phased retirement and drawdown plans, to spend the whole of the money available to him from the SSAS in purchasing an immediate annuity on his life (compare Allied Maples Group v. Simmons & Simmons [1995] 1 WLR 1602 per Stuart Smith LJ at p.1610D-G).

52. In my judgment Mr. Beary has failed to prove on the balance of probabilities that had Mr. Jefferies given him proper advice he would have advised him to apply his pension fund in purchasing an immediate annuity. He would certainly have explained the possibility of so doing to Mr. Beary, but I am not satisfied that he would have advised him to do so."

23. He noted that Mr Beary was only 52 years of age when he retired, and that there was a substantial risk that the real value of a fixed rate annuity would have been very seriously eroded by inflation before Mr Beary died or attained the age of 75, when he would have been obliged to buy an annuity in any event. He accepted the evidence of Mr Skene, that in 1999-2000 the likely benefits of future capital growth, and therefore income growth, to be obtained from a drawdown plan invested in a reasonable spread of investments would have seemed more attractive than might appear to be the case today in the light of recent substantial falls in the value of Stock Exchange investments. The judge also accepted the evidence of Mr Skene that he (Mr Skene) would have discouraged Mr Beary from buying an immediate annuity at his age.
24. The judge rejected the evidence of Mr Beary that, if Mr Jefferies had advised him not to buy an immediate annuity, he would not have accepted that advice. He said:

"57. I do not accept he would have done so. There is clear evidence, including his own, that Mr. Beary accepted and acted on Mr. Jefferies' advice unquestioningly. I am not satisfied that, if Mr. Jefferies had properly explained all the alternatives to Mr. Beary, including an immediate annuity, but had advised him against buying an annuity at his age, Mr. Beary would not have accepted that advice.

58. It seems that that would have been perfectly proper advice for Mr. Jefferies to have given. I accept it is quite possible that other competent and careful independent financial advisers would have given different advice. It is a point on which there is, I accept, room for different perfectly proper views. The question I have to answer is whether, on all the evidence, it is more likely than not that in performing his duty to Mr. Beary properly Mr. Jefferies would have advised him to purchase an immediate annuity. I am not satisfied that he would, and, as I have said, I do not think that, unless Mr. Jefferies had given that advice, Mr. Beary would have purchased such an annuity."

25. At paras 59-61 of his judgment, the judge explained why he did not accept Mr Beary's evidence on this point.

The first ground of appeal: causation and the "conventional" approach

26. As I have said, the way the claim was pleaded and advanced below was that (i) the PMI Fund was an unsuitable investment because it was not risk-free; (ii) Mr Jefferies negligently failed to advise Mr Beary as to the possibility of taking an annuity; (iii) had such advice been given, Mr Beary would have purchased an annuity as he was a risk-averse investor; and (iv) he was entitled to be placed in the position that he would have been in had he taken out an annuity as compared with the position in which he was in. Since it was common ground that Mr Jefferies had been negligent in failing to advise Mr Beary that an annuity was an alternative possibility, the only issue of causation was whether, if that possibility had been brought to his attention, Mr Beary would have purchased an annuity. Mr Beary failed to persuade the judge that, if he had been told of this possibility, he would have opted for an annuity, and that conclusion of the judge is not challenged on appeal.
27. Before this court, Mr Ticciati puts his primary case on causation very differently. In relation to what he calls "causation on conventional principles", he submits that, having found (as he was entitled to do) that Mr Beary would have accepted and acted on Mr Jefferies' advice unquestioningly, the judge should have asked himself two questions: (i) what advice would he have given as a matter of fact on a balance of probabilities if he had not been negligent; and (ii) if as a matter of fact, Mr Jefferies would still have advised the drawdown arrangement as opposed to an immediate annuity, would that advice have been negligent? In putting forward this formulation, Mr Ticciati relies on Bolitho v City & Hackney Health Authority. He criticises the judge for not answering either of these questions.
28. In Bolitho, a child was admitted to hospital suffering from respiratory difficulties. His breathing deteriorated and a nurse summoned the doctor. The doctor did not attend. The child collapsed and suffered brain damage. Negligence proceedings were brought against the health authority. The plaintiff's case was that any competent doctor attending the child would have arranged for intubation which would have averted the cardiac arrest and subsequent injury. The judge held that the doctor had been in breach of duty in failing to attend, but that, even if she had attended, she would not have arranged for the child to be intubated, and a decision not to intubate would not have been negligent. Causation was, therefore, not proved. This decision was upheld by the House of Lords.
29. In the course of his speech at page 240D, Lord Browne-Wilkinson adopted the analysis of Hobhouse LJ in Joyce v Merton, Sutton and Wandsworth Health Authority [1996] 7 Med LR 1, 20:

"Thus a plaintiff can discharge the burden of proof on causation by satisfying the court either that the relevant person would in fact have taken the requisite action (although she would not have been at fault if she had not) or that the proper discharge of the relevant person's duty towards the plaintiff required that she take that action. The former alternative calls for no explanation since it is simply the factual proof of the causative effect of the original fault. The latter is slightly more sophisticated: it involves the factual situation that the original fault did not itself cause the injury but that this was because there would have been some further fault on the part of the defendants; the plaintiff proves his case by proving that his injuries would have been avoided if proper care had continued to be taken. In the Bolitho case the plaintiff had to prove that the continuing exercise of proper care would have resulted in his being intubated."

30. In Bolitho, the claim would have succeeded either if the judge had found that the doctor who negligently failed to attend, would as a matter of fact have intubated if she had attended, or if it would have been negligent not to intubate. It was necessary on the facts of that case to consider what the doctor would have done if she had attended the child. But it does not follow that it is necessary in every case to ask what a defendant would have done if he or she had not been negligent. That question falls to be considered only where it is relevant on the facts of the particular case. In Bolitho it was relevant because the negligence lay in the failure to attend, and there was a causal link between that failure and the injury suffered by the child, because, if the doctor had attended and if she would have intubated, she would thereby have averted the injury. This causal link on the facts of that case was the hypothetical conduct of the defendant herself. In many negligence cases, the question is what would the claimant or some third person have done if the defendant had not been negligent. Usually, the only relevant question in relation to a defendant's conduct is: what should the defendant have done? It will not often be meaningful to go on to ask what the defendant would have done if he had not been negligent. It is tautologous to say that, if the defendant had not been negligent, he would not have acted negligently.
31. In my judgment, there is no scope for the application of the Bolitho principle in the present case. The negligence lay in failing to advise on the possibility of an annuity, advice which the judge found would not have led Mr Beary to reject the recommendation of the PMI fund. In such a case, it is meaningless to ask what Mr Jefferies would have done if he had not been negligent. If he had not been negligent, what he should have done and what he would have done are one and the same: ie advise on the possible option of an annuity. I would reject the first ground of appeal.

Causation: Chester v Afshar [2004] UKHL 41, [2005] 1 AC 134

32. In the alternative, Mr Ticciati submits that, even if the judge was right to find that Mr Beary had not proved that he would have purchased an annuity if he had been properly advised, he ought nevertheless to have found that Mr Beary was entitled to recover the loss incurred as a result of investing in the PMI fund on the basis of the reasoning in Chester v Afshar. In that case, the appellant had not been informed of a small risk of significant side effect from surgery. The side effect occurred, but not due to any fault on the part of the surgeon. The appellant sued the surgeon, but could not show that, if she had been properly informed, she would not have had the surgery after she had considered other options. Her claim for damages was upheld by the House of Lords: the argument that the surgeon's failure to warn caused her no loss was rejected by a majority of their lordships.
33. It was accepted by the majority that their decision amounted to a departure from established principles of causation which was not justified except for good reasons: see per Lord Steyn at [20] and at [24] where he said that the claimant's "right of autonomy and dignity can and ought to be vindicated by a narrow and modest departure from traditional causation principles". Lord Hope said at [85] that in the unusual circumstances of that case, justice required the normal approach to causation to be modified. He concluded at [87] that to leave the patient who would find the decision difficult without a remedy would render the doctor's duty to inform useless in the cases where it may be needed most. On policy grounds, therefore, he held that the test of causation was satisfied in that case. Lord Walker essentially adopted the same reasoning as Lord Steyn and Lord Hope.
34. In Benedict White v Paul Davidson & Taylor [2003] EWCA Civ 1511, this court refused to apply the reasoning in Chester v Afshar in a claim involving an allegation of negligent handling of litigation by a solicitor. Arden LJ said:

"40….In my judgment, this case [Chester] does not establish a new general rule in causation. It is an application of the principle established in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 that, in exceptional circumstances, rules as to causation may be modified on policy grounds. In that case, the injured party had been exposed to the risk of harm by the wrongful conduct of several tortfeasors but he could not prove which one had caused the harm. It was held that it was sufficient for him to show that the wrongdoer had materially increased the risk of harm. In Chester v Afshar the requisite policy grounds were also found to exist….

41. Accordingly, the Chester case concerned a negligent failure to warn a patient of the side effects of medical treatment. The principle of informed consent to medical procedures has special importance in the law: see [17] and [18] per Lord Steyn….

42. There are no such policy considerations in the present case. If there were, then it would be difficult to distinguish this case from any other case of professional negligence on the part of a lawyer or accountant. None of the long-established authorities on causation was overruled by the House of Lords in Chester v Afshar. For these reasons, it would not, in my judgment, be right for this court to apply Chester v Afshar in preference to those traditional principles already summarised by Ward LJ. The basic rule remains that a tortfeasor is not liable for harm when his wrongful conduct did not cause that harm…."

35. To similar effect, Baroness Hale of Richmond said in Gregg v Scott [2005] UKHL 2, [2005] 2 WLR 268 at [192]

"192….Well settled principles may be developed or modified to meet new situations and new problems: the decisions in Fairchild v Glenhaven Funeral Services Ltd [2003] I AC 32 and Chester v Afshar [2005] I AC 134 are good examples. But those two cases were dealing with particular problems which could be remedied without altering the principles applicable to the great majority of personal injury cases which give rise to no real injustice or practical problem."

36. Mr Ticciati submits that there are policy considerations in favour of applying the approach adopted in Chester to cases of negligent advice. He says that pension advice has special importance in the law: see the Financial Services Act 1986 and the Financial Services and Markets Act 2000, and the numerous rules and regulations deriving from these statutes. Pension advice is as important to an individual's financial health as medical advice is to his or her physical health. As in the case of medical advice, so too in the case of pension advice there are great difficulties in determining the answer to the hypothetical question: what would have happened if proper advice had been given? Indeed, the question is even more difficult for the victim of negligent pension advice than it is for the victim of negligent medical advice. This is because in the world of financial advice, there are very many possible choices, whereas the number of possible answers to the question what would the patient have decided to do if properly advised or informed is usually far more restricted. He places particular emphasis on this last point. He submits that, if a financial adviser is found to be liable for negligent advice, the court is often faced with the almost impossible task of deciding what loss has been caused. There is likely to be a wide range of possible answers to the question what advice would have been competent in the circumstances of any particular case, and the measure of damages will vary according to what answer is given.
37. Although I can see that this last problem will cause difficulties in some cases, it seems to me that these are inherent in this type of claim. I do not consider that this particular problem arises in the present case in any event because, as I have explained, it was not alleged that it was negligent to recommend the PMI fund that Mr Jefferies recommended to Mr Beary in this case. Since it was conceded that Mr Jefferies had been negligent not to advise Mr Beary of the annuity option, the only issue for the judge on the annuity claim was whether, if that option had been drawn to his attention, Mr Beary would have adopted it. In my judgment, on the facts of this case there is no reason for not applying the conventional approach to causation as the judge did.
38. But I would not in any event accept the submission of Mr Ticciati that the Chester v Afshar principle should be applied generally in claims for negligent financial advice. In Chester v Afshar, the majority made it very clear that the departure from established principles of causation in that case was exceptional, and was justified by the particular policy considerations that are in play where there is a breach of the doctor's duty to advise a patient of the disadvantages and dangers of proposed treatment so as to enable the patient to give informed consent. The analogy that Mr Ticciati seeks to draw between a breach of the doctor's duty of care and breach of the duty of care owed by financial advisers (whether in relation to pensions or otherwise) is unconvincing. The subject-matter of the two duties is very different. The policy considerations applicable to the duty to give proper financial advice and the duty to give proper medical advice are quite different. The suggestion that the established principles of causation should be rejected in all cases of negligent financial advice is breathtakingly ambitious, contrary to authority and, in my view, wrong.
39. There is a further problem with Mr Ticciati's submission. If the established principles of causation are to be abandoned, what is to take their place? He had no answer to this question. I have already accepted that there may be real difficulties in establishing what loss a claimant has suffered in certain types of negligent financial advice cases. The court may have no difficulty in deciding that the advice given was negligent, but without deciding what advice should have been given the court cannot decide what loss has been caused. This problem is inherent in this class of case. But it is not solved by recourse to Chester v Afshar. As I have said, in the present case, there was no such difficulty. The judge was able to find that Mr Beary had suffered no loss as a result of the negligent failure to advise the existence of the annuity option, because even if that advice had been given, Mr Beary would still have invested his money in the PMI fund. It follows that I would reject the second ground of appeal.

Could the defendant have advised the drawdown arrangement without negligence?

40. For the reasons already given at paras 12-20 above this was not an issue before the judge. I would, therefore, not give permission to appeal on this point.

The index-linked annuity

41. The judge dealt with this at paras 68-70 of his judgment:

"68. Not surprisingly, Mr. McMaster, counsel for the defendant, objected to this last-minute attempt to change the nature of the claim. He rightly submitted that the question whether the proper advice for Mr. Beary would have been to purchase such an annuity, which would have had the merit of some protection against erosion of the real value of the annuity by inflation but the detriment of producing a significantly lower initial sum as opposed to a higher fixed rate annuity, was not explored in the evidence of the two expert witnesses.

69. Clearly, the propriety of such advice would have depended, amongst other things, on the view that might reasonably have been taken in 2000 of future inflation. I think there is great force in Mr. McMaster's objection. No application was made on behalf of Mr. Beary to call further evidence on this new claim. I consider it would be wrong to allow it to be made at so late a stage.

70. However, I would say that, even if allowed to be pursued, I have no doubt that on the evidence before me the claim would have fared no better than the claim based on a fixed rate annuity. I am not satisfied on the balance of probabilities that if acting properly Mr. Jefferies would have advised Mr. Beary to purchase any sort of immediate annuity, or that Mr. Beary would have done so without such advice."

42. Mr Ticciati submits that the judge was wrong to rule that Mr Beary should not be permitted to advance his case on the basis that Mr Jefferies should have advised on the index-linked annuity option. He points out that Mr Skene canvassed the alternative of an index-linked annuity in his report and it was mentioned at para 2.2.2 of the experts' joint report, although he accepts that it was not explored in the evidence. He submits that the defendant would not have been prejudiced by the late introduction of the index-linked annuity issue. Finally, he contends that the judge was wrong to say that, even if Mr Jefferies had advised as to the possibility of an index-linked annuity, this would not have made any difference to the outcome of the case.
43. In my judgment, the judge was entitled in the exercise of his discretion to refuse to allow Mr Ticciati to advance this new argument so late in the day. In substance, he was seeking to make a significant amendment to Mr Beary's case. Mr Ticciati has come nowhere near showing that the judge's decision was plainly wrong. On the contrary, I consider that it was a reasonable and entirely justifiable decision. The question of the purchase of an index-linked annuity was not explored in the evidence. As we have seen, the shape of the case was that it involved a comparison between (i) a fixed annuity (with its attendant inflation risks) and (ii) a managed fund with its volatility, but greater potential for growth over the long term coupled with the advantages of income drawdown. An index-linked annuity case was, in a very real sense, a different case. The judge was entitled to say that it was too late. I would not give permission to appeal on this point.

The Lombard bond

44. The judge dealt with this at paras 73-75 of his judgment

"73. On the basis of the evidence, which I accept, that Mr. Jefferies knew that Mr. Beary had no desire to take a cash lump sum from his pension fund at its inception, the proper advice would clearly have been not to do so, but to leave the whole fund invested together. I accept Mr. Beary's evidence that had he not been advised to take the tax free lump sum he did, he would not have done so.

74. However, I do not see how this can now entitle him to the loss made on the Lombard bond. Had he been given the advice he claims, and I think he should have been in relation to tax free cash, the £230,000-odd withdrawn would have stayed invested with the rest of the pension fund in the PMI Growth Fund. He would therefore have suffered the same degree of loss as the rest of the fund suffered from the diminution of value of the PMI Growth Fund unit.

75. As I have said, Mr. Beary makes no claim based on the proposition that that investment in that fund should not have been made. Thus, in my judgment, Mr. Beary's claim under this head is for any amount by which his actual loss on the Lombard bond at the relevant date (which I will consider in a moment) exceeded what would have been his loss at that date had the £180,000 invested in the Lombard bond remained invested in the PMI Growth Fund. Mr. Beary realistically accepts that he has no claim in respect of the £51,000 of tax free cash that he spent on his world cruise, even though he says he would not have taken a cruise had he known he did not have to take the tax free cash."

45. The judge found at para 71 that the advice to invest in the Lombard bond was negligent. He awarded as damages the difference between the loss Mr Beary actually made on his investment and the loss he would have made if he had invested the £180,000 in the PMI fund. Mr Ticciati criticises this part of the decision. But his principal complaint is that the judge was in error in saying that no claim was made on the footing that the investment in the PMI fund should not have been made. For the reasons I have given earlier, however, the judge was right about this. His finding that was that, if Mr Jefferies had not been negligent in relation to the option of an annuity, Mr Beary would nevertheless have invested in the PMI fund. In the light of that conclusion, it was inevitable that the judge would find that, if Mr Jefferies had not advised him to invest the £180,000 in the Lombard bond, Mr Beary would have invested it in the PMI fund. It is true that at para 15 of the particulars of claim, it is pleaded that, if Mr Beary had been properly advised, the £180,000 would have been left on deposit. But that was not how the Lombard bond claim was presented at the trial. During Mr Ticciati's closing submissions, the following exchange took place:

"SIR DONALD RATTEE: I still do not quite understand how this works, because on your case the Lombard Bond would never have been bought, the money would all have been in the PMI Fund.

MR TICCIATI: Yes".

This well illustrates the way this part of the claim was put below, and amply justifies the way in which the judge dealt with it. It follows that there is no substance in this ground of appeal and I would refuse permission to appeal to advance this point.

Conclusion

46. For the reasons given, I would dismiss this appeal on the two grounds which Carnwath LJ gave permission to argue, and refuse permission to appeal on the other grounds.

Mr. Justice Wilson:

47. I agree.

Lord Justice Keene:

48. I also agree.