England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		08/11/2007

Mr. Justice Beatson:

Part 1: Introduction

1. In this case Mr. Clifford Shore, now aged 66, seeks damages for negligence and breach of statutory duty under section 62 of the Financial Services Act 1986 from the first defendant, Sedgwick Financial Services Ltd ("SFS"). He claims to have sustained loss as a result of transferring from his occupational pension scheme (the "Avesta scheme") arising out of his employment with Avesta Sheffield Distribution Ltd. to a personal pension fund withdrawal scheme ("PFW") with Scottish Equitable during March and April 1997. He also transferred from two other smaller occupational pension schemes, but the claim primarily concerns the transfer from the Avesta scheme.
2. Mr. Shore's primary claim is that Mr. Ormond, the SFS financial adviser who dealt with him, was negligent and in breach of statutory duty in advising him in January 1997 to transfer his accrued benefits in the Avesta scheme into the Scottish Equitable's PFW scheme. It is claimed that he would have followed such advice and taken his pension benefits at the age of 60. It is also claimed that Mr. Ormond failed to advise Mr. Shore as to his options, to prepare an adequate personal financial report, and to give adequate advice about the risks of PFW schemes, in particular where more than 75% of the maximum income permitted was taken. As well as breaching SFS's common law duty of care, it is claimed these failures breached the regulatory rules made by the Investment Management Regulatory Organisation ("IMRO"), then the relevant regulatory body at the time. Those rules required a fair and clear comparison between the benefits that would be retained by staying with the Avesta scheme and those under the PFW and that a transfer analysis be made and discussed with the client. Mr. Shore's secondary claim is that, having transferred his benefits to the Scottish Equitable's PFW scheme on 28 April 1997, he should, because of his changed income needs as a result of no longer having a prospect of consultancy income, have been advised by SFS to purchase an annuity and that he would have followed such advice. It is common ground that any claim for breach of contract is barred by the Limitation Act 1980.
3. By its defence, SFS:-

(a) admits the existence of a duty of care in tort owed by it in relation to advice given by Mr. Ormond to Mr. Shore;

(b) denies that the advice given was negligent, and claims the advice Mr. Shore received was appropriate to his circumstances, wishes and intentions at the time as communicated to Mr. Ormond;

(c) raises defences of limitation, causation, and contributory negligence; and

(d) maintains that it is not open to the Court to determine the case on the basis of breaches of regulatory rules made by IMRO.

4. A claim against the second defendant, Barclays Financial Planning Ltd., trading as Sedgwick Independent Financial Consultants Ltd. ("SIFC Ltd"), which took over the business of SFS on 1 January 2000 in respect of events after that date, has been settled. Mr. Soole QC, on behalf of Mr. Shore, and Mr. Wardell QC, on behalf of SFS, provided helpful written opening and closing submissions.
5. Since 1981 Mr. Shore has been employed by companies in the Avesta group and has been a member of its pension scheme. In 1984 he was appointed managing director of Avesta Sheffield Distribution Ltd. (formerly Avesta Johnson Stainless Ltd.). In 1997 his salary was about £120,000 pa, about £5,000 pm net. The bulk of his pension rights were in the Avesta scheme. He was also entitled to smaller pensions from his former employments at Wilmot Breeden and Woodlock Marketing. He transferred his rights under these to Scottish Equitable on 20 March and 6 April 1997. He transferred his rights under the Avesta scheme on 28 April 1997. The transfer value of the Avesta rights was £637,507. On 28 May he entered into a PFW scheme with Scottish Equitable.
6. PFW schemes (also referred to as "income drawdown" schemes) provide flexibility as to the tax-free sum, the income taken (including enabling a capital withdrawal to be used as income), and how the fund is invested. However, PFW schemes expose the beneficiary to stock market risks and substantial withdrawals could reduce the fund. Because of this they are not suitable for all. In May 1996 SFS Ltd circulated guidance by a Mr. Dawson to advisers stating that the maximum income withdrawn "should not exceed 75% of the maximum permitted by the Government Actuaries Department (GAD)" and that "if the client's on-going income requirement is in excess of this percentage, then PFW is probably not appropriate" and the purchase of an annuity with a higher guaranteed income should be considered as an alternative. Further guidance in February 1999, which (save in respect to "an insistent customer") it was accepted broadly accorded with the position in 1996 and 1997 stated "…generally our advice will be that no more than 75% of the GAD maximum be withdrawn as income. This protects the investor against depletion of the fund". SFS also required financial advisors who wished to recommend a PFW to obtain approval from its pension transfer unit.
7. The extent of the exposure of a person with a PFW policy depends on the amount of income taken; the larger the sum, the greater the exposure. In Mr. Shore's case he was very exposed because he took both the maximum tax-free lump sum and the maximum permitted income. Market movements, the sustained fall in gilt yields, and the fall in the annuity rates set by the Government Actuary's Department mean that the maximum annual withdrawal open to Mr. Shore fell from £35,915 net in 1997 to £15,671 in 2003. In 2006 the figure was £22,065.

Part 2: Issues

8. (1) The 'duty' issue: What was the extent of the common law duty of care in tort owed by SFS Ltd to Mr. Shore regarding the advice given to him by Mr. Ormond?

(2) The 'breach of duty' issue: Did the advice Mr. Ormond give breach his duty of care? This is a mixed question of fact and law. What advice Mr. Ormond gave, and the basis on which he gave it, are questions of fact. Whether the advice he gave fell below the required standard is a question of law.

If the advice Mr. Ormond gave did breach his duty of care, the following issues arise:-

(3) The 'causation' issue: Did the giving of the negligent advice cause any damage to Mr. Shore?

(4) The 'contributory negligence' issue: Assuming Mr. Ormond was in breach of duty and his negligent advice caused damage to Mr. Shore, was the damage caused or contributed to by relevant contributory negligence on the part of Mr. Shore?

(5) The 'breach of statutory duty' issue: Is Mr. Shore entitled to damages under section 62 of the Financial Services Act 1986? This provides that a contravention of the provisions of the statute or rules made pursuant to it and a contravention by an authorised person of the applicable regulatory rules "shall be actionable at the suit of a person who suffers loss as a result of the contravention subject to the defences and other incidents applying to actions for breach of statutory duty". At the relevant times SFS was regulated by the Personal Investment Authority ("PIA") and was obliged to comply with the principles of the Securities and Investments Board ("SIB") and certain IMRO rules which were adopted by the PIA. As a result of the regulatory changes introduced by the Financial Services and Markets Act 2000 IMRO's regulatory functions were transferred to the Financial Services Authority in 2001.

(6) The 'limitation' issue: Are Mr. Shore's damages in any event barred by the Limitation Act 1980?

Part 3: The Factual Evidence

9. Factual evidence in support of the claim was given by Mr. Shore, his wife Judith, and his brother Michael, and on behalf of SFS by Mr. Ormond. The statements of Mr. Clark, formerly Finance Director of Avesta and a trustee of the pension scheme, Mrs Earle, from 1988 Avesta's Human Resources Manager who looked after pensions matters, and Mr. Alexander Miller were read. Mr. Miller held senior positions in the stainless steel industry before retiring. His statement deals with Mr. Shore's prospects of obtaining consultancies in 1997.
10. Over ten years have passed since the crucial events and it is not easy to decide where truth and accuracy lie. Inevitably the recollections of those involved will differ to some degree. It would be surprising if it were otherwise. In these circumstances, as HH Judge Jack QC, as he then was, said in Loosemore v Financial Concepts [2001] 1 Lloyd's Rep. PN 235, at 237

"…memory, where it is unsupported by documents, must inevitably be suspect. Things which occurred can be forgotten. Things can apparently be remembered which did not in fact occur. What did occur can be remembered with a false slant to it. All of that can happen without dishonesty. So, unless the documents are clear the court's task is difficult".

In the present case the differences between the parties are fundamental and go beyond what can be explained as normal given the passage of time. The key documents are in part unclear on the issues between the parties or, as in the case of the Scottish Equitable illustrations, needed to be explained. The evidence of that explanation is primarily oral.

11. There is a sharp conflict between the evidence of Mr. Shore and Mr. Ormond as to what was said at a number of meetings, particularly those in January and May 1997. The conflict is as to Mr. Shore's assets and financial position, his requirements for capital and income, the risks of a PFW policy, his understanding of those risks, and Mr. Ormond's explanations about the risks of taking the maximum income permitted. Mr. Shore's evidence is that the financial needs analysis questionnaire ("FNAQ") completed by Mr. Ormond lists assets which he did not have and did not tell Mr. Ormond that he had. There are also conflicts as to subsequent dealings between Mr. Shore and Mr. Ormond and, after June 1999 when Mr. Ormond left SFS, with his successor Mr. Fry who dealt with Mr. Shore until around the middle of 2001. As a result of Mr. Fry's increasing health problems from cancer, Mr. Lancaster took over Mr. Shore's file in October 2001. Mr. Fry has sadly died and there was no evidence from others then in the firm. Mr. Mitten, who was then in Sedgwick's employee benefits division, advised Avesta and dealt with Britannia, the pension scheme's actuaries, was the person who referred Mr Shore to Mr Ormond, and was involved at an early stage. Mr. Gibbs was Mr. Ormond's regional manager. He signed Mr. Ormond's application for approval of the recommendation of a PFW scheme for Mr. Shore and was with Mr. Fry at a meeting with Mr. Shore in May 2000. Mr. Mason was then in Sedgwick's pensions transfer unit and dealt with the application for approval. SFS relies on contemporaneous and nearly contemporaneous documents by Mr. Ormond and Mr. Fry which it claims are inconsistent with Mr. Shore's claim.
12. Judith and Michael Shore were plainly trying to assist the court to the best of their ability. I have no doubt as to the reliability on the matters upon which they were able to give evidence. Neither Mr. Shore nor Mr. Ormond were, however, entirely satisfactory witnesses. Aspects of Mr. Shore's recollection of events were distorted by hindsight, his strong view that he was badly let down by Sedgwicks and its employees, in particular Mr. Ormond who he considered acted as a salesman, and by his efforts to reconstruct what happened from the documents provided by the defendant. In particular, he was unreliable as to his intentions about retirement (paragraph 30), what he told Mr. Ormond in January 1997 about his income requirements (paragraphs 110-122), and his claim to be unaware that his pension fund with Scottish Equitable was exposed to market risks (paragraphs 136-137). On a number of issues there were differences between his witness statement, the pleaded case and the evidence he gave, which he did not explain satisfactorily.
13. Given the passage of time and the number of transactions he has been involved in since 1997, it is understandable that Mr. Ormond's evidence was largely based on his reconstruction of events from the documents. I accept that some of the answers characterized by Mr. Soole as confusion and evasiveness, in fact reflected unclear recollection or such reconstruction. I also take into account the inevitable stress of being cross-examined in the context of allegations of negligent advice. I, however, regret to say that I did not find Mr. Ormond to be a satisfactory witness. He was at times evasive and non-responsive to questions. This was particularly so in relation to what warnings he gave about the risks associated with a PFW scheme, particularly if maximum income is drawn (paragraphs 140-153), the implications of an income stream based on high assumed growth rates, and whether he compared the benefits available to Mr. Shore under the Avesta scheme and those available under a PFW scheme (see paragraphs 128-132). He was alive to the areas in which his conduct was vulnerable and, in trying to protect himself, was willing to mould his recollection of events accordingly. Apart from his evidence about warnings, the principal example was his explanation of the reference by him in the FNAQ to "Luxembourg unit trust – Jupiter/Fidelity etc income reinvested" (see paragraph 125). Another albeit less significant example was his response to the suggestion that he made a file note of an important meeting on 20 January because a note from his regional manager Mr. Gibbs instructed him to (see paragraph 54). The way Mr. Ormond described how he explained the transaction to Mr. Shore and went through the documents (see paragraphs 74, 145 and 152) did not satisfy me that he explained its features, the risks attendant on withdrawal of maximum income, and the benefits of the Avesta scheme clearly. These factors have led me to approach his evidence with considerable caution save where it is supported in the documents.

Part 4: The Expert Evidence

14. Mr. Egerton, retained by the claimant, and Mr. Waddingham, retained by SFS, gave evidence on liability. Mr. Egerton has had 37 years experience in the life assurance and different sectors of the financial services industry, including 19 years in a compliance consultancy dealing with financial services firms, which he chaired. Mr. Waddingham qualified as an actuary in 1975 and has spent nearly all his professional career advising on issues relating to occupational pensions schemes. There was no oral evidence on quantum. Reports on quantum by Mr. Critchlow, an actuary, retained by the claimant and Mr. Waddingham were read.
15. There was agreement between Mr. Waddingham and Mr. Egerton on many issues. On others there was a difference in nuance. For instance, Mr Waddingham did not consider that in January or April 1997 the dramatic fall in annuity rates after 1997 was foreseeable whereas Mr. Egerton said there was no evidence to suggest a reverse in the downward trend and thus the increasing cost of purchasing an annuity. Mr. Waddingham, however, placed more importance on what was said at the meetings between Mr. Shore and Mr. Ormond than on the documents whereas Mr. Egerton focussed on the documents. Mr. Waddingham said this was because in his experience many clients do not read the documents. Mr. Egerton also looked at the meetings alone and not as part of a process, did not acquaint himself with Mr. Ormond's manuscript and file notes, and did not consider what transpired at the meeting on 29 January when Mr. Ormond and Mr. Shore discussed Mr. Ormond's report and recommendations. Secondly, Mr. Egerton focussed on the value of the fund in January 1997 rather than in April when Mr. Shore in fact transferred his benefits in the Avesta scheme whereas Mr Waddingham considered that the material date in assessing the reasonableness of the advice was the date of the transfer. On these issues I preferred Mr Waddingham's view. For the reasons I give in paragraph 183, it was artificial for Mr. Egerton to deal with the value of the fund in January 1997.
16. Mr. Waddingham accepted that Mr. Shore was a private investor for the purposes of the IMRO rules, but placed more weight than Mr. Egerton on the fact that he was the managing director of the company, a trustee of its pension scheme, and was financially aware. Although Mr. Shore was a trustee, his limited and largely formal involvement in the pension scheme (see paragraph 20) has led me to prefer the emphasis in Mr. Egerton's report and evidence to Mr. Waddingham's on this issue.

Part 5: Findings of fact

17. I turn to the facts. I first set out those that are not disputed, identify the areas of dispute and record my findings in respect of most of them in a broadly chronological way. Where my findings on matters in dispute depend on events later in the chronology, I record my findings after dealing with those events.
18. (a) The background: From 1992 British Steel built up its interest in Avesta, achieving a 51% interest in June 1996 when it effectively took over Avesta. Mr. Shore described what happened as a hostile take-over. By the middle of 1995 the build-up of British Steel's interest had led him to consider his position and his pension entitlements. On or about 7 December 1995, soon after British Steel increased its interest to 49%, he gave notice to Avesta that he would resign as Managing Director in two years' time.
19. Before then, in a letter dated 12 September 1995 Mr. Shore asked Mr. Mitten for advice about his retained benefits in the Woodlock Marketing pension scheme, which he had identified was held by Prudential, and whether to take the money out or transfer it. He had given Mr. Mitten details of the employment with Woodlock Marketing and with Wilmot Breeden in May that year. The employee benefits division was not able to give Mr. Shore personal financial advice and Mr. Mitten referred Mr Shore to Mr. Ormond in Sedgwick's Financial Services Division. Before dealing with the initial contact between them, I set out Mr. Shore's pension rights at that time.
20. (b) Mr Shore's pension rights: The bulk of Mr. Shore's pension rights were in the Avesta final salary scheme. For many years before it was wound up with effect from 1 December 1996, it was administered by a member of the Sedgwick group, Sedgwick Noble Lowndes. Actuarial services were provided by Britannia Life Ltd ("Britannia") and legal advice by Wragge & Co. When Mr. Shore became managing director of Avesta he also became a trustee of its pension scheme. Mr. Clark, the Finance Director, was the other trustee. Mrs Earle and Mr. Clark relied heavily on the scheme's advisers, Chris Mitten at Sedgwicks and Sara Hughes at Wragges. Mr. Shore was involved in the affairs of the scheme about a couple of times a year when matters required the formal approval of the Board and on occasions when the approval of a trustee was required and Mr. Clark was not available. Annual meetings of the pension scheme were largely formal.
21. Entitlement under the scheme at normal retirement age was to a pension of two thirds of an employee's final salary, a tax free lump sum, and spouse's benefits. The pension was not index linked except for the small guaranteed minimum pension ("GMP") element. Initially the normal retirement age was 65 but in August 1992 this was reduced to 60. The spouse's pension on the death of the member was 50% of the member's pension and, in the event of death within five years of retirement, a lump sum equal to the balance of 5 years' pension instalments. The scheme enabled a person who took early retirement to draw a pension but this was subject to a deduction based on a compounded 12% percentage reduction of the pension payable at the age of 60.
22. Mr. Shore was entitled to the following benefits: on retirement in January 1997 (when he was 56) a tax free lump sum of £140,400 and a pension of £34,300 pa (gross) or a pension of £47,300 pa (gross); on retirement in November 1997 (when he was 57) a tax free lump sum of £140,400 and a pension of £39,900 pa (gross) or a pension of £53,100 pa (gross); on retirement in October 2000 (when he was 60) a tax free lump sum of £155,100 and a pension of £54,900 pa (gross) or a pension of £70,600 pa (gross).
23. Mr. Shore's other pensions were much smaller. He was entitled to a pension of £1,216 p.a. at 65 from his former employment at Wilmot Breeden ("the Rockwell scheme") and to a money-purchase pension under the Woodlock scheme, which in 1997 was transferred at a value of £21,854. As part of his termination arrangements, British Steel paid a lump sum of £10,970 to Mr. Shore as a contribution to his pension arrangements and reflecting his service with the company after 1 December 1996.
24. (c) Initial dealings between Mr. Shore and Mr. Ormond: October 1995 – June 1996: After Mr Mitten's division referred Mr. Shore to Mr. Ormond, they met. A memorandum dated 11 October 1995 from Mr. Ormond to Mr. Mitten states that ideally Mr. Shore would like to take his retirement age at 57-58 and asks Mr. Mitten to get Britannia to prepare figures for his Avesta benefits based upon those ages. In a file note also dated 11 October Mr. Ormond states that Mr. Shore was seriously considering taking benefits at those ages and wanted two-thirds of his final salary at those times. The file note states that Mr. Shore is keen to leave employment, has "a lot of hours and does not wish to carry on that way" and "wants to look at his own personal situation where he has got a property in Florida and France" and has hobbies he cannot pursue to any extent. It also states that Mr. Shore "confirmed" that his mortgage would be repaid in two years time. It was repaid in June 1996 with funds provided by his brother Michael.
25. The references to the Florida and French properties were to holiday homes. Although it was Mr. Shore who found and bought the Florida property and the title was in his name, he said it was his brother Michael's property. Michael Shore funded the purchase and received the proceeds of its sale. Mr. and Mrs Shore bought the French property in 1994 for £18,000. They renovated it between late 1997 and early 2001, and sold it in July 2001 for a price in the region of £190,000. I have referred to the conflict between the parties as to what assets Mr. Shore had. One aspect of this concerned the source of the funds for the renovation of the French property. Mr. Shore said that Michael contributed £100,000 towards the renovations but this was disputed.
26. Mr. Shore said he did not consider that Mr. Ormond's file note was an accurate record of what transpired at their meeting. He said it was written by a salesman and embellished matters. He denied that he would have said he had a "property" in France because all he had was a derelict. Of the property in Florida he said it was his brother's property although the title was in his name. He said he would not have told Mr. Ormond that he was intending to retire at those ages but only asked him to establish what his benefits would be so that he would get the figures. I do not accept that Mr. Ormond embellished matters in his note. I deal with Mr. Shore's intentions about retirement later. I do not, however, consider that Mr. Shore's references to the properties at that time show he is a person who exaggerates his assets. When asked why he said that he had a property in Florida if he hadn't, Mr. Shore said he didn't know how to answer. However, in the context of him wanting to have more time for leisure and the pursuit of his hobbies it is understandable that he would mention "having a property in Florida" because it was a property that was available to him. It is also understandable that he would refer to the property in France.
27. Mr. Ormond summarised the main points discussed at the meeting in a letter to Mr. Shore dated 19 October. The letter states that ideally Mr. Shore would like to go at age 57 or, at the latest, at age 58, and that he wanted to achieve benefits of two thirds final salary at those ages. It enclosed letters of authority enabling Mr. Ormond to deal with the administrators of Mr. Shore's retained pensions for Mr. Shore to sign, and stated Sedgwick's fee. Mr. Shore agreed the fee in a letter dated 23 October and returned the signed letters of authority. Mr. Shore's letter does not comment on or dispute what Mr. Ormond's letter said about his desire to retire early and achieve two-thirds benefits.
28. By 17 November Mr. Shore had obtained information about his interest in the Rockwell pension scheme and found out the scheme was being handled by Towers Perrin. He wrote informing Mr. Ormond and said he was "most anxious to establish with all speed" his pensionable status together with options.
29. On 24 November Britannia provided Mr. Ormond with the figures for Mr. Shore's Avesta pension. Britannia stated that his pension at 55, his age at that time, would be £37,549, at 57 it would be £44,989, and at 60 it would be £64,864. On 27 November 1995 Mr. Ormond, Mr. Shore and Mr. Clark met at Mr. Shore's office. Mr. Ormond informed them of Britannia's figures. His file-note refers to working on a final projected earnings including salary and bonus of £120,000 at 57. There are references to information showing benefits at 55, 57 and 60 in subsequent letters from Mr. Ormond to Mr. Shore. The information about the other pensions was provided by Prudential and Towers Perrin in letters respectively dated 1 December 1995 and 8 January 1996.
30. After British Steel's effective takeover in June 1996, Mr. Shore telephoned Mr. Ormond to ask what his pension position would be if he were forced to leave his employment. He stated that he had in mind retirement in a year's time, i.e. at or about age 57. There is a file note dated 4 July by Mr. Ormond of a telephone conversation between him and Mr. Shore on 2 July 1996 about the offer from British Steel of a transfer into their pension fund. The note states that Mr. Shore said he wanted guidance based upon what is the maximum cash and pension he could receive if he retired and indicated to Mr. Ormond that he would probably take retirement in about a year's time. Mr. Shore says this is inaccurate and that he had indicated to Mr. Ormond that he was working in a takeover atmosphere and might not continue in employment until retirement age. Mr. Shore sought to explain away the notice he gave the company in December 1995 but his explanation was not convincing. I find that Mr. Shore intended to retire from Avesta in about November 1997. Apart from his notice, all the documents are consistent with this and others, including Wragge & Co and Mr. Mitten, worked on this basis.
31. Although Mr. Shore was intending to retire from his employment, he was intending to continue working, either as a consultant for British Steel or other companies, or for his brother, Michael, who had offered him a job in Canada. In January 1997 Mr. Shore told Mr. Ormond that there was "a very high chance/probability" that he would receive a consultancy income. Mr. Ormond recorded that he mentioned a £50,000 consultancy with British Steel and a £30,000 consultancy elsewhere. The pension plan illustrations obtained by Mr. Ormond in January 1997 assumed income other than the pension and a tax rate of 40%.
32. (d) British Steel's decision to wind up the Avesta scheme as from 1 December 1996: By September 1996 British Steel decided that the Avesta scheme should be wound up with effect from 1 December 1996. Wragge & Co prepared the necessary documents. Members of the Avesta scheme were to be given three options. These were; to transfer their benefits to the British Steel Scheme, to transfer the value of these benefits to a personal pension, and to leave their benefits in the Avesta Scheme for eventual transfer on a fixed basis to the British Steel scheme. Under the third option, the death in service benefits under the Avesta scheme would cease after transfer to the British Steel Scheme.
33. A letter dated 18 September 1996 from Britannia to Mr. Mitten states that the writer is of the opinion that the proposed British Steel scheme credits being offered in place of the Avesta scheme credits would provide the transferring members with benefits at least equivalent in value to those in the Avesta scheme. This was in part because of the better provision for indexation in the British Steel scheme. The letter also states that the writer is not in a position to know whether the Avesta scheme had sufficient funds to provide the equivalent British Steel scheme benefits at that time. There were also exchanges between Sedgwicks and Mrs Earle at Avesta about the winding up of the Avesta scheme and the relative merits of it and the British Steel scheme.
34. A letter dated 19 September 1996 from Mr. Mitten to Mr. Shore referred to the fact that the benefits under the Avesta scheme had been calculated both at normal retiring age and on early retirement. In a letter dated 30 September 1996 to Mr. Clark and copied to Mr. Shore, Wragge & Co. set out the options. By 17 October it had been agreed that there would be staff presentations and individual counselling sessions on 12 November about the decision to wind up the pension scheme.
35. The formal decision to wind up the scheme was made by Avesta's Board on 28 October. Mr. Shore signed the minutes and an announcement to members that day setting out the options and stating they would shortly receive details of the benefits earned in the Avesta scheme.
36. A letter dated 30 October 1996 from Wragge & Co to Mr. Shore and Mr. Clark as trustees of the Avesta scheme states that as the firm were the advisors to the trustees they could not advise them in their personal capacities. Notwithstanding this, the letter offered a number of comments on the benefits for them. It refers to the rates Britannia would apply on early retirement and states that "given Cliff's intention of taking early retirement next year", the writer understood that it is likely that British Steel will agree to take on the relevant assets from the Avesta scheme and to give Mr. Shore written confirmation that a pension conforming to the promise made by Avesta in its letters to Mr. Shore most recently in 1992, when the normal retirement age was reduced, will be paid. It also states that if Mr. Shore "takes early retirement he will be obliged to apply an early retirement factor to his benefits."
37. A meeting was arranged on 8 November with British Steel representatives to discuss the positions of Mr. Shore and Mr. Clark. Mr. Shore sought information from Mr. Mitten and Mr. Ormond for this meeting. A memorandum dated 31 October 1996 from Mr. Mitten to Mr. Ormond states that Mr. Shore wanted to know what pension he would get from the Avesta scheme if he remained an active member and retired on 31 December 1997, the early retirement factor on that date and the maximum tax free cash sum he could take on that date. The memorandum also asks whether the early retirement factor was negotiable because Sara Hughes at Wragge & Co said 12% was on the high side. Mr. Mitten sought this information from Britannia on 31 October 1996 as a matter of urgency. The urgency resulted from the timetable. Apart from the fact that there was to be a meeting on 8 November, it was originally envisaged that members of the Avesta scheme would have to elect their option by 20 December 1996. This period was extended, first to 17 January and then to 31 January 1997.
38. The atmosphere at the meeting on 8 November was hostile. Mr. Walker and Mr. Kelly of British Steel said that Mr. Shore and Mr. Clark's pension packages were excessive because their benefits were much higher than those of British Steel executives. Mr. Clark understood that British Steel would prevent them transferring to the British Steel pension scheme and Mr. Shore subsequently complained about the conduct of the British Steel representatives at the meeting. A note of the meeting records that Mr. Walker understood that Mr. Shore had given notice to terminate his employment on 31 October 1997.
39. In December Mr. Shore received the formal offer to him by the British Steel scheme. On 30 December he faxed the documents to Mr. Ormond and sought his advice about the offer. The retirement date assumed in the offer is 30 November 1997. The documents set out the options and included a comparison between the British Steel scheme and the Avesta scheme showing that the Avesta scheme was significantly better. It provided a pension of £41,825 pa and a lump sum of £145,840, whereas the British Steel scheme would provide a pension of £35,328 pa and a lump sum of £97,195.
40. In early 1997 there was further correspondence about the options between Britannia and Mr. Shore qua trustee of the Avesta scheme, including one on 7 January from Mr. Jamieson, and from Mrs Erle to Mr. Shore.
41. It is suggested that the information Mr. Shore had from these letters and documents show that, notwithstanding his evidence, he knew that it was open to him either to retire before 60 and take a deferred pension under the Avesta scheme subject to the 12% pa actuarial deduction or to retire at 60 and take a deferred pension under the Avesta scheme with full benefits and without the actuarial deduction.
42. I do not, however, consider this was clear to Mr. Shore. Wragge's letter dated 30 October says "it is likely" that British Steel would agree to this but that was before the hostile meeting on 8 November. The sections in the draft documents and letters from Wragge & Co. concerning or addressed to pensioners and those with deferred entitlement make it clear that option 3, leaving benefits in the Avesta scheme for eventual transfer on a fixed basis to the British Steel scheme, did not affect the benefit and that only the source of the pension would be different. But the sections of the drafts concerning or addressed to employees do not and only refer to a transfer on a fixed basis to the British Steel scheme. It was only in Mr. Jamieson's letter dated 7 January that this is stated in relation to serving employees. In the light of these factors I accept that, notwithstanding the fact that Mr. Shore was a trustee of the scheme, he was unclear about the effect of the winding-up on his Avesta benefits.
43. (e) The meeting on 14 January 1997: Mr. Shore's fax request to Mr. Ormond for advice led to them meeting on 14 January 1997. Mr. Mitten attended the meeting. There was a follow-up meeting on 20 January. There is a fundamental disagreement between Mr. Shore and Mr. Ormond as to what was said and advised at these meetings, and the accuracy of documents and notes made by Mr. Ormond.
44. At some stage before the meeting Mr. Symes of Scottish Equitable, faxed Mr. Ormond a number of quotes for Mr. Shore and Mr. Clark. They included a PFW quotation for Mr. Shore with a target net income of £29,806 pa. It is not clear whether the fax was sent on 4 January, the date on the fax header, or on 14 January, the date handwritten on the covering page by Mr. Symes. A manuscript note in Mr. Ormond's handwriting on the covering page of Mr. Symes' fax with the illustrations states "spoke to Chris Mitten 3/1/97". Mr. Ormond accepted that he had a PFW scheme in mind for Mr. Shore before the meeting and had discussed this with Mr. Mitten. At that time PFW schemes were relatively new. Mr. Ormond thought he had completed about six. He was aware of the May 1996 guidance that the drawn-down income should not exceed 75% of the maximum income permitted by GAD.
45. After the meeting Mr. Ormond wrote to Mr. Shore summarising what occurred at the meeting. Mr. Ormond stated that his letters would record all important matters that were discussed. His letter (dated 15 January) states that Mr. Shore indicated that he would prefer to leave his benefits in the Avesta scheme rather than transfer to the British Steel scheme, and was considering the reduced pension with a tax free sum. The letter also states that the British Steel pension is linked to the retail price index whereas the Avesta pension only allows for very limited escalation, that there was a discussion about the option of income drawdown, that Mr. Shore said he was aware of this and it was something he wanted to discuss in greater detail, and that Mr. Shore had around £80,000 pa income from other sources. Mr. Ormond accepted that he raised the option of Mr. Shore having a pension fund withdrawal scheme for the first time at this meeting. The reference to Mr. Shore having around £80,000 pa income from other sources was incorrect because, although Mr. Shore anticipated receiving such income from consultancy, he was not then receiving it. He telephoned Mr. Ormond to correct him and a revised letter, also dated 15 January does not refer to income from other sources. Neither letter refers to any discussion at the meeting about a comparison of the Avesta benefits and the possible benefits under a PFW. In the light of Mr. Ormond's evidence that his letters would record all important matters that were discussed, I find that there was no such discussion at the meeting.
46. As to whether Mr. Shore was aware of income drawdown before this meeting, I find that while he probably responded positively to a question by Mr. Ormond at the meeting about his awareness of it, this may have been out of a desire not to appear ignorant and he did not have any real awareness of such pensions before the meeting. It is likely that he did not raise this with Mr. Ormond when he telephoned to correct what was said about consultancy income because he was focusing on financial inaccuracy and because there was to be further discussion of income drawdown. His denial of such awareness in cross-examination should be seen in that light and in the light of Mr. Ormond's practice of recording the answers to his own leading questions as Mr. Shore's statements or views.
47. On 14 January Mr. Ormond believed Mr. Shore had to choose one of the three options in the British Steel offer before 31 January 1997. He had that date in mind, even after Mr. Shore had rejected the option to transfer to the British Steel pension scheme. He was incorrect. The deadline only applied to option 1, joining the British Steel scheme, and there was no need for the decision whether to transfer out of the Avesta scheme pursuant to option 2 to be made before 31 January. This was Mr. Waddingham's evidence. Mr. Ormond ultimately accepted that this was so, although he had previously said there was a deadline for option 2 because the transfer value given was only valid until 31 January and British Steel need not have given Mr. Shore a further transfer value for twelve months. His view after the meeting on 20 January that a decision was urgently required was the result of his erroneous belief.
48. The position was, however, not entirely open-ended because, once the scheme's winding up was completed, members would lose the right to a cash equivalent: see the Pension Schemes Act 1993 and Law Debenture Trust Corp. plc v. Pensions Ombudsman [1997] 3 All ER 233, 236-239. This was not a matter put to Mr. Waddingham and, if this is what lay behind Mr. Ormond's initial view that there was a deadline, he was not able to express it at all, let alone clearly.
49. (f) The meeting on 20 January 1997: Mr. Ormond arranged to meet Mr. Shore again on 20 January. On 17 January he received three illustrations from Scottish Equitable assuming a tax rate of 40%, i.e. assuming other income. The illustrations were based on a transfer value of £471,010, of which the maximum tax-free lump sum could be £117,752. The illustrations respectively showed a level net income of £16,696 pa from an annuity, the minimum income that could be drawn, £11,109 pa gross, and the maximum income that could be drawn, £31,741 pa gross. Mr. Ormond received a further illustration on 20 January showing the net income Mr. Shore could receive if he did not take the maximum lump sum and instead entered into a phased drawdown arrangement. Each illustration provided for the three then standard assumed growth rates; 6%, 9% and 12%. Mr. Shore acknowledged in his statement that he had been taken through the illustrations but in cross-examination he said he had no recollection, he never understood the illustrations, and did not accept that the illustrations were consistent with him saying he wanted a gross income of £3,000 pm.
50. In the following months Mr. Ormond obtained many illustrations from Scottish Equitable. These illustrations give gross and net income projections to age 75 based on the different growth assumptions. They give a net figure for the annuity that is available at 75 with the capital sum and the notes to the illustration include a statement that "what you might get back will depend on how investments grow". The illustrations are, however, not altogether easy to follow and a lay person's understanding of them depends on the clarity of the explanation given by the financial adviser. Mr. Waddingham said he considered the discussion more important than what is in the documents because clients often did not read the documents. Even allowing for the time since Mr. Ormond was advising on PFW policies and the stress of being cross-examined, his explanation of what he told Mr. Shore and how he explained about the risks of PFWs and in particular the risks attendant on taking the maximum income was very unclear. He repeatedly fell back on the words in the documents saying for example that he "would have gone through the quotations", that "the quotations clearly showed the growth assumptions and the consequences of taking the specified level of income" and that Mr. Shore "was aware of the facts and figures in the quotations".
51. It is common ground that by the meeting on 20 January Mr. Shore had dismissed the option of transferring his Avesta benefits to the British Steel scheme because the transfer quote was vastly inferior. There are many important areas of conflict in the evidence as to what transpired at the meeting. These include; whether Mr. Shore said the pension of £3,000 a month he desired was to be gross or net, whether he was pressing for the maximum tax free cash, what he told Mr. Ormond about his assets, and whether there was any comparison made between Mr. Shore's entitlements under the Avesta scheme and under a PFW, his knowledge that the PFW was vulnerable to fluctuations in the market, what Mr. Ormond told Mr. Shore about the risk of taking maximum income under a PFW, the operation of the GAD rates, and SFS's recommendation that the income taken should not exceed 75% of the permitted maximum.
52. The first relevant document is a handwritten one in which Mr. Ormond set out the figures for the lump sum and income contained in the illustrations he obtained on 17 January and the lump sum and income available to Mr. Shore at that time and in November 1997 if he retained his Avesta benefits, assuming a 40% rate of tax. Mr. Ormond accepted that both the lump sum and the net income available under the Avesta scheme were greater than those available under all the illustrations. Mr. Shore said this document was not used at the meeting on 20 January. It was not included in the documents sent to him after the meeting and the information in it is not set out in the personal financial report and the FNAQ. Mr. Ormond said the handwritten note was prepared for the meeting but I find that it was not shown to Mr. Shore at the meeting.
53. The second and third documents are the financial needs analysis questionnaire ("FNAQ") dated 20 January and a single page of rough notes in Mr. Ormond's handwriting. The FNAQ was either completed at the meeting, as Mr. Ormond said was his usual practice, or completed from rough notes made at the meeting. Since there is some duplication between the information in the rough notes and the FNAQ, the FNAQ was probably completed from the notes. The fourth document is a file note by Mr. Ormond dated 21 January 1997. Mr. Shore disputes that the FNAQ, the rough notes and the file note record what transpired at the meeting.
54. The fifth document is a consultant submission form also dated 21 January in which Mr. Ormond sought permission from Sedgwick's transfer unit for him to recommend a PFW for Mr. Shore. The file note was prepared after Mr. Gibbs, Mr Ormond's regional manager, signed the consultant submission form. Mr. Gibbs marked the form with a note telling Mr. Ormond to sign it and to dictate a file note using the information on the FNAQ mentioning the reasons the client prefers the benefits from transfer to an indexed linked benefit with British Steel. Mr. Ormond denied that his file note was prepared after Mr. Gibbs' instruction. He said that he would have prepared the file note and Mr. Gibbs' note was a coincidence but it is difficult to see why Mr. Gibbs would write what he did if the file contained the note.
55. The relevant matters recorded in Mr. Ormond's file note are: a transfer value of £494,474 was provided by Britannia; Mr. Shore will invest "maximum tax free cash – offshore alongside Luxembourg investments"; pension to commence 1 January 1998; he may be offered a £50,000 pa consultancy and therefore income may be delayed; the value of the Avesta pension (£39,829 gross, £23,897 net) and the lump sum (£145,840); they discussed the features of income drawdown and the risks of investment. It is stated that Mr. Shore "wants flexibility, control and money to cascade down to dependants rather than pensions ceasing on wife's death" and "accepts risks and is a balanced investor", desires a pension of £30-£35,000 gross, "accept maximum cash will be lower under drawdown", a decision is "urgently required – transfer out by 31 January 1997". Mr. Ormond's rough notes refer to "max cash Jersey –Luxembourg", "accept double figures risk", under drawdown option "flexibility", "not gobble up funds when die", "accept risk", "ideal pension 30-35,000". Under consulting, the notes state "will not take pension" and "accepts double figures risk". There are also references to "maximum 35%", "not mention unit trusts in report" and "3,000 pa pension" ("pa" may be a mistake for "pm"). As to the value of the Avesta pension, the figures are based on a 40% tax rate; at the basic tax rate the net pension would be in the region of £30,000 pa.
56. The net figure recorded in the file note for the pension under the Avesta scheme assumes a tax rate of 40%, and income from consultancy. In the absence of consultancy work or other income the tax rate would have been approximately 24.5% and the net income approximately £30,000 rather than £23,897.
57. The relevant matters recorded in the FNAQ are: Mr. and Mrs Shore did not have a capital sum available for investment, Mr. Shore had a balanced attitude to risk and was thinking of the long term, his desired pension was £30-£35,000 gross, his specified net income requirement was a "minimum £1,000 per month", the values of a property in France and the Shores' principal residence were respectively £150,000 and £450,000, there was £50,000 deposited in Luxembourg and £20,000 in Barclays Bank, and £250,000 "Luxembourg Unit trust – Jupiter/Fidelity etc income re-invested". The assets listed totalled £920,000. Mr. Shore denies that he had the Luxembourg deposits and unit trusts or that he said the property in France, which needed renovation, was worth £150,000.
58. The section in the FNAQ headed "summary of client needs" states that Mr. Shore "quoted his belief that inflation will be at a 'low level' for many years, therefore he categorically states transfer to British Steel is an option he does not want to consider". This may suggest that any views on inflation were expressed in the context of the fact the British Steel pension was index linked but the Avesta pension was not, rather than in the context of PFW schemes.
59. The section in the FNAQ headed "additional information" includes the following:- "maximum tax free cash – Cliff will invest offshore alongside Luxembourg investments"; "discussed features and flexibility of income drawdown"; "may be offered consultancy 50,000 pa therefore income may be deferred"; "discussed features and flexibility of income drawdown Cliff wants flexibility, control, cascading funds to dependants rather than pension ceasing on wife's death"; "discussed risks involved – Cliff accepts risk + is a balanced investor"; "pension desired 30-35,000 gross" (replacing the word "net" which is crossed out); and "accepts max cash will be lower under drawdown". Mr. Ormond said that he crossed out "net" because it was a mistake. No income is given from other assets, and the value of the Avesta pension and the lump sum is as in the file note (paragraph 55 above).
60. Mr. Ormond put the beneficial features of PFWs to Mr. Shore. He raised the issue of "flexibility" of PFWs and accepts that "cascading" was his word. Mr. Shore in substance "echoed back" the features which were then recorded.
61. (g) Obtaining approval for the recommendation from the pension transfer unit: Mr Ormond had to obtain approval from the pension transfer unit for his recommendation that Mr. Shore enter into a PFW arrangement with Scottish Equitable. I have referred to the consultant submission form he completed on 21 January. The form states that he "discussed the advantages, disadvantages, risks and potential benefits of PFW…" with Mr. Shore, and that he considered Mr. Shore was financially sophisticated because "he invests offshore and actively switches investment". It states that Mr. Shore's other marketable assets are £320,000 and his gross income requirement was £30,000. Mr. Ormond put a lower figure for income requirement on the submission form than the figure on the FNAQ because he knew that £35,000 gross could not be achieved.
62. The form contains errors and omissions. Mr. Ormond's statement, "option to defer in old scheme until Nov 97 not allowable as new trustees will not allow t/value within 12 months of retirement", was incorrect. The expert evidence was that there was no reason why Mr. Shore could not have remained in the Avesta scheme until November 1997 and transferred at that time, although this depended on the winding up not being complete by that date: see paragraph 48. The form does not state that Mr. Ormond was planning the transaction on the basis that Mr. Shore would receive other income from a consultancy. It also states that Mr. Shore's pension fund was £494,000, a figure which included the protected rights. Those should have been excluded when calculating the maximum amount that could be drawn down. If that was done the available sum at that time was £471,000. The errors in the form made it more likely that approval would be given to the recommendation of a PFW scheme.
63. Mr. Mason wrote to Mr. Ormond on 22 January giving approval for the recommendation. He told Mr. Ormond to ensure that he covered a number of points. Mr Mason's memorandum refers to the fact that the applicable GAD rates indicated that the maximum income available under pension fund withdrawal for Mr. Shore is £33,377 at 75% of GAD rates. It states that as the fund value included the tax-free cash the net fund will result in the income being on the borderline on the maximum GAD rates. He attached a copy of Mr. Dawson's memo with its general guideline that the maximum amount of income to be produced from pension fund withdrawal should not exceed 75% of the maximum permitted by GAD. It should have been clear to Mr. Ormond from this that the desired income would exceed the 75% guidance and would indeed be close to the maximum permitted by GAD.
64. (h) The personal financial report: The IMRO rules refer to this as "the reason why" document. The experts agreed the report prepared by Mr. Ormond for Mr. Shore was a key document, containing as it did, the first definitive set of recommendations by Mr. Ormond. It is dated 23 January 1997. It recommends an income withdrawal plan. The report is divided into six sections; A, a summary, B, analysis and recommendations, C, schedules, D, notes on the investment products, E, technical notes, and F, compliance matters.
65. The first part of section B containing the analysis and recommendations is headed "Your pension benefits on retirement". This states that, with regard to benefits earned before 1 December 1996, as Mr. Shore did not wish to transfer his benefits into the British Steel scheme he was left with the option of leaving the benefit in the Avesta scheme or taking the transfer value. The report does not, however, contain any details of Mr. Shore's Avesta benefits. Sedgwick's guidance indicated that the "freeflow" in the report should give "details of the client's pension arrangements" and the IMRO rules say that the explanation of why the advice is suitable should take explicit account of the alternative of remaining within the occupational pension scheme. The IMRO rules also state that the document should "not be a mechanistic recitation of stock motives applicable to any and every transaction".
66. Mr. Ormond said that he did not include details of the Avesta benefits because, if he had done so, it would make the report "considerably longer". Mr. Ormond said that there had been a comparison of the benefits at the meeting on 20 January, and pointed to the document referred to in paragraph 52 which he said was prepared for the meeting.
67. This part of section B of the report states:-

"We have now discussed at length the income drawdown arrangement.

Your objective is to take the maximum cash sum.

As mentioned you require flexibility and control of the account. Also you prefer the fund value on death to cascade down to dependants rather than traditionally ceasing on the death of you and your wife.

I mentioned that there are investment risk (sic) involved in relation to drawdown, you accept the risk being a balanced investor. We need to discuss investment choice."

68. The report then states that ideally Mr. Shore would like to have initial income of £30,000 but had informed Mr. Ormond that he may be offered a consultancy which could earn him £50,000 pa and therefore the income could be deferred. It states that the tax free cash sum from the drawdown contract "is likely" to be lower than the cash sum under the Avesta scheme, and deals with Mr. Shore's desire for his other pension benefits to be transferred to the drawdown arrangement.
69. The remainder of section B is headed "Taking your pension benefits under a pension fund withdrawal plan". It entirely consists of some of the defendant's standard paragraphs for inclusion in personal financial reports. All but two of the standard paragraphs are included. One of the excluded paragraphs, relating to concerns about health, was irrelevant to Mr. Shore's position. The other, considered below, was very relevant. The second, third and fourth paragraphs included in the report state:

"[2] You believe that annuity rates may improve and an income withdrawal plan is a vehicle that you can utilise and achieve flexibility with until annuity rates reach a more acceptable level.

[3] You would like to take all of your tax-free cash entitlement at present and a modest level of income. The income withdrawal plan allows you to take a tax-free lump sum of up to 25% of the non-protected rights fund. (choice is given as to whether to refer to taking 'the minimum' or 'a modest level' of income).

[4] You will have a variable income from other sources, eg consultancy work and value the facility of adjusting the income from your pension to accommodate this situation. In addition this will help you with tax planning exercises." (paragraph numbers added)

70. I return to the second of the standard paragraphs not included in Mr. Ormond's report for Mr. Shore. It concerns those planning to take a relatively high level of income. It suggests the income to be taken should be inserted and contains the sentence: "You should be aware that taking income at or close to the permitted maximum is likely to reduce the income you may be able to take in the future." Neither this part of the report, nor any other part of it contains a warning about the risks of taking income at or close to the permitted maximum, which (notwithstanding what was said in standard paragraph [3] set out above) Mr. Shore was planning to do. Nor does the report mention that, in Mr. Shore's case, the net income to be taken would be over 75% of the maximum income allowable and on the borderline of the maximum. These were points Mr. Mason had told Mr. Ormond he should ensure were covered in the light of the recommendation that 75% of the maximum should not be taken, a recommendation of which Mr. Ormond was aware.
71. Section D contains the notes on the investment products. It includes a paragraph on how the maximum and minimum amounts of withdrawals are determined by applying annuity rates set by the GAD. There is also a paragraph on the risks associated with PFW. Those listed include: annuity rates are not guaranteed and may become less favourable, the value of the fund is not guaranteed and may go down, and large pension fund withdrawals will reduce the amount remaining in the fund so restricting the potential for long term growth and reducing the financial security of a spouse and dependants in the long term.
72. A copy of the personal financial report was sent to Mr. Shore, together with a copy of the FNAQ. Page 6 of the FNAQ contains a list of Mr Shore's assets, valuing the French property at £150,000 and listing bank deposits totalling £70,000 and £250,000 in a "Luxembourg Unit trust, Jupiter/Fidelity etc". Mr. Shore says the copy of the FNAQ sent to him did not contain page 6 but he did not notice the omission at the time. He says he first saw page 6 in January 2004 when (see paragraph 157) the Adjudicator considering his complaint against SFS to the Financial Ombudsman Service sent him a copy. He maintains that page 6 fundamentally misrepresents his financial position. Although Mr. Wardell put it to Mr. Shore that his evidence on many matters was untrue, he did not specifically suggest to Mr. Shore that he had received page 6. It was also not put to Mr. Ormond by Mr. Soole that he deliberately withheld page 6 when he sent the report to Mr. Shore. Nevertheless the substance of both parties' case is that the evidence of the other about this is untrue. Mr Shore's response to the Adjudicator was that he was "at a total loss to understand where the figures come from on the Sedgwick's capital asset page you have included". This reaction leads me to conclude that the copy of the FNAQ sent to Mr. Shore did not contain page 6. I have considered whether the fact that the FNAQ was sent to Mr. Shore together with the personal financial report when put together Mr. Ormond's file note "not mention unit trusts in report" means that it was deliberately withheld. I am not, however, satisfied, on the evidence before me that this is so.
73. (i) Authority to proceed and the meeting on 29 January 1997: On 28 January 1997 Mr. Shore signed an "authority to proceed" document. This confirmed he had received a copy of a FNAQ dated 14 January 1997 and understood the advice contained in the personal financial report dated 23 January. The reference to 14 January is an error. That was the date on which Mr. Ormond "initiated" the meeting. The FNAQ records that it was completed on 20 January. Mr. Shore said that although he signed the "authority to proceed" document, he did not properly read and understand the personal financial report. He said he "skimmed" the report and the references to his objective to take maximum cash, the explanation of GAD rates, their calculation and effect on income withdrawal and what was said as to the risks in PFW because he trusted Sedgwicks who had advised Avesta for such a long time. I have referred to Mr. Waddingham's evidence that in his experience many clients do not read the documents and that is why the discussions at meetings are important.
74. The next day, 29 January, Mr. Shore met Mr. Ormond. Mr. Ormond's file note dated 5 February states they went through the report "in detail" comparing all options available, that Mr. Shore wanted to transfer into the income drawdown plan with Scottish Equitable, to split the fund in two ways into the Mixed and Global funds, and that the discharge form was signed. Mr. Ormond said in evidence that he went through the report page by page and line by line to make sure Mr. Shore was 100% happy with the action he was taking. As to the Avesta benefits, he said that although Mr. Shore's decision to transfer out of the Avesta scheme had been made before the meeting on 29 January, nevertheless, from a professional point of view, there was a need to compare the benefits of PFW with Avesta, and as a "belt and braces" exercise he compared the benefits at that meeting. He said that he went through the personal financial report line by line discussing its contents. He wanted to make sure the decision Mr. Shore was making was correct and all the angles and options were covered.
75. Mr. Shore denied that he had been fully taken through the report by Mr. Ormond at the meeting on 29 January. Mr. Shore's copy of the report, which he accepted he had when he met Mr. Ormond on 29 January, contains a number of annotations, primarily "n/a" next to paragraphs not relevant to him. Significantly, however, he also underlined 35%, in the paragraph stating that the maximum and minimum amounts of withdrawals are determined by applying annuity rates set by the GAD. The defendant relies on this to show that in early 1997 Mr. Shore was not intending to draw a large pension because of the anticipated consultancy or other income, to show that he was aware of the GAD rates, and that he sat with Mr. Ormond and went through the report.
76. (j) February to April 1997: By 14 February 1997 Mr. Walker and Mr. Shore agreed that Mr. Shore would leave his employment at Avesta on 7 October 1997 but would be paid to the end of the month. Mr. Shore and Mr. Ormond met on 24 February. By then an issue had arisen as to whether there were surplus funds in the Avesta scheme and, if so, how they should be distributed. In view of this they agreed to 'hold fire' on the transfer from the Avesta scheme. They discussed investment. Mr. Ormond's note states that Mr. Shore was initially going to invest in the Global and Mixed Fund but Mr. Ormond felt a more cautious view was needed because the market was at a high. He spoke to Mr. Shore about the Security Plus 75% Fund which had an underlying guarantee and Mr. Shore agreed that all monies would be invested in that. Mr. Ormond's file note records that Mr. Shore stated he needs income of around £36,000 per year although he would not be looking at a pension until January 1998.
77. The note of this meeting also refers to a possible investment in a fund operated by Jupiter, one of the investments referred to on page 6 of the FNAQ. Following his meetings with Mr. Ormond in January Mr. Shore contacted Jupiter and, after a meeting, on 14 February informed Jupiter he would invest £100,000 in Jupiter funds, and did so on 6 March. Mr. Shore said that this was money received from his brother Michael. In his statement he said it was used to renovate the French property. The statements of Mr. Shore's Jupiter account and the fact that the funds in it were invested in Jupiter market funds in 2000 show that the renovations were not paid from these funds. It is also clear that moneys Mr. Shore had invested in Rothschild Asset Management were not used to renovate the property but were used to repay money owed to Michael Shore. Michael Shore in his evidence did not say that he financed the renovations. Mr. Shore gave no other source for the funding.
78. By the beginning of April 1997 the transfer value of Mr. Shore's accrued rights under the Avesta scheme was £528,000. He considered it would take several months to sort out how to distribute the surplus in the Avesta scheme. On 3 April he told Mr. Ormond he had decided to transfer the £528,000 out of Britannia into Scottish Equitable, and by 10 April had instructed Britannia to do so. On 21 April, after it was decided how the surplus assets were to be distributed, Mr. Shore's accrued rights were revalued at £637,507.
79. Mr. Ormond met Mr. Shore on 28 April. Mr. Ormond's file note states that Mr. Shore was looking to take cash of £145,000 on 1 January 1998 and wanted an income of around £4,000 pm net. The note does not indicate Mr. Ormond considered that this would be difficult. It states the monies would be kept liquid and they would meet on 9 May after the general election to discuss the situation. The reason Mr. Shore asked for more income was the substantial increase in the transfer valuation. The note makes no reference to consultancy. On 29 April Britannia transferred £637,507 to Scottish Equitable and Mr. Shore's rights under the Avesta scheme terminated.
80. (k) The meetings in May 1997: Shortly before the meeting on 9 May Mr. Ormond obtained a further illustration. This assumed a tax rate of 23%. It showed that if Mr. Shore took a maximum tax free cash sum of about £160,000 he could receive a maximum income of £34,839 net, that the income would drop on assumed growth rates of 6 and 9%, but would not drop on an assumed growth rate of 12%. He also printed out a table of comparative annuity rates.
81. At the meeting on 9 May Mr. Shore told Mr. Ormond he was looking for income of around £48,000 net pa and a cash sum. By then it was clear that he had no prospect of a consultancy with British Steel. Mr. Ormond told him that £48,000 was not possible and he made it clear he needed £3,000 pm net. Mr. Ormond's file note states that he estimated that if Mr. Shore took £36,000 that would produce around £140,000 cash. It also states that Mr. Shore decided to invest the income in the Global and Mixed funds. Unlike some of the other file notes about the investments, the note gives no indication as to whether or not this was pursuant to advice by Mr. Ormond. Mr. Ormond's handwritten notes for the meeting contains the words "purchase annuity", and a row of figures for cash and income showing the income rising as the cash falls. A printout of annuity rates dated 9 May showed rates ranging from 8.1% for Prudential to 6.3% for Old Mutual. The figure for Scottish Equitable is 7%.
82. Following the meeting Mr. Ormond asked Scottish Equitable to "re-quote with income £36,000 net per annum". In response Mr. Symes sent an illustration to Mr. Ormond under cover of a compliment slip stating "I've got there in the end….at age 75 near as dam it £36,000 pension continues". The illustration assumed a tax rate of 23% and was for a phased drawdown policy giving a reduced initial tax free lump sum of £124,721 followed by a net income of £36,000 pa at a 9% growth rate.
83. At Mr. Shore's request they met again on 12 May. Mr. Shore informed Mr. Ormond that he had resigned from Avesta with immediate effect and had decided to withdraw the maximum cash free sum as soon as possible and to commence the maximum pension from 1 January 1998. He also put this in a letter of that date to Mr. Ormond.
84. Following the meeting Mr. Ormond obtained a further illustration from Scottish Equitable. This illustration, dated 25 May, and assuming a 23% tax rate, showed that Mr. Shore could obtain a maximum tax free lump sum of £146,647 and a maximum income of £46,643 gross. Again, only the illustration assuming a growth rate of 12% shows this income being maintained until Mr. Shore's 75^th birthday and leaving a fund which would achieve the same income thereafter. A minimum growth rate of 10.7% was required each year to achieve this. Mr. Ormond wrote to Mr. Shore on 27 May stating that following their recent meeting he was confirming that the application to set up the income drawdown had been sent to Scottish Equitable, the income was to be payable in six months time, and that Mr. Shore had completed forms in relation to the investment of the money in the Mixed and Global funds.
85. The illustration stated that it was possible to purchase an annuity of about £34,700 net pa if the maximum tax-free lump sum was taken. If no cash is taken, the annuity would be about £44,700 pa net.
86. On 29 May the tax free sum of £146,647 was credited to Mr. Shore's account at Barclays Bank. When Mr. Shore and Mr. Ormond met on 3 June Mr. Shore stated that he wished to take the maximum income straightaway. Mr. Ormond asked him to put this in writing. Mr. Shore's manuscript letter states that he wished to take the maximum income of £46,643.46 pa as in the quotation in the illustration dated 25 May with effect from 3 July. Asked whether Mr. Ormond asked Mr. Shore to do this because he had warned Mr. Shore that he was risking depleting the fund by taking maximum income, Mr. Ormond's first reply was that the illustrations "quite clearly show on the three growth rates the consequence of taking that level of income", and it was only when the question was put for a fourth time that he said he "would say yes". The letter does not refer to any warning. Mr. Waddingham said that the contents of the letter (and presumably an oral expression of them) should have set alarm bells ringing and that Mr. Ormond should have told Mr. Shore that he was moving in high-risk territory.
87. A personal financial report dated 5 June deals with Mr Shore's intention to invest £100,000 offshore. It refers to his decision to commence withdrawing income on 1 July but does not refer to the impact of the changes in his requirements on the risks to which he is exposed.
88. (l) Contact with the transfer unit in June 1997: A file note dated 13 June by Mr. Ormond records a meeting with Mr. Shore on 6 June to discuss the off-shore investments. There is no reference to a warning being given to Mr. Shore about the risks of taking maximum income.
89. The transfers of Mr. Shore's rights in the Rockwell and Woodlock pension schemes had been made to Scottish Equitable on 20 March and 6 April, shortly before the transfer of his rights in the Avesta scheme. As a result of the delays after the initial meetings in January, and because he was concentrating on the rights in the Avesta scheme, Mr. Ormond had overlooked the need to apply to the pension transfer unit for approval. He wrote to Mr. Gibbs on 20 May asking what he needed to do and was told to contact the transfer unit.
90. On 17 June Mr. Mason asked Mr. Ormond to complete a form regarding the current position on Mr. Shore's PFW. Mr. Ormond did not reply to Mr. Mason but on 27 June asked Mr. Cole at the transfer unit what needed to be done, given that approval for the transfer of the benefit under the main scheme was given on 22 January but he had overlooked the need for approval of the two small pensions. This was apparently passed to Mr. Mason. He responded on 16 July, giving the revised GAD limit calculation, stating that the maximum and minimum percentage figures would be reduced proportionately if tax-free cash was taken, and reiterating the necessity of involving the transfer unit in all cases before they proceed. Mr. Mason's calculation is based on the old figures rather than the increased figures produced in the revaluation in April.
91. On 25 July Mr. Mason had a telephone conversation with Mr. Ormond in which he said that after reviewing the information concerning Mr. Shore, nothing else was required. On 12 August Mr. Ormond sent a memo to this effect to Mr. Gibbs. On 19 September Mr. Ormond returned the transfer forms to Mr. Mason together with a memorandum showing the income being drawn by Mr. Shore was £45,996 pa, which was well over the 75% of the GAD maximum referred to by the transfer unit.
92. (m) September 1997- August 1999: Mr. Ormond wrote to Mr. Shore on 18 September 1997 referring to a discussion about the funds and the desirability of switching into the Security Plus Fund given volatility in the equity market. He wrote on 23 December about a review of the investment options on 19 December. The letter refers to their decision to continue in the Security Plus Fund for a further three months, and a discussion of the situation of the income since Mr. Shore was taking the maximum income. It states the Government Actuary sets the annuity rates which are reviewed every three years but contains no warning about the risks involved in taking the maximum income under the PFW or continuing to do so.
93. On 1 April 1998 Mr. Mason advised Mr. Ormond that "a review of the client's circumstances should be carried out each year in order to assess the continued suitability of pension fund withdrawal" and that the annual review of Mr. Shore's PFW was due. Mr. Ormond responded on 23 April stating that he had four meetings with Mr. Shore in the last year which referred to the fact that the income taken was the maximum and that "in relation to suitability the pension fund withdrawals still meets his needs and requirements".
94. Mr Shore's review took place on 27 May. Mr. Ormond's note refers to them reviewing the paperwork from Scottish Equitable, the fact that Mr. Shore was taking the maximum income, that Mr. Shore decided to switch to the Mixed and Global funds and that he was going to sell his house. Mr. Ormond accepted that there was a requirement during the review to consider the level of income being taken by the client. Since he said that he recorded all significant matters discussed in filenotes or letters, I conclude that, in the light of Mr Ormond's response to Mr. Mason, and as the note does not say that the review considered the level of income being taken and the continued suitability of PFW, Mr. Ormond did not consider this at the meeting. Mr. Ormond wrote to Mr. Shore on 11 June 1998 enclosing a unit statement and a summary of transactions from Scottish Equitable.
95. The words "min 35% and max 75%" have been written on Mr. Shore's copy of the letter of 11 June. Mr. Shore stated that he wrote this but did not know when he did so. He did not believe it could have been before his telephone discussion with Mr. Fry on 2 December 1999 (on which see paragraphs 101-103) and was probably later. He said he never discussed 35/75% with Mr. Ormond.
96. On 19 May 1999 SFS informed Mr. Shore that Mr. Ormond had resigned and would be leaving the company in June. Mr. Shore met Mr. Ormond on about 23 May for his annual review. Mr. Shore said that he asked if the fund was still on target to produce £60,000 pa at age 60 and Mr. Ormond's response was that he could see no reason for the target not being achieved. This was disputed by Mr. Ormond. Following the meeting Mr. Ormond wrote to Mr. Shore saying that they reviewed the drawdown plan and Mr. Shore was pleased with the performance, that they had agreed the investment of the funds would not be altered, and that Mr. Ormond had mentioned that the income would be reviewed the following March in line with the three year review procedures. There is no reference in the letter to the risks Mr. Shore was taking by drawing the maximum income.
97. An indication of the importance of considering the 75% guidance at the annual review is seen from SFS's "annual review confirmation form" produced shortly after Mr. Shore's review and dated 15 July 1999. This required the consultant to complete and tick a box against one of two options. The first is that "the client's income has been amended to £... p.a. which is within 75% of GAD maximum". The second is that "the client's income has been amended to £... p.a. which exceeds 75% of GAD maximum, the client has been made aware of the disadvantages of this, and the client file has been documented accordingly".
98. An internal manuscript document indicates that Mr. Shore's file was reviewed within SFS, possibly in April 1999, since the date "6.04.99" appears at the top. Mr. Ormond thought this may have been a handover meeting because it refers to "meeting May". The document also states "no complaint re original advice" and refers to a meeting on "3.4.00" in order to carry out the "triennial" review. This document indicates that someone within Sedgwick's was concerned that the original advice given to Mr Shore was open to criticism.
99. In August 1999 Mr. Fry took over Mr. Shore's files. He wrote introducing himself, stating that he specialised in the income drawdown market and had responsibility for more cases than any other Sedgwick's consultant. Mr Fry also informed Mr. Mason. On 22 September the value of the fund was £418,993, which, taking account of the tax free sum drawn by Mr Shore, is a fall of approximately £87,000 from the total sum invested (which included funds from the Woodlock and Rockwell schemes). Mr Shore was in touch with Mr Fry during the first half of October about the division of the fund between his wife and daughters should he die.
100. (n) Contact with Mr Fry in December 1999: A statement of Mr Shore's account at 19 October 1999 sent to him by Sedgwicks at the beginning of December showed the value of the fund was £401,986, the lowest it had been. This was a fall of approximately £104,000 from the total sum invested. There was then a telephone conversation between Mr. Shore and Mr. Fry. Its contents, who made the telephone call, and the accuracy of the note of the conversation made by Mr. Fry are disputed. Mr. Fry's death means there is no evidence from him.
101. I first deal with what is not disputed. Prior to his conversation with Mr. Shore Mr. Fry telephoned Scottish Equitable to ascertain the current value of the fund. It is, however, not clear whether this was on 2 or 3 December. Mr Fry's note is dated "2 December 1999, 9.30 am". It states he telephoned Scottish Equitable "earlier in the day" and ascertained the value "on that day" was approximately £450,000. But one annotation on the copies of the valuation states the valuation was sent to Mr. Shore on 2 December and another annotation that on 3 December the value of the fund was £444,787. That figure appears to be the basis of Mr. Fry's statement to Mr. Shore about the increase in the value of the fund. Notwithstanding the date on Mr. Fry's note, I find that the valuation was sent to Mr. Shore on 2 December and the conversation took place on 3 December. In the absence of evidence from Mr. Fry or from anyone else at SFS, I am not able to make findings as to when the file note was made although it was not suggested that it was not broadly contemporaneous with the conversation, even if not written on the same day.
102. It is not disputed that Mr. Fry told Mr. Shore that taking 100% income was contrary to SFS's advice, and that the recommendation was 75% of income. Mr. Fry also told Mr. Shore the fund had increased by 12% since October so that there had been no overall decline in the past 12 months and he was taking 100% income. Mr. Fry also told Mr. Shore that, against a background of falling annuity rates and large withdrawals from the fund, at the triennial review there would be a substantial reduction in the maximum amount Mr. Shore could withdraw. The disputed part of the important fourth paragraph of the file note states:

"Cliff stated that whilst he understood the reason for this advice, his intention was always to take maximum income, since it was his intention to try and take as much out of the pension pot as possible, and that he had substantial other investment assets valued at approximately £800,000, and thus went into this with 'his eyes open', in so much that if the value of his policies fell because of his drawing maximum income, then that was by his choice and his alone."

103. Mr. Shore denies that he said anything of the sort. He says the first time he learned of the 75% recommended maximum was during this conversation and that the manuscript note on the letter from Mr. Ormond dated 11 June 1998 to which I have referred was inserted after it. He says he told Mr. Fry that Mr. Ormond told him he could expect to achieve pension income of £60,000 a year by the age of 60. He said he would not use the phrase "eyes open" and any reference to £800,000 was either because an asset review had been discussed because of his dissatisfaction or a passing reference, while he was agitated about what Mr. Fry had told him, to the value in 1999 of his English home and the French property. In an email to the Financial Services Ombudsman in August 2004 he had said that Mr. Fry either embellished the conversation or fabricated it, and that their assets at the time would not have reached £800,000.
104. It was suggested by Mr. Soole that the note reflected a defensive posture by Mr. Fry to protect the interests of his employers. This may be so in relation to some of what is said, for example the references to Mr. Shore trying to take out as much as possible from the pension pot and going into the transaction with his eyes open. It appears from the manuscript file note with "6.04.99" at its top (paragraph 98) that within SFS there was concern about the advice that had been given to Mr. Shore in the past. In these circumstances, it is not unreasonable to consider that Mr. Fry, who had recently taken over the file, would have reviewed it and would have this concern in mind when dealing with Mr. Shore. The file note does not state that Mr. Shore had previously been told of the Defendant's 75% guidance, or that he said he had always intended to take the maximum income or that he had done so in the knowledge of the risks involved. The language used in the note is not language that Mr. Shore would use, particularly in the context of a conversation in which he was complaining about the fall in the value of the fund.
105. This cannot, however, be said about Mr. Shore saying he had investment assets worth about £800,000. It is no longer suggested that Mr. Shore did not refer to having assets of that value. Both Mr. Shore's explanations for him referring to that sum are inconsistent with what he said to the Financial Services Ombudsman in August 2004. There is nothing in the documents to indicate that an asset review was suggested. It would also not be usual to refer to one's home as an investment asset.
106. During December Mr. Shore wrote to his MP about the GAD rates. In a telephone conversation with Mr. Fry on 15 December he complained about the news given him in the earlier conversation about the potential effect of GAD rates on his income. He said there was nothing in the Scottish Equitable documents about the link to long dated gilts, and asked for information about the changes to GAD rates. Mr. Fry's file note states he pointed out that the report by the company would refer to the income level being set by reference to GAD rates and that there was to be a further meeting to be attended by Mr. Gibbs, the regional manager.
107. (o) January 2000 to October 2002: On 1 January 2000 Sedgwick's business was split and responsibility for administering the Scottish Equitable funds was transferred from SFS to SIFC.
108. Scottish Equitable's triennial review was due on 25 May. Scottish Equitable sent Mr Shore's triennial review pack to Mr. Fry on 10 May and Mr. Fry sent a copy to Mr. Shore on 20 May. The value of the fund was £427,246. Mr. Shore's maximum pension entitlement was reduced to £32,578. An email refers to his disappointment and to a forthcoming meeting to discuss whether there are to be changes in the rules about the GAD rates. He met Mr. Fry and Mr. Gibbs on about 18 May 2000. He says he was assured that the fund was "healthy", that he was told by Mr. Gibbs they were expecting Government moves to replace the GAD link with long-term yields with a link to the FTSE index, and that the situation would come right. It is not clear whether SFS denies that he was told the fund was "healthy". If it does, SFS's position rests on the submissions about Mr. Shore's credibility because no evidence was adduced. Mr. Fry has since died and Mr. Gibbs did not give evidence. An email dated 23 May from Mr. Shore to Mr. Fry refers to a meeting in Salisbury with Mr. Fry on 7 June. Mr. Shore said that at that meeting he was again assured the fund was healthy.
109. Between May 2000 and October 2002, probably because Mr. Fry was increasingly unwell, Mr. Shore received no information as to the value of his fund. During this period he and his wife were selling their renovated holiday house in France, buying a holiday home in Spain, and involved with various property transactions in England.
110. (p) Findings on disputed issues not previously resolved:

Mr. Shore's income requirement: It is not in issue that by 9 May 1997, Mr. Shore had told Mr. Ormond that he needed £3,000 pm net to maintain his standard of living. By then, however, he had transferred out of the Avesta scheme, and the consequences are only of relevance to the secondary claim. The issue is as to what he told Mr. Ormond as to his requirements in January and during the period before 28 April when he left the Avesta scheme. Mrs Shore said that they had worked out they would need a minimum of £3,000 pm net to maintain their standard of living and Mr. Shore said that is what he told Mr. Ormond.

111. The contents of the documents concerning meetings prior to that on 20 January are of limited assistance. At the meeting in October 1995 Mr. Shore is recorded as saying he wanted a pension of two thirds of his final salary at the age of 57 or 58, a sum greater than £3,000 pm gross. Mr. Ormond's summary of the main points discussed at their meeting on 14 January does not give a desired pension. It states only that Mr. Shore was considering the reduced pension with a tax-free lump sum under the Avesta scheme. The illustration obtained on 17 January with an income of £31,741 pa gross (less than required to produce £3,000 pm net) does not, however, assist. It pre-dates the meeting on 20 January and the gross income is less than £3,000 pm and so not consistent with either Mr. Shore or Mr. Ormond's evidence. I conclude that, before the meeting on 20 January, Mr. Shore did not tell Mr. Ormond that he required either £3,000 pm gross or net.
112. I turn to the meeting on 20 January and what happened in the time before Mr Shore transferred out of the Avesta scheme. Mr. Ormond's evidence is supported by his broadly contemporaneous file notes and manuscript notes about the meeting on 20 January and the FNAQ prepared by him probably shortly after the meeting. The FNAQ states that Mr. Shore's entitlement to an Avesta pension at that time was £39,829 pa gross. Applying a 40% tax rate that is £23,892 pa net. The notes and the FNAQ refer to a desired income of £30-35,000 gross (although in the FNAQ the word "gross" replaced "net" which is crossed out) and a minimum income of £1,000 pm net. These documents state or suggest that Mr. Shore was looking for the maximum tax free sum and a small pension because of the prospect of consultancy and other income. It is common ground that at that time Mr. Shore thought he had good prospects of consultancies from British Steel or other companies and had been invited to work for his brother in Canada. The majority of the illustrations obtained from Scottish Equitable in January suggest that an income of £3,000 pm net was not attainable and are thus also consistent with Mr. Ormond's evidence.
113. Other documents and circumstances, however, support Mr. Shore's evidence. First, an illustration Mr. Ormond obtained from Scottish Equitable on 27 January stated that the "net income required" was £30,400, a figure requiring a gross income significantly greater than £36,000 pa, £3,000 pm.
114. Secondly, Mr. Ormond's note of his meeting with Mr. Shore on 9 May records that Mr. Shore "confirmed" that he needed £3,000 pm net to maintain his standard of living. Mr. Ormond also used the word "confirmed" when giving evidence about this. (Mr. Ormond's note of his meeting with Mr. Shore on 24 February records that Mr. Shore "confirmed" that he needed income of around £36,000 a year.) Mr. Ormond also used the word "confirmed" when giving evidence about this. By the May meeting it was clear that Mr. Shore required £3,000 pm net. It is submitted by Mr. Soole that had this been a change of instruction Mr. Ormond would have referred to it as such and would not have used the word "confirmed". This does not, however, reflect Mr. Ormond's use of the word "confirmed" in other documents, including in his letter dated 19 October 1995, soon after they first met.
115. Thirdly, Mr. Ormond originally wrote "£30-35,000 net" on the FNAQ but crossed out the word "net" and replaced it with "gross". Although Mr. Ormond said he did this because "net" was a mistake, on the form for the transfer office he knowingly recorded Mr. Shaw's gross income requirement as £30,000 rather than the £30-35,000 recorded in the file notes and the FNAQ. This shows willingness by Mr. Ormond to mis-record instructions in documents he prepared and may be seen as giving a different flavour to his explanation of the change he made to the FNAQ. Mr. Shore's evidence on this is that, when he received the FNAQ, he telephoned Mr. Ormond to point out the error. Mr. Ormond said he noted Mr. Shore's requirement and would take account of it. Mr. Shore said he then crossed out the word "gross" on his copy of the FNAQ and wrote "net" on it. Mr. Ormond denies this telephone conversation occurred.
116. It is difficult to draw conclusions from the plethora of illustrations obtained in January – 6 were obtained on 27 January – as to what Mr. Shore's instructions were. The illustrations are not altogether easy for a layperson to follow. The amount of the annuity that could be purchased at the time with the whole of the transfer value is stated as a net sum on page 3 of the illustrations. Although the maximum and minimum limits on income on that page are in fact gross figures, it is not stated that they are gross. The tables of income that it is projected will be received on the different assumptions about growth rates do, however, list the gross and net income in separate columns.
117. The contents of the FNAQ both as to the desired pension and the minimum net requirement were clear. Mr. Shore said he phoned about the former but did not say he mentioned the latter. Moreover, notwithstanding what he said about his telephone call, on 28 January he signed the authority to proceed stating the information in the FNAQ and its supplements was accurate. He did so without inserting any qualification about the error. He said he signed the authority to proceed because he trusted Sedgwicks. While that might explain the authority to proceed with the PFW arrangement, it does not explain why he signed an acknowledgement of accuracy regarding a document which he had on his evidence found to be inaccurate and about which he had telephoned Mr. Ormond.
118. Leaving aside Mr. Shore's reasons for signing the document without any qualification, whatever Mr. Ormond's failings, it was his practice to take notes of meetings and conversations. There is no note or letter recording a telephone conversation about the "gross" or "net" issue. Moreover, the day after Mr. Shore signed the authority to proceed he met Mr. Ormond to discuss the personal financial report. There is no reference in the contemporaneous notes about that meeting to any discussion of this error. Mr. Shore states that he crossed out gross and inserted net on his copy of the FNAQ either during the telephone conversation or when he reviewed the personal financial report. There is, however, no suggestion in his statement that the point was discussed during the meeting to consider the personal financial report. Since section B of the report refers to him ideally wishing to have an initial income of "£30,000 per annum" without specifying whether this was gross or net, had Mr. Shore been clear that his requirement was net and that a mistake had been made in the FNAQ, they would have discussed it.
119. It may well be natural to think in terms of "take home", that is net, income. In the light of the fact that Mr. Shore was at that time taking home about £5,000 pm net, £3,000 pm gross does not fit in with his request in October 1995 for a pension of two-thirds of his salary: £3,000 pm gross would be about £2,300 net, less than 50%. £3,000 pm gross is, however, consistent with what was available net from the Avesta scheme on the early retirement figures under consideration.
120. A requirement of £3,000 pm gross is also consistent with Mr. Shore's views as to his prospects of consultancies in January. At that stage he thought he could earn a significant sum from consultancy and was considering taking a smaller income because of it rather than concentrating on whether the income was to be gross or net. That this was his frame of mind at that time is indicated by his underlining the 35% minimum figure in the personal financial report.
121. I have concluded that Mr. Ormond's evidence is to be preferred on this issue. This is in the light of the documents, Mr. Shore's signature on the authority to proceed, his failure to qualify his confirmation that the FNAQ was accurate, the absence of a file note or letter from Mr. Ormond recording the telephone call Mr. Shore said he made to correct the FNAQ, and the absence of any suggestion that the "gross/net" issue was discussed when they met to consider the personal financial report.
122. Accordingly, I find that at the meeting on 20 January when the FNAQ was filled in, and at the later meetings before 28 April when he transferred out of the Avesta scheme, even if he had a figure of £3,000 pm net in mind, he had not made this clear to Mr. Ormond.
123. What Mr. Shore told Mr. Ormond about his assets? It is prima facie extraordinary for a person seeking financial advice to give erroneous information about his assets to the person who is to advise him in part on the basis of what assets he holds. I accept that Mr. Shore had no reason to mislead Mr. Ormond over the extent of the assets he held. For the reasons I have given (paragraph 25) I reject the suggestion that what he said about the property in Florida (which is not listed as an asset in the FNAQ) shows that he did so.
124. The fact that Mr. Ormond ultimately recommended taking a lower rate of commission than was payable on a PFW arrangement does not sit comfortably with the suggestion that he falsified Mr. Shore's asset position in order to increase the prospect of getting approval from the transfer unit and earn commission. But the completion of the asset section of the FNAQ shows, at the very least, confusion on his part. There may have been some misunderstanding in the case of the value of the French property. There may also have been some misunderstanding about the balance in Mr. and Mrs Shore's account at Barclays Bank, although the sums in that account in the months before the meeting on 20 January make that less likely. There is, however, no room for an explanation based on misunderstanding in relation to Jupiter and Fidelity. It is clear that on 20 January 1997 Mr. Shore had no assets in either fund. He had no investments in Fidelity and it was not until 6 March that he invested in Jupiter. The later documents referring to Jupiter, such as Mr. Ormond's file note on 12 May 1997 and Mr. Shore's annotation on the copy of the financial report dated 5 June 1997, provide no support for the submissions made on SFS's behalf.
125. Mr. Ormond's evidence about how he came to record the assets, and in particular the £250,000 investment in Luxembourg Unit Trusts, and whether the words "Jupiter/Fidelity etc" related to the £250,000, was not satisfactory. I do not regard his manuscript note that the unit trusts were not to be mentioned in the financial report as providing support for his evidence that Mr. Shore told him he had Luxembourg unit trusts and deposits in Luxembourg. Mr. Ormond said that Mr. Shore did not ask for the unit trusts not to be mentioned in the report. He said he made the note because Mr. Shore did not want to give him details of the investments, said he considered them to be irrelevant to their conversation, and gave him the impression they were confidential. There was no satisfactory explanation given for Mr. Ormond's willingness to exclude from the personal financial report assets which were included in the application to the transfer office for approval, and in the copies of the FNAQ that were on file and sent to Mr. Shore with the personal financial report.
126. Mr. Soole invited me to find that Mr. Ormond exaggerated Mr. Shore's assets by including in them assets which he believed Mr. Shore would have in the future, including a combination of the lump sum (which was to be invested) and the monies to be received from Michael Shore, and a value of £150,000 for the French property once the renovation was complete. Mrs Shore said they did not have any shares or equities in Fidelity or Luxembourg and that page 6 of the FNAQ was incorrect. She also said that she did not know about funds and left investment decisions to her husband. The balance in Mr. Shore's account at Barclays Bank, recorded as £20,000 in the FNAQ, was approximately £10,000.
127. Notwithstanding Mrs Shore's limited involvement, if one leaves out of account the file note made by Mr. Fry almost 2 years later and the evidence about the funding of the renovations of the French property, the conclusion that Mr. Ormond exaggerated Mr. Shore's assets appears the most probable. But in the light of those two items of evidence, I am unable to conclude that what is stated on page 6 of the FNAQ in relation to matters now disputed is entirely the product of exaggeration by Mr. Ormond.
128. I have dealt with the statement in Mr. Fry's file that Mr. Shore said that "he had substantial other investment assets valued at approximately £800,000" in paragraph 105 and the funding of the renovations of the French property in paragraphs 25 and 77. The absence of an explanation of how the renovation of a property described as a derelict in 1997 was funded so as to enable it to be sold in mid-2001 for about £190,000 is striking. This, together with the reference to the £800,000 investment assets in Mr. Fry's note, has led me to conclude that although Mr. Ormond was confused in the way he recorded Mr. Shore's assets and, in relation to Fidelity and Jupiter, exaggerated them, Mr. Shore did indicate that he had some assets other than those he now accepts that he had.
129. Did Mr. Ormond compare Mr. Shore's benefits under the Avesta scheme with those available under PFW? There are no references to an overall comparison of the Avesta and PFW schemes in any of the documents concerning the meetings on 14, 20 and 29 January. The documents refer to the fact that the tax-free sum under a PFW is lower than under the Avesta scheme and to the benefits of PFW schemes in terms of flexibility, control, and the potential for inheritance. There is no document containing a transfer value analysis and the only document setting out the comparative position on commencing to take benefits in November 1997 and in October 2000 when Mr. Shore reached the age of 60 is the hand-written document Mr. Ormond said he prepared for the meeting on 20 January which I have found (paragraph 52) was not shown to Mr. Shore at the meeting.
130. The personal financial report does not refer to the Avesta benefits either at 60 or on early retirement, or to the fact that the Avesta scheme does not expose its members to market risks. Mr. Ormond said that although Mr. Shore's decision to transfer out of the Avesta scheme had been made before the meeting on 29 January, as a "belt and braces" exercise he compared the benefits at that meeting. He said that he went through the personal financial report line by line discussing its contents. But, if Mr. Ormond went through the points contained in the documents, as he said he did, there was nothing in them to trigger a discussion of the comparative benefits of the Avesta scheme and PFW, even in relation to the tax free lump sum.
131. I find that any consideration of the comparative benefits of the Avesta scheme and PFW at the meetings on 20 and 29 January related to the maximum lump sum, and, in the case of the meeting on 20 January, to Mr. Shore's benefits under the Avesta scheme at the age of 57.
132. The comparative benefits of the Avesta scheme and a PFW scheme were not considered after January. During the period Mr. Ormond was considering Mr. Shore's position and advising him, the transfer value was increased on two occasions. In the light of the deteriorating relationship between Mr. Shore and British Steel it is probable that his prospects of obtaining consultancy income were lower before his transfer from the Avesta scheme on 28 April. Mr. Shore did not, however, say anything about this to Mr. Ormond before or at the meeting on 28 April. The reason he said he asked for more income at the meeting was the substantial increase in the transfer valuation. It was not until the illustration obtained for the meetings in May that the assumed tax rate was 23%, i.e. that there would be no other income.
133. What discussion was there of annuities? At the meeting on 14 January there was some consideration of the comparative annuity rates printed out by Mr. Ormond on 3 January. There was also some discussion of annuity rates at the meetings on 20 and 29 January. At the meeting on 20 January only the Avesta figures for early retirement in November 1997 were mentioned and the discussion of annuities was primarily in the context of the flexibility of PFW arrangements.
134. Section D of the personal financial report refers to maximum and minimum amounts of withdrawal, which are determined every three years by applying annuity rates, and may fall. Mr. Ormond said the reference to flexibility in the documents is to the possibility of getting an annuity later if rates improved. While agreeing that it was he who introduced "flexibility" into the discussion and that the statement that Mr. Shore believed that annuity rates may improve was taken from Sedgwick's standard paragraphs, Mr. Ormond said that when they went through the report Mr. Shore did not correct this. At the meeting on 29 January there was no discussion of taking what was in effect an annuity under the Avesta scheme because Mr. Ormond considered that by that meeting Mr. Shore had already decided to transfer out of it and enter into a PFW arrangement. There was no consideration of taking deferred benefits under the Avesta scheme at 60 at either of the two meetings.
135. There was also some discussion of annuities at the meeting on 9 May. Mr. Ormond's hand written notes prepared for the meeting contain the phrase "purchase annuity" and a print-out dated 9 May of comparative annuity rates was shown to Mr. Shore. They looked at the quotations but Mr Ormond's evidence was they were not an important factor in relation to the matters discussed and the decisions taken. The consideration of annuities at that meeting was principally in the context of Mr. Shore's ability to choose when to purchase one under the PFW arrangements. At that time Mr. Ormond considered that an annuity was not appropriate for Mr. Shore because it would lock him into particular benefits at the time and deprive him of flexibility. While Mr. Shore's greater need for income, because there were then no prospects of consultancies, was discussed, the impact of that factor on the desirability of considering taking an annuity was not considered. Mr. Ormond said that the unavailability of consultancy income could be a temporary factor.
136. The question of taking an annuity was not adequately put to Mr. Shore at the meeting on 9 May. Mr. Ormond said that the comparison of the PFW and an annuity was put squarely before Mr. Shore because the annuity that could be purchased at that time with the whole of the transfer value was on page 3 of the Scottish Equitable quotation. Mr. Ormond said that they went through the quotation and Mr. Shore was "aware of all the facts and figures within the quotation". By then Mr. Shore, to Mr. Ormond's knowledge no longer had prospects of consultancies and had a greater need of income. The PFW would only provide the income he required on the highest of the three assumed growth rates in the illustrations. In these circumstances I do not consider that making Mr Shore aware of the sum then available as an annuity constituted putting the comparison between an annuity and the PFW squarely before him.
137. Did Mr. Shore know that the PFW pension was vulnerable to the market? I reject Mr. Shore's evidence that he did not know that he was exposed to the risks of the stock market under the PFW scheme. This followed from one of the features of the flexibility of such funds, flexibility as to how the fund is invested. Even if Mr. Shore did not appreciate from this that he was exposed to stock market risks, the statement in section D of the personal financial report that "the value of the fund is not guaranteed and may go down" identified a risk. Moreover, the decisions made as to where Mr. Shore's fund was to be invested, switching between the Mixed and Global Funds and the Security Plus Fund (whether or not this was done on Mr. Ormond's advice) make no sense save in the context of an exposure to the risks of the market and as reflecting reactions to market conditions.
138. Mr. Ormond's file note of his meeting with Mr. Shore on 24 February states he advised Mr. Shore to take a more cautious view because the market was at a high. From March 1997 Mr. Shore was also involved with his investments in the Jupiter fund and receiving regular communications about market conditions. Mr. Shore's PFW funds were switched back into the Mixed and Global Funds in May 1998 and in May 1999 Mr. Ormond's follow up letter to Mr. Shore after the annual review stated that Mr. Shore was pleased with the performance of the fund and that they had agreed the investment of the funds would not be altered. Mr. Shore may not have been a financial man but he was the Managing Director of a significant company and must have had some awareness of the way markets operate. His refusal to accept any knowledge of risk was entirely incredible and an example of the sort of distortion that can occur where a person considers he has been badly let down.
139. Was Mr. Shore informed or aware of GAD rates and their effect? Mr. Shore ultimately accepted that he had been taken through Scottish Equitable's January 1997 illustrations which identified both the maximum and minimum GAD rate limits and contained notes as to how they operated. He underlined the reference to 35% in section D of the personal financial report showing that the GAD calculation produced a maximum limit and a minimum limit. Mr. Shore clearly knew that the GAD limits existed: they and the triennial reviews are also mentioned elsewhere, for instance in Mr. Ormond's letter to him dated 23 December 1997. He accepted this but said he did not understand them or their impact on his pension.
140. I do not consider that Mr. Ormond's explanatory powers were very high, and (see paragraph 169) I accept that the letter dated 23 December 1997 and the discussion which preceded it would not have brought home the position to Mr. Shore. I do, however, accept that he took Mr. Shore through the illustrations and the personal financial report. In doing so, I find his repetition of the contents of those documents brought to Mr. Shore's attention that the maximum and minimum amounts of withdrawal are determined by applying annuity rates set by the GAD every three years and that such rates are not guaranteed and may become less favourable. In reaching this conclusion I do not rely on the contents of Mr. Fry's file note dated 2 December 1999.
141. Was Mr. Shore aware of Sedgwick's recommendation that the maximum income withdrawn should not exceed 75% of the maximum GAD limit? None of the 1997 documents refer to the fact that Sedgwick recommended that the maximum amount of income to be produced from an income withdrawal plan should not exceed 75% of the maximum income allowable under the GAD rate. Nor does the personal financial report or the file note of the meeting on 29 January refer to the fact that the valuation figure at that time put the income on the borderline of the maximum GAD rates and in excess of the 75% figure recommended. Mr. Ormond had been reminded of this by Mr. Mason. The absence of any reference to the recommendation in the documents when coupled with the absence (see paragraphs 143-152) of any adequate warnings as to the risks associated with taking maximum income leads me to conclude that Mr. Shore was not made aware of the 75% guideline at the time he decided to transfer out of the Avesta scheme or in May when he chose which illustration to accept.
142. Mr. Ormond's letter dated 11 June 1998 contains an annotation by Mr. Shore stating "min 35% and max 75%". Mr. Shore originally said that he annotated this letter days or weeks after its receipt but in his evidence said that he believed the annotation was made in or after December 1999 following his telephone conversation with Mr. Fry. I reject the latter explanation. The letter dated 11 June 1998 enclosed a unit statement and a summary of transactions from Scottish Equitable but made no comment. Mr. Shore received at least two further valuations in the 18 months between June 1998 and his conversation with Mr. Fry. I do not consider that Mr. Shore would have annotated a fairly standard letter from Mr. Ormond about his funds which did not refer GAD rates, after a conversation with Mr. Fry some eighteen months later. Although Mr. Shore was adamant that he did not have a conversation on this topic with Mr. Ormond in the weeks or months after he received the letter dated 11 June 1998, I find that by the end of 1998 and certainly by the annual review on about 23 May 1999 he was aware of Sedgwick's 75% guideline.
143. Was Mr. Shore warned about the risks involved in taking maximum income under his PFW? I have found that Mr. Shore was not told about the guidance that the drawn-down income should not exceed 75% of the maximum income permitted by GAD before he transferred out of the Avesta scheme and he entered into the PFW scheme with Scottish Equitable. Apart from this, was he, however, warned of the risk of income falling if he made maximum withdrawals? Mr. Shore said he was not. Mr. Wardell submits this is impossible to reconcile with the documentary evidence and the fact that Mr. Shore was an experienced businessman, who despite his denials, had some familiarity with financial matters. He relied on the various Scottish Equitable illustrations Mr. Shore was taken through. These showed that, save on growth assumptions of 12%, income would fall. Mr Wardell also relied on the notes of the meetings from January, in particular the statement "accepts double figures risk", Mr. Shore's decision to switch the funds from the lower risk Security Plus Fund into the Global and Mixed Funds, and Mr. Fry's note of his conversation with Mr. Shore in December 1999 (set out in paragraph 102 above).
144. That Mr. Shore decided to switch the fund out of the Security Plus Fund, for the reasons I have given, shows that he was aware that his fund was subject to market risks. It does not, however, show that he understood the risk of his income falling if he made maximum withdrawals. For the reasons I have given, I approach Mr. Fry's file note with a degree of caution. Apart from that, Mr. Wardell's submissions primarily depend on the clarity of the way Mr. Ormond went through the illustrations with Mr. Shore and explained the position then and when going through his personal financial report.
145. Mr. Shore's personal financial report does not contain SFS's standard paragraph warning those who take income at or close to the permitted maximum of the likelihood that this will reduce the income they may be able to take in the future. All that the report has is the generic language of the notes on the investment products in section D. These state that the value of the fund is not guaranteed and may go down. What is said about large pension fund withdrawals is that they "will reduce the amount remaining in the fund so restricting the potential for long term growth and reducing the financial security of a spouse or dependants in the long term". A warning about a restriction of the potential for long term growth and the impact in the long term on the spouses and dependants is different to a warning that the income the client may be able to take is likely to be reduced. Even in respect of the long term, nothing is said about the increase in the risk that there will not be adequate funds to purchase an annuity of equivalent value at a future date.
146. Given the way Mr. Ormond said he went through the report (see paragraph 74), the absence of SFS's standard paragraph with its warning to those taking income at or close to the maximum meant there was nothing to trigger a discussion of the risks of taking maximum income.
147. There are no warnings in the letter dated 27 May Mr. Ormond sent Mr. Shore following their meeting or after Mr. Shore's letter dated 3 June stating he wanted to take the maximum income available. The circumstances in which this letter was written and the evidence about it are important. Mr. Ormond said that it was written because Mr. Shore said he wanted to take maximum income although to maintain or increase his income the fund would have to grow at a rate of 12%. Mr. Ormond said:

"…it was very much going into the fact of taking such a high level and the detrimental effect that it could have on his fund and his future income if that is what he did. He stated that he was quite clear and quite open that he was happy doing this, albeit a temporary measure. He was happy to take that decision and therefore I would have said to him, 'Ok, I want this in your handwriting so therefore please put it in writing that you wish to take the maximum level of income' which Mr. Shore did."

148. Mr. Ormond was asked whether, when Mr. Shore said this, he advised him that to take the maximum risked depleting the fund. Mr. Ormond replied that they "would have" gone through the quotations and he "would have" highlighted the consequence of taking the maximum level.
149. I have referred (paragraph 86) to Mr. Waddingham's evidence about the contents of the letter. I do not accept that Mr. Ormond gave Mr. Shore an explicit warning of the sort indicated by Mr. Waddingham when he said Mr. Ormond should have told Mr. Shore he was moving in high-risk territory. There is no indication in Mr. Ormond's file note of his meeting with Mr. Shore that he did so. Mr. Ormond said that he was more explicit at the meeting but I do not accept his evidence on this. It appeared to be reconstruction rather than recollection and did not square with his evidence that he recorded all significant matters discussed at meetings in filenotes or letters.
150. There is also no warning in Mr. Ormond's letter to Mr. Shore dated 18 September following a discussion about the funds in the light of the volatility of the market. The closest the documents get to a warning is the letter from Mr. Ormond on 23 December 1997 written following a meeting on 19 December (see paragraph 92). This refers to "a discussion of the situation of the income" since Mr. Shore "was taking the maximum income" and states "the government actuary sets the annuity rates which are reviewed every three years". The letter does not articulate the exposure to such reviews of a person taking maximum income. The reference to a discussion of the income situation since Mr. Shore was taking maximum income and to the fact that annuity rates are reviewed every three years hints at the issue but not in any way that would bring home to the reader that there is a problem or at least a risk. There is no reason to believe that he was any more explicit in discussion.
151. Mr. Ormond's response to Mr. Mason's reminder in April 1998 that the annual review should assess the continued suitability of PFW (paragraph 93) shows either unawareness of the importance of reassessing the risks at the review -- and of giving warnings -- or a refusal to do so. There are no references to warnings about the risks in the follow up letters following the annual reviews in May 1998 and May 1999.
152. I find that no written warning was ever given that taking income at or close to the permitted maximum is likely to reduce the income in the future. The nearest the documents come are in the reference to the restriction of the potential for long term growth in the personal financial report and the allusive reference in the letter dated 23 December 1997. I also conclude that there were no oral warnings given or at least no clear oral warnings. Had there been, the documents would have referred to them, as they did in relation to the desirability of switching into the Security Plus Fund in September 1997 in the light of the then volatility of the market.
153. As to the way Mr. Ormond went through the illustrations at the various meetings, his approach throughout the period he was advising Mr. Shore can be exemplified by what he said about the meetings on 9 and 12 May on the fifth day of the trial. He said they discussed the features of the quotations and "also the growth rates that were applicable". Asked whether he'd warned Mr. Shore about the risk of taking the maximum he said he very much warned him. Asked what he said to Mr. Shore, he replied "we would have gone through the quotations" and "the quotations clearly show the consequences of taking that level of income". His answers to questions about how he explained the illustrations to Mr. Shore and to questions about giving warnings were evasive. Mr. Ormond's evidence as to how he went through the illustrations did not satisfy me that he gave a clear explanation and warning about the risks involved in taking maximum income. His file note of the meeting on 20 January 1997 does include the phrase "accepts double figures risk". This must, however, be seen in the light of the way he went through the illustrations: that is on the basis of running through the figures in them but without any warning as to the risk of taking maximum income or of the 75% guidance, or highlighting the implications of needing to achieve the highest of the three assumed growth rates.
154. Even an experienced businessman is entitled to clear warnings from the professional selling him a product. In the absence of an adequate warning about the risks of taking maximum income the client is not able to make an informed decision about the benefits. In principle all would want flexibility, control and a capacity for dependants to inherit, but understanding of the costs of those benefits and the risks attendant on them is necessary for an informed decision to be taken.
155. (q) Mr. Shore's complaints to the firms and to the Financial Ombudsman Service: In early October 2002 Mr. Shore asked SIFC, now responsible for administering his fund, about its state. He spoke to Mr. Lancaster and a meeting was arranged for 11 October. Before the meeting Mr. Lancaster informed Mr. Shore that he would be looking after him. He also asked Scottish Equitable to send Mr. Shore a valuation of his fund. The valuation dated 6 October 2002 was £204,000. They discussed this at the meeting and Mr. Lancaster advised that at the next triennial review Mr. Shore's income was likely to fall again to about £12,000 pa. In fact the triennial review in May 2003 led to a reduction in the maximum pension from £32,577 to £15,671 pa.
156. Mr. Lancaster's note recorded Mr. Shore's anger and said that he was likely to make a complaint. Mr. Shore did so in a letter dated 13 October 2002. At that stage his complaint focused on Sedgwick's failure to advise on the potential impact of the GAD rates on his pension and on the silence about his fund between May 2000 and October 2002. SIFC forwarded the complaint to Mercer (which by then was responsible for complaints concerning advice by SFS). Mercer rejected the complaint on 4 December 2002. On 2 January 2003 SIFC rejected Mr Shore's complaint about events after 2000.
157. On 23 January 2003 Mr. Shore complained to the Financial Ombudsman Service ("FOS"). His complaint was against SIFC. It was that he had been mis-sold a pension with no alternative offered and there had been no advice given between July 2000 and October 2002. (The form he sent to the FOS in fact refers to July 2002 but that must be an error). He said that he should have been advised to take an annuity in 1997. In a letter dated 8 February 2003 the FOS stated it could not deal with SIFC because it was not a member. By October 2003, however, it appears that the FOS was pursuing the complaint. In a letter dated 22 October it asked for more details and sent Mr. Shore a questionnaire. Mr. Shore returned this on 28 October. He said Mr. Ormond had discussed an annuity with him but had said they couldn't do it with a fund of the size that his was.
158. There were further exchanges between the FOS and Mr. Shore and SIFC in November 2003 and January 2004. In a letter dated 9 January 2004 Mr. Shore was asked about his other assets and the fact that the FNAQ recorded him saying he had accounts in banks and building societies and unit trusts. In a letter dated 25 March 2004 he was asked about the fact that he had signed a form saying that he had received the FNAQ and that it accurately reflected his circumstances. Mr. Shore told the FOS he had not seen page 6 of the FNAQ questionnaire and would not have signed the authorisation if he had done so. On 27 April 2004 Fidelity confirmed to the FOS that Mr. Shore had no assets with them during the relevant period.
159. In May 2004 the FOS informed Mercer that it considered that SFS Ltd should have recommended an annuity in November 2000 after the first triennial review, when it became clear Mr. Shore was taking and planned to continue to take high levels of an income. On 28 May Mercer wrote to Barclays Financial Planning, i.e. SIFC, saying that in view of the date this was an issue for them and not for Mercer. The FOS's letter to Mercer was copied to Mr. Shore who, in a letter dated 21 June 2004, said that the recommendation should have related to 1997 and not 2000. On 3 August 2004 the FOS rejected Mr. Shore's argument because it considered that in 1997 he wanted flexibility.
160. Mr. Shore then asked the FOS for time to get expert advice. He consulted his present solicitors at the beginning of September. In a letter dated 2 November 2004 his solicitors wrote to the FOS reformulating his complaint and stating that in 1997 there had not been any consideration of option 2, that is to leave his retained benefits in the Avesta scheme. In a letter dated 9 December 2004 Mr. Bellinger of Barclays Financial Planning informed the FOS that this raised a new issue and that Barclays Financial Planning was upholding this complaint. Barclays Financial Planning subsequently made an offer to Mr. Shore. Mr. Shore accepted this in a communication dated 4 February 2005 but in a letter dated 6 June 2005 Barclays withdrew the offer inter alia on the ground that Mr. Shore had not suffered a loss because of the failure to consider leaving his retained benefits in the Avesta scheme. There were further communications between the FOS, Barclay Financial Planning's solicitors, and Mr. Shore's solicitors during the summer of 2005. On 29 September Mr. Shore issued proceedings against SFS. SIFC was subsequently joined as a second defendant. On 25 January 2007 the action against SIFC was settled for £140,000 inclusive of costs. In his second statement Mr. Shore says that at the time the settlement was reached his total legal costs were £308,690.

Part 6: The 'duty' issue

161. It is common ground that Mr Ormond and SFS owed Mr Shore a common law duty to act with the skill and care to be expected of a reasonably competent financial adviser. In determining the extent of this duty, it is useful to start with the requirements of the relevant regulatory regime, in this case the SIB principles and the IMRO rules. This is because the skill and care to be expected of a reasonably competent financial adviser ordinarily includes compliance with the relevant regulatory rules (Loosemore v Financial Concepts [2001] 1 Lloyd's Rep P.N. 235 at 241) and "the regulations afford strong evidence as to what is expected of a competent adviser in most situations": Seymour v Ockwell [2005] PNLR 758 at 784. Mr. Waddingham said that the IMRO Rules are a clear indication of what represents good practice.
162. The SIB principles included requirements that a firm should act with due skill, care and diligence (principle 2), that it should seek information from customers about their circumstances or investment objectives which might reasonably be expected to be relevant in enabling it to fulfil its responsibilities to them (principle 4), and that it should take reasonable steps to give a customer it advises, in a comprehensive and timely way, any information needed to enable him to make a balanced and informed decision (principle 5).
163. It is common ground that Mr. Shore was a "private customer" of SFS for the purposes of the IMRO rules. The relevant IMRO rules are rules 3.1(1) (suitability), 4.1(1) (fair and clear communication) and 6.7(1) and Appendix 6.3 and 6.7 (the procedures when advising on pension transfers).
164. Rule 3.1(1) requires a firm to take reasonable steps to ensure that it does not make any recommendation or arrange any transaction unless the recommendation or transaction "is suitable for the customer having regard to the facts disclosed by the customer and other relevant facts about the customer which the firm is, or reasonably should be, aware". Rule 4.1(1)(a) prohibits a firm from making a communication with another person which is designed to promote the provision of Investment Services unless it can show that it believes on reasonable grounds that the communication "is fair and not misleading". Rule 4.1(1)(b) requires a firm to take reasonable steps to ensure that any agreement, written communication, notification or information which it gives or sends to a private customer to whom it provides investment services "is presented fairly and clearly".
165. As to the procedures when advising on pension transfers, rule 6.7(1) provides:

"(a) A firm must not recommend a transaction which involves a transfer of accrued pension benefits from an Occupational Pension Scheme to a Personal Pension Scheme unless:

(i) it has carried out a transfer value analysis; and

(ii) the recommendation is consistent with the results of that analysis.

(b) The transfer value analysis carried out under paragraph (a) of rule 6.7(1) must include information concerning the rates of investment return which would need to be achieved for the Package Product to provide benefits which are the same as those afforded under the Occupational Pension Scheme.

(c) The transfer analysis carried out under paragraph (a) of rule 6.7(1) must be given to the customer and the firm must take reasonable steps to enable the customer to understand the nature of the analysis." (emphasis added)

166. Appendix 6.3(7)(c) provides that the "reason why" letter confirming recommendations in relation to pension transfers "…should not be a mechanistic recitation of stock motives applicable to any and every transaction". The "reason why" letter in this case is the personal financial report dated 23 January 1997 (see paragraph 64).
167. The material provisions of Appendix 6.7 provide:

"Part 1. Opt Outs: Prospective investors who are current or prospective members of occupational pension schemes.

(a) Defined benefit occupational pension schemes

(i) The starting point for a Firm considering the situation of an active member of a 'defined benefit' Occupational Pension Scheme should be to assume that it would not be suitable to recommend opting out into a Personal Pension Scheme.

(ii) If an opt out is recommended, the onus is on the Firm to demonstrate that, on the evidence available at the time, it appears bona fide to be in the Customer's best interests. An opt out is presumed to be adverse to the interests of the individual concerned unless the contrary can be affirmatively shown.

(iii) Any Firm contemplating giving advice in favour of an opt out should identify the specific rights and benefits available to the prospective investor under the Occupational Pension Scheme and consider carefully the effects on the investor's situation of their replacement by the very different benefits of a Personal Pension Scheme. An analysis should be carried out, by someone competent to do so, of the Occupational Pension Scheme data compared with the available personal pension products. ….".

…

Part 2: Transfers: Prospective investors who have deferred benefits.

(a) Transfers from defined benefit occupational pension schemes

(i) The position is more finely balanced when a prospective investor currently has deferred benefits from a final salary Occupational Pension Scheme (i.e. a deferred benefits scheme) and is considering transferring these benefits to a Personal Pension Scheme.

(ii) Advice on whether to transfer deferred benefits should be preceded by a detailed consideration of the ceding scheme compared with the Personal Pension Scheme, and of the personal circumstances and objectives of the investor.

(iii) The process should include procedures… to ascertain the prospective investor's career aspirations and desired retirement age and to consider what a realistic retirement would be … for carrying out an analysis of the yield required to match the benefits under the ceding scheme … for enabling the prospective investor to receive sufficient, clear information to make an informed investment decision based on a firm understanding of the risks involved and a knowledge of what protection, rights, expectations and options they may be giving up.

…

(vii) Under Rule 6.7(1) a transfer value analysis must be undertaken or obtained… It should be documented and recorded before firm investment advice is offered to the prospective investor. The results of this analysis should be discussed with the latter in simple clear language.

…

(ix) Relevant items of information for the prospective investor include… the Transfer Value Analysis including an indication of the rate of growth needed to ensure the investor is no worse off.

(c) Conclusion on transfers of deferred benefits to personal pension arrangements

(i) Firms may find it difficult to demonstrate compliance with the relevant Rules if the process outlined above has not been completed and fully documented, including the collection of the relevant information from the ceding scheme and the prospective investor, and clear provision of the necessary information to the latter.

(ii) The process will be no means point to all customers being confirmed as prospects for the sale of personal pension plans… It will confirm that many customers would be better advised to remain in their Occupational Pension Schemes or to transfer to a new employer's scheme."

168. In the light of these rules and the evidence of Mr. Waddingham and Mr. Egerton, I have concluded that SFS and Mr. Ormond were under the following duties to Mr Shore:

1 To advise Mr. Shore as to the options open to him, that is as to the benefits under the Avesta scheme and the potential benefits under a PFW scheme as at November 1997 and at the age of 60 in October 2000;

2 To compare the benefits under these options, and the risks involved under both options; and, whether by a transfer value analysis or in some other way, to inform Mr. Shore of the rate of growth under the PFW scheme needed to match the benefits under the Avesta scheme. Given the proximity of Mr. Shore's intended retirement, a transfer value analysis was, however, less crucial.

3 To inform Mr. Shore of the risks of taking a high level or the maximum level of income, and of the risks resulting because of the triennial reviews in the GAD rates;

4 To prepare an adequate personal financial report setting out these comparative benefits and risks fairly and clearly.

169. It is submitted on behalf of Mr. Shore that, given his circumstances, Mr. Ormond was in January and in April under a duty to advise him to retain his rights in the Avesta scheme, and that alternatively, in June he was under a duty to advise him to take an annuity.
170. I have concluded that, given Mr. Shore's circumstances as communicated to Mr. Ormond, Mr. Ormond was not under a duty to advise Mr. Shore to retain his rights in the Avesta scheme and defer taking his pension until he was 60. It was central to the argument that he was under such a duty that Mr. Shore had no settled intention to retire before the age of 60, and that he had told Mr. Ormond that his income requirement was £3,000 pm net and been led to understand that this was achievable under a PFW. I have rejected Mr. Shore's evidence as to his intention and as to the income requirement he stated in January 1997.
171. By January 1997 Mr. Shore had given his notice to his employers. I have found that he had a settled intention to retire in November 1997 and that before May 1997 the income requirement he communicated to Mr. Ormond was £3,000 pm gross. I also found that, whether or not induced by Mr. Ormond telling him what most people did in respect of the tax-free sum, by January 1997 he wanted access to it. In the light of these findings, the uncertainties and "lumpiness" of consultancy income, and Mr. Shore's indication to Mr. Ormond that he would start drawing his pension in January 1998, on the information available to Mr. Ormond, Mr. Ormond's failure to consider a scenario in which Mr. Shore would not withdraw anything from his pension pot until he was 60 was not unreasonable.
172. It was not argued by Mr. Soole that Mr. Ormond should have advised Mr. Shore to take his benefits under the Avesta scheme at 57, i.e. from November 1997 (see the particulars of breach at paragraph 41 of the Amended Particulars of Claim). This is not surprising since, at that time, after taking a lump sum of £140,400 his gross annual pension under the Avesta scheme would have been £39,300 pa, at a tax rate of 40% a net pension of about £23,800 pa, and at a tax rate of 24.5% a net pension of about £30,000 pa. Both are less than Mr. Shore could have achieved in May 1997 by purchasing an annuity even after taking the maximum tax-free lump sum.
173. The illustrations before Mr. Shore at that time showed that he could have purchased an annuity giving him a net income of about £34,700 pa in May 1997. Annuity rates fell slightly between January and April 1997 so that the cost of purchasing an annuity increased slightly. The experts agreed that, notwithstanding that, the dramatic changes in annuity rates after 1997 could not have been reasonably foreseen at the time Mr. Shore transferred out of the Avesta scheme, although Mr. Egerton said there was no evidence to suggest a reverse in the downward trend and thus the increasing cost of purchasing an annuity.
174. I do not consider Mr. Ormond was under a duty to advise Mr. Shore to take his benefits under the Avesta scheme in May or November 1997. I have referred to the circumstances disclosed by Mr. Shore to Mr. Ormond, including his income requirement, his asset position, his desire to have access to the tax-free lump sum, and his anticipation that he had good prospects of a substantial income from consultancy and thus, before May 1997, less need for income, in considering whether Mr. Ormond was under a duty to advise Mr. Shore to remain in the scheme and defer taking his pension until he was 60. In addition to those matters, in January 1997 Mr. Shore's benefits under the Avesta scheme were subject to the 12% pa compounded actuarial deduction. Mr. Shore's inquiries to Britannia via Mr. Mitten show that he knew about the actuarial deduction under the Avesta scheme and that Wragge's considered the deduction to be on the high side. Mr. Waddingham's evidence was that the pension transfer was justified.
175. By the beginning of June 1997, however, Mr. Shore's circumstances, as disclosed to Mr. Ormond, had changed. First, it was clear that there was no longer any prospect of consultancy income from British Steel. Secondly, he had resigned from British Steel. Thirdly, in May 1997 he informed Mr. Ormond that his requirement was for a net income of £3,000 pm. On 3 June he informed Mr Ormond he had decided to take his pension benefits immediately. It is clear that income was now his priority. As a result of those changes of circumstance, Mr. Ormond should have revisited and re-assessed his advice to Mr. Shore. Mr. Waddingham's evidence was that it is essential for an adviser to review the advice given to a client where the client's position or priorities have changed.
176. In the light of the regulatory rules, the evidence of the experts, and the changes in Mr. Shore's circumstances, I have concluded that by the end of May and the beginning of June SFS and Mr Ormond were under the following duties to him:

1 To advise Mr. Shore as to the options open to him, that is as to the benefits obtainable by purchasing an annuity and the potential benefits under a PFW scheme;

2 To compare the benefits under these options, and the risks involved under both options in circumstances in which Mr. Shore had taken the maximum tax-free lump sum and needed to take the maximum income;

3 To inform Mr. Shore of the risks of taking a high level or the maximum level of income, and of the risks resulting because of the triennial reviews in the GAD rates;

4 To prepare an adequate personal financial report setting out these comparative benefits and risks fairly and clearly.

177. Mr. Waddingham said that Mr. Ormond was not under a duty to advise Mr. Shore to purchase an annuity because the pension transfer that had taken place was justified, there were valid reasons why PFW fitted Mr. Shore's circumstances, and the increasing cost of purchasing an annuity was not generally foreseen in July 1997. Mr. Waddingham was, however, of the view that Mr. Ormond was under a duty to revisit his advice in the light of Mr. Shore's changed circumstances and to put the possibility of taking an annuity squarely before Mr. Shore as an alternative to the PFW. Although these two views are logically distinct and not inconsistent, the distinction is one that in practice it is difficult to maintain, particularly if considered without regard to Mr. Ormond's duty to warn Mr. Shore of the risks of taking the maximum permitted income. I have concluded that Mr. Ormond was under a duty to put the possibility of an annuity squarely before Mr. Shore and to advise him of its advantages and of the risks of taking and continuing to draw the maximum permitted income under the PFW scheme in the light of his changed circumstances.

Part 7: The 'breach of duty' issue

178. SFS accepts that it is responsible for the conduct of Mr. Ormond in his dealings with Mr. Shore. It is clear, and the experts are agreed on this, that Mr. Ormond failed to meet the regulatory requirements relevant at the time in relation to pension transfers in a number of respects.
179. First, he did not comply with IMRO rule 6.7 and Appendix 6.7, Part 2 (a)(vii) because no transfer analysis was undertaken comparing the Avesta scheme with the Scottish Equitable PFW, and, save in respect of the cash lump sums and any oral discussion of the benefits available under the Avesta scheme on retirement in November 1997 at the meetings on 14 and 20 January 1997, no comparison of the benefits was discussed with Mr. Shore.
180. Secondly, he breached Appendix 6.7, Part 2 (a)(ii) and IMRO rule 4.1(1)(b) because there was no detailed consideration of the ceding scheme compared with the PFW scheme and because the personal financial report did not fairly and clearly present a comparison between the benefits that would have been retained by staying with the Avesta scheme and those to be had under the PFW. There was neither a written nor an oral consideration of the comparative benefits and risks of the schemes. Such a comparison and analysis would, if it included, as the rules require, the yield required in the personal pension to match the benefits of the occupational pension, have shown that magnitude of the risk required for what was not a substantial advantage in pension terms to what was available under the Avesta scheme. On the January figures the PFW would only match the benefits under the Avesta scheme at the age of 60 if there was growth of 14.5% pa, which Mr. Waddingham described as "a racy objective" and "something for the adventurous".
181. The experts agreed that a transfer analysis was required by the rules, and was both material and important in considering the reasonableness of any advice to transfer. They, however, also agreed that such an analysis is not the only way of bringing home the risks and the comparative benefits of the occupational pension and the personal pension (particularly when the intended retirement date is less than twelve months away). The rules recognise that in the case of a person with deferred benefits in a final salary occupational pension scheme, which Mr. Shore would be once he retired from the company, the position between remaining in it and transferring to a personal pension is more finely balanced than in the case of an active member of such a scheme.
182. Had Mr. Ormond brought home the comparative benefits and risks to Mr. Shore in some other way, I would have had to consider whether this was a situation in which his non-compliance with the rules did not constitute a breach of his common law duty of care and skill. As I have found that he did not do this at all, let alone in the simple clear language required by the rules, the question does not arise.
183. For these reasons, notwithstanding the breaches of the regulatory rules and Mr. Ormond's other failures (for example, recording Mr Shore as having assets in Jupiter and Fidelity and not giving adequate warnings about the risks of taking maximum income), I have concluded that Mr. Ormond was not under a duty to advise him to remain in the Avesta scheme and to take his benefits at the age of 60, and thus this part of Mr. Shore's claim does not succeed.
184. Accordingly, it is not necessary to resolve the dispute as to whether the basis for considering the reasonableness of the advice to transfer out of the Avesta scheme is the initial transfer value of about £471,000, the later figure of about £528,000 at the beginning of April, or £627,043 on 28 April when the transfer was made. On behalf of Mr. Shore it is said the later figures should be disregarded, because the advice and the decision to proceed were given and made in January, the increase in value did not remove Mr. Ormond's duty to explain the risks, and there is no reason to conclude that, properly advised of the comparative benefits and risks, Mr. Shore would have chosen to prefer to forego the Avesta benefits. Although it is not necessary to resolve this issue, in my judgment the relevant date for considering the reasonableness of the transfer from the Avesta scheme is the date upon which the transfer occurred. Mr. Shore and Mr. Ormond anticipated that the value of the fund would increase after January and Mr. Shore remained a member of the Avesta scheme until 28 April. I do not consider that the reasonableness of what was done should be tested by reference to a transfer value given some three months earlier and superseded. The underlying breach of which Mr. Shore complains in relation to this, however, is the failure to warn him of the risks of a PFW. That failure applies whatever time the transfer value is considered.
185. I turn to the secondary claim. I have stated the duties SFS and Mr. Ormond owed to Mr. Shore in the period from before the meeting on 9 May until 3 June when Mr. Shore stated he wished to take the maximum income forthwith.
186. I have found that Mr. Ormond's repetition of the contents of the Scottish Equitable illustrations over the period he was advising Mr. Shore brought to Mr. Shore's attention that the maximum and minimum amounts of withdrawal are determined by applying annuity rates set by the GAD every three years and that such rates are not guaranteed and may become less favourable.
187. I, however, also found that:-

(a) At the meeting on 9 May or thereafter Mr. Ormond did not revisit his advice in the light of Mr. Shore's changed circumstances and his greater need of income. He did not do this by preparing a revised personal financial report or other document, and did not do so orally.

(b) In the light of Mr. Shore's changed circumstances and the fact that the PFW would only provide the income he required on the highest of the three assumed growth rates, the way Mr. Ormond went through the illustrations did not suffice to put the comparison between an annuity and the PFW squarely before Mr. Shore.

(c) Mr. Ormond did not adequately warn Mr. Shore about the risks involved in taking maximum income under his PFW or make him aware of Sedgwick's recommendation that the maximum income withdrawn should not exceed 75% of the maximum GAD limit.

188. I therefore find that Mr. Ormond breached his duty to put the possibility of an annuity before Mr. Shore and to advise him of its advantages and of the risks of taking and continuing to draw the maximum permitted income under the PFW scheme.

Part 8: The 'causation' issue

189. In the light of my findings in respect of the primary claim it is not necessary for me to decide whether Mr. Shore would have done all that he could to defer taking his Avesta benefits until the age of 60 and succeeded in doing so. Notwithstanding this, I record that I am not satisfied that, had the defendant been under a duty to advise Mr. Shore to defer taking his benefits under the Avesta scheme until the age of 60, Mr. Shore would have done so. Of the options put by Mr. Soole in his closing submissions the most realistic one on the evidence appeared to be to work for his brother Michael in Canada. That, however, was an option that remained open to Mr. Shore in May when he decided to resign from his employment forthwith. Prior to that he had contemplated taking his pension from January 1998 and possibly not drawing all of it and even only the minimum permissible. On his resignation, however, he elected to draw his maximum pension entitlement. While the offer of a job with his brother may have been open, it does not appear to be something which Mr. Shore seriously explored. In 1996 he had said to Mr. Ormond that he did not want to work so many hours and wanted more time for his leisure and hobbies. Moreover, in his evidence he said that apart from taking the pension benefits his first step would have been to use the tax free lump sum to live off.
190. As far as the secondary claim is concerned the defendant's position is that Mr. Shore has failed to show on the evidence that, had he been recommended to purchase an annuity in May or June 1997 he would have been likely to have done so. Mr. Wardell relied on the statement in the personal financial report that he contemplated that annuity rates might well improve. He also relied on the fact that, having just entered into a PFW arrangement with its flexibility, he was unlikely to forgo that flexibility so soon. Mr. Waddingham said at that time clients, particularly those with investments, were reluctant to purchase an annuity even when advised that was the prudent route because they resented the loss of control.
191. I reject these submissions. Mr. Shore's position was that he needed to take the maximum permitted income under the PFW scheme from the outset. He was not warned adequately of the dangers of this, particularly in the light of the growth assumption required, and was not alerted to Sedgwick's recommendation that no more than 75% of the maximum permitted income should be withdrawn. Had the risks of taking maximum income and the existence of Sedgwick's recommendation been squarely before him, in the light of the income he could have secured by purchasing an annuity I consider it likely that he would not have exposed himself to the risks of taking maximum income under the PFW scheme. In that situation, in the light of his income needs and the fact there was no longer any prospect of consultancy income, notwithstanding what Mr. Waddingham said about his experience, Mr. Shore was likely to have purchased an annuity. I do not consider that his investment of his pension and in Sedgwick's Mixed and Global Funds, with their greater exposure to the market shows a willingness to take risks that is inconsistent with taking an annuity. First, his decisions as to where to invest his PFW pension were taken on the advice of Mr. Ormond. Secondly, those decisions were taken with an inadequate appreciation of the risks to which he was exposed by taking maximum income.

Part 9: The 'contributory negligence' issue

192. The defence of contributory negligence was raised in paragraph 44 of the defendant's re-amended amended defence served on 20 June 2007. The defendant relies on the claimant voluntarily leaving his employment on 11 May 1997 and failing to seek a consultancy as he indicated he was planning to do, his withdrawing the maximum permissible income from June 1997 onwards, and continuing to do so, even after the triennial review in June 2000. It also relies on him transferring the investment of the fund from the Security Plus Fund to the Mixed and Global Funds on 27 May 1998 which increased his exposure to the risks of the markets.
193. In the light of my findings that Mr. Shore, although informed of the operation of the GAD limits, was neither warned of the risks of taking the maximum permitted income nor of Sedgwick's recommendation that no more than 75% of the limit be taken, I reject the submission that his continuing to draw the maximum income before he became aware of the position constituted contributory negligence. By that time he was locked into the arrangement and needed to take the maximum income which, after the triennial review, was no longer sufficient to meet his requirements. As far as his investment in the Mixed and Global Funds is concerned, in the light of the absence of adequate advice and a warning about the risks of taking maximum income, I do not consider this amounted to contributory negligence.
194. With regard to the secondary claim, the defendant's submission is that Mr. Shore knew that annuity rates could fall and believed that they would do so, and took the risk. In this context too they rely on what is said in the personal financial report and in Mr. Ormond's notes. Again, given the absence of adequate advice as to the risks of taking the maximum permitted income and information as to Sedgwick's recommendation that no more than 75% of the maximum should be taken, I do not consider that Mr. Shore's conduct in deciding not to purchase an annuity, in the circumstances of the advice he received, constituted contributory negligence. On Mr. Ormond's evidence the issue of an annuity was not an important factor in relation to the matters discussed at the meeting on 9 May. He said that at the time he considered that an annuity was not appropriate for Mr. Shore because it would lock him in to particular benefits and deprive him of flexibility. He had not revisited the issue in the light of Mr. Shore's greater need for income and changed circumstances and did not put the question of taking an annuity adequately to Mr. Shore.

Part 10: The 'breach of statutory duty' issue

195. I have set out the relevant parts of section 62 of the Financial Services Act 1986 and the IMRO rules at paragraph 8(5) and paragraphs 163-166 of this judgment. For the reasons given in paragraphs 177-181, the defendant did not comply with IMRO rules 4.1(1)(b) and 6.7 and Appendix 6.7, Part 2 (a)(ii) and (vii). I find that such breaches caused loss to Mr. Shore: see paragraph 190 above. Accordingly, subject to the limitation issue, Mr. Shore is entitled to damages pursuant to section 62.

Part 11: The 'limitation' issue

196. The claims in negligence and under section 62 of the Financial Services Act 1986 accrued on the date Mr. Shore first suffered relevant damage. Section 2 of the Limitation Act 1980 provides that "an action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued". A cause of action in tort may accrue before the potential claimant knew or had reason to know of it.
197. The rule that time could start running when the claimant did not know he had suffered damage led to injustice. To remedy this, in certain cases statute provides for an extended period of limitation from a date later than that on which the cause of action accrued. In the case of claims for negligence other than for personal injuries these are contained in sections 14A and 14B of the Limitation Act 1980.
198. Section 14A makes provision for a special time limit for such negligence actions "where facts relevant to the cause of action are not known at [the] date of accrual". Section 14A(4)(b) provides for a period of three years after the earliest date on which the claimant had both the knowledge required for bringing an action in respect of the relevant damage and a right to bring such an action. Section 14A does not apply to a claim under section 62 of the Financial Services Act 1986: see Martin v Britannia Life [2000] Lloyd's Rep PN 412, at 9.2.
199. (a) The six year period: In the present case proceedings were instituted on 29 September 2005. Unless Mr. Shore's claim accrued after 28 September 1999 or he did not have the requisite knowledge under section 14A before 28 September 2002, his claim is time-barred. The submissions on limitation concentrated on the primary claim on which the claimant has not succeeded. The arguments deployed in that context are however, relevant to the defendant's submission that the secondary claim is time-barred and I consider them together.
200. I first deal with the date on which the cause of action accrued for the purposes of section 2 of the 1980 Act and section 62 of the 1986 Act. In relation to the primary claim Mr. Wardell submitted that Mr. Shore suffered his damage when he gave up the Avesta benefits on 28 April 1997 so that the six-year period expired before 29 September 2005. The transfer value Mr. Shore received did not compensate him for the increases in his benefit that would have accrued if he had remained in the scheme. His interests were also plainly damaged by moving from a fund requiring no market growth to produce its benefit to one requiring such growth. Mr. Wardell also submitted that Mr. Shore had the necessary knowledge for the purposes of section 14A of the Limitation Act 1980 before 29 September 2002. He submitted Mr. Shore had sufficient knowledge by 15 December 1999 or by 25 May 2000 when his first triennial review reduced his maximum pension entitlement, or, at the latest by October 2001.
201. In relation to the secondary claim, Mr. Wardell submitted that Mr. Shore suffered his damage on the last day Mr. Ormond should have advised him to purchase an annuity, 31 July 1997, so that the six year period expired on 30 July 2003. As far as section 14A is concerned, Mr. Wardell relied on the same dates as he did for the primary claim.
202. Mr. Soole submitted that this is a case in which it is necessary to look at both the debit side of the transaction (the surrender of the rights in the Avesta scheme) and the credit side (the acquisition of the PFW scheme). He relied on First National Commercial Bank v Humberts [1995] 2 All ER 673 at 677 per Saville LJ, and Nykredit Plc v Edward Erdman Ltd (No 2) [1997] 1 WLR 1627 at 1630-1635, per Lord Nicholls. He submitted that Mr. Shore suffered no relevant damage until he was on balance financially worse off: see Law Society v Sephton and Co [2006] 2 AC 543 at [20] and [43] per Lord Hoffmann and Lord Walker, and Wardley Australia Ltd v. State of Western Australia (1992) 175 CLR 514, at 536 per Brennan J.
203. Mr. Soole submitted that Mr. Shore was not on balance financially worse off when he entered into the PFW scheme. This was because the revised transfer value calculated by the scheme actuary in accordance with statutory regulations was, as the experts agreed, a reasonable value for the accrued Avesta benefits foregone. Although Mr Shore was then exposed to the risks of the PFW scheme, whether, and if so when, he suffered any loss depended on whether, and if so when, those risks occurred. Mr. Soole's submission on the primary claim was that Mr. Shore did not become financially worse off either until he first suffered a cumulative net loss of income in early 2005 or until the risks to which he was exposed by the PFW scheme occurred. He argued those risks occurred either on 7 October 2000, Mr. Shore's sixtieth birthday, or as a result of the first triennial review on 25 May 2000. In relation to the secondary claim Mr. Soole submitted that Mr. Shore sustained no relevant loss and actual damage until the first triennial review reduced his income.
204. I accept Mr. Soole's submissions that no loss was sustained by Mr. Shore either on 28 April 1997 when he transferred out of the Avesta scheme or on 31 July 1997, the last day Mr. Ormond should have advised him to purchase an annuity. In relation to the primary claim, this is because, on leaving the Avesta scheme and entering the PFW scheme, he did not there and then fail to obtain what he expected, and did not in any other way suffer immediate detriment which constituted actual (if yet unquantifiable) loss or damage. Although he was thereby exposed to the risks of the PFW scheme, those risks may not have materialised. In the event of satisfactory investment performance and annuity rates, he would have obtained benefits in excess of the Avesta benefits he surrendered. The position is similar in relation to the secondary claim. As in the case of the primary claim, although Mr. Shore was exposed to the risks of the PFW scheme, those risks may not have materialised and, in the event of satisfactory investment performance and annuity rates, he would have obtained benefits in excess of the annuity he could have purchased in July 1997. Just as incurring a possible future liability does not count as immediate damage (see e.g. Law Society v Sephton and Co [2006] 2 AC 543 at [17] and [18]), so also exposing oneself to the risk of a possible future loss does not.
205. The defendant is not assisted by Glaister v. Greenwood [2001] PNLR 602 or Martin v. Britannia Life [2000] Lloyds Rep PN 412. In Glaister's case it was conceded that the primary limitation period had expired: see 604, 613. The issue was whether the Court could consider the claimant's 'date of knowledge' without determining when the cause of action accrued. Lawrence Collins J (as he then was) proceeded on the assumption that the cause of action accrued when the claimant transferred into the personal pension scheme but (at 614) stated he was not deciding the point. In Martin's case the 'Homeplan Plus' policy the claimant had undertaken as a result of the advice resulted in an immediate increase in his monthly expenditure. It was because of this that he acted to his detriment and suffered actual damage from the moment he undertook the recommended package: see paragraphs 4.58 and 7.4, and 9.16.
206. Similarly, the defendant is not assisted by the decisions in Forster v. Outred [1982] 1 WLR 86, Bell v. Peter Browne [1990] 2 QB 495, and Knapp v. Ecclesiastical Insurance Group plc [1998] PNLR 172. In First National Commercial Bank v Humberts [1995] 2 All ER 673 at 679 Saville LJ stated that in Forster and Bell's cases "the court was able to conclude that the transaction there and then caused the claimant loss …". Law Society v Sephton and Co [2006] 2 AC 543 made it clear that all three cases were ones in which the immediate effect of entering the relevant transaction caused the plaintiff to suffer loss: see Lord Hoffmann at [22], Lord Walker at [48], and Lord Mance at [67].
207. The High Court of Australia in Wardley Australia Ltd v. State of Western Australia (1992) 175 CLR 514 drew a distinction between a breach of duty causing a person to enter into a contract which exposes the contractor to a contingent loss or liability and a breach of duty causing a person to enter into a contract which exposes the contractor to an immediate, although often not yet quantifiable, loss. Only in the latter case has the person sustained loss by entering into the contract. The speeches in Law Society v Sephton approved this analysis.
208. Transactions giving rise to purely contingent liabilities and losses have been distinguished from transactions with both benefits and burdens. In Law Society v Sephton Lord Hoffmann at [20] stated that in Nykredit Plc v Edward Erdman Ltd (No 2) [1997] 1 WLR 1627 there was no question of a purely contingent liability. Nykredit's case concerned a claimant who entered into transactions with both benefits and burdens as a result of the negligence of the defendant. Lord Hoffmann stated at [19] that, in such a case, the claimant suffers loss and damage only when it is possible to say he or she is on balance worse off.
209. As to when it is possible to say that a claimant is on balance worse off, Lord Hoffmann (at [21]) contrasted two situations. The first is where the liability is for the difference between what the claimant got and what he would have got if the defendant had done what he was supposed to have done. The second is where the damage is the difference between the claimant's position after entering into a transaction and what it would have been if he had not entered into the transaction. He stated that in the first situation it may be relatively easy to infer that the claimant has suffered some immediate damage simply because he did not get what he should have got, but in the second situation the answer may be more difficult. This is because:

"despite the breach of duty, the transaction may on balance have originally been advantageous to the [claimant] and some evidence may be necessary to show when he was actually in a worse position".

210. Lord Mance stated (at [70]) that:

"[W]hile a defendant's failure to preserve or protect a particular asset by proper performance of his duty in relation to a particular transaction may readily be seen to have caused measurable loss, negligence causing a claimant to enter into a transaction which he would not otherwise have entered may not immediately, or indeed ever, cause measurable loss to any particular asset."

and (at [71]), referring to UBAF Ltd. v European American Banking Corp. [1984] QB 713, at 725; Nykredit's case, and Wardley Australia Ltd, that:

"…the court has made it clear that a claimant does not necessarily suffer loss merely by being caused by negligence to enter into a transaction to which he would not otherwise have agreed."

211. Lord Walker stated ( at [41]) that:

"It is a commonplace of negligence actions of all sorts that a cause of action may arise long before it is possible to quantify precisely the damages eventually recoverable. But there are other situations in which the correct legal analysis is that, however great may be the prospect (or risk) of economic loss, actionable damage has not yet occurred (just as there are situations in which there is grave and obvious risk of personal injury or damage to property but actionable damage has not yet occurred)."

212. For the reasons I have given, Mr. Shore did not suffer loss merely by transferring out of the Avesta scheme and entering into the PFW scheme or, in relation to the secondary claim, did not suffer loss on 31 July 1997. This is so whether Mr. Shore is regarded as a person whose entry to the PFW exposed him to a contingent risk, or as a person who entered transactions with both benefits and burdens.
213. In relation to both the primary and the secondary claims I do not, however, accept Mr. Soole's submission that Mr. Shore sustained no relevant loss until the first triennial review on 25 May 2000 reduced his pension income. In Law Society v Sephton Lord Hoffmann stated that it is necessary to consider the evidence about when a claimant was actually in a worse position. In the present case the evidence is that, by the beginning of 1999, annuity rates, which had fallen since Mr. Shore entered into the PFW scheme in 1997, reached a new low. The market would have valued Mr. Shore's pension scheme differently after the fall in annuity rates during 1998 and the beginning of 1999.
214. While Mr Shore's rights in the PFW scheme were not demonstrably less valuable at the time he entered into it, they were after the fall in annuity rates. At that stage the risk was not purely contingent. The materialisation of a risk which has the effect of depressing the value of an asset creates loss.
215. In the case of the secondary claim Mr. Soole submitted that Mr. Shore was better off until the triennial review on 25 May 2000 because until then he was receiving slightly more income each month than he would have done had he purchased an annuity. He was drawing the maximum permitted income and this was more than the income he could have obtained by purchasing an annuity. Although Mr. Shore did not suffer loss merely by not purchasing an annuity and entering into the PFW scheme, he was only able to take the maximum permitted income by depleting the fund. I have concluded that Mr. Shore was actually in a worse, albeit not yet quantified, position by the beginning of 1999. Accordingly, allowing some margin, in relation to both the primary and the secondary claims, save to the extent that the running of time is postponed by section 14A, the claim became statute-barred by no later than the end of February 2005, some seven months before proceedings were launched.
216. (b) Section 14A: I turn to the question of knowledge and section 14A of the 1980 Act. The material parts of section 14A provide:

"(5) For the purposes of this section, the starting date for reckoning the period of limitation … [under section 14A(4)(b)] … is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.


(6) In subsection (5) above "the knowledge required for bringing an action for damages in respect of the relevant damage" means knowledge both--
(a) of the material facts about the damage in respect of which damages are claimed; and
(b) of the other facts relevant to the current action mentioned in subsection (8) below.


(7) For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.


(8) The other facts referred to in subsection (6)(b) above are--
(a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and
(b) the identity of the defendant; and
(c) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant.


(9) Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5) above.


(10) For the purposes of this section a person's knowledge includes knowledge which he might reasonably have been expected to acquire--
(a) from facts observable or ascertainable by him; or
(b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek;
but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice."

217. Mr. Soole submitted that Mr. Shore did not have the relevant knowledge under section 14A until September 2004 when he received advice from Mr. Erskine to the effect that he should have been advised to remain in the Avesta scheme. Alternatively he submitted that he did not have the relevant knowledge until October 2002 when he was told of the collapse of the fund by Mr. Lancaster.
218. Mr. Soole submitted that before the meeting with Mr. Lancaster in October 2002, notwithstanding the conversations with Mr. Fry in December 1999 and the effect of the triennial review, Mr. Shore had been reassured that the difficulties that arose because of the adjustment of the GAD rates were under Government review and that his funds were healthy. Mr. Soole relied on the meetings with Mr. Fry in May and June 2000, the first of which was attended by Mr. Gibbs. He also relied on the fact that Mr. Shore did not receive any information about the state of his fund between May 2000 and October 2002.
219. Mr Soole submitted that even the knowledge acquired at the meetings with Mr. Lancaster was not enough because it was only when Mr. Shore received Mr. Erskine's advice in September 2004 that he was told that he should have been advised to remain in the Avesta scheme. I reject this argument. I have held that the defendant was not under a duty to advise Mr. Shore to remain in the Avesta scheme so the 'knowledge' acquired from Mr. Erskine's advice is not material. Mr. Soole accepted (see e.g. paragraph 171 of his opening submissions) that before receiving Mr. Erskine's advice Mr. Shore had focussed his complaint on inter alia the absence of advice to take an annuity.
220. Mr. Wardell submitted that Mr. Shore had the requisite knowledge in the spring of 1997. This was because he knew or must be taken to have known of his accrued rights under the Avesta scheme and that he would have no final salary rights when he transferred out of it. He also knew or must be taken to have known of the warnings in the personal financial report. The Scottish Equitable illustrations he received gave him knowledge that, save on the highest growth assumption, his income would fall if he withdrew the maximum permitted income. He was a businessman, a trustee of the Avesta scheme, and had been advised of his rights by Wragge and Co and Mr. Jamison of Britannia, the scheme's actuaries.
221. I reject this submission. In effect it is a submission that Mr. Shore knowingly took the risk. This is inconsistent with my findings on liability which are predicated on the insufficiency of the explanations given by Mr. Ormond. Moreover, at the time Mr. Shore transferred out of the Avesta scheme and in July 1997, for the reasons I have given, he had not suffered damage. He was only exposed to risks. While he could be regarded as having knowledge of some of the material facts for the purposes of section 14A(6)(a) and (7), he did not know about Sedgwick's recommendation that the maximum income withdrawal should not exceed 75% of the maximum GAD limit. In the light, in particular of what Mr. Waddingham said about the importance of discussions as well as documents, he also did not have the requisite knowledge of the risks involved in taking maximum income under his PFW. The standard paragraph warning clients of the risks of taking income at or close to the permitted maximum limit was not included in Mr. Shore's personal financial report. Nor do I find that, even an experienced businessperson would, unless in finance, know of the risk as a result of being taken through Scottish Equitable's illustrations in the way Mr. Ormond took him through them.
222. Mr. Wardell alternatively submitted that Mr. Shore had the requisite knowledge by the triennial review on 25 May 2000. He had been told in December 1999 of the fall in annuity rates and that this would lead to a substantial reduction in his income. That reduction occurred as a result of the triennial review. Mr. Wardell's third submission was that, in any event, Mr. Shore knew or ought to have known of the fall in the value of his pension funds by 30 June 2001 or at the latest 15 October 2001. This was because the fall in markets and the impact of that on pension funds was widely reported and he had received several reports about market conditions from Jupiter Asset Management. He received the annual review pack for his protected rights fund as at 15 October 2001 showing that the fund, which was invested in the same way as the non-protected rights fund, had fallen very substantially in value.
223. (c) The principles for determining whether a person had the requisite knowledge: These were considered in the recent decision of the House of Lords in Haward v Fawcetts [2006] 1 WLR 682. In that case the claimant acquired a controlling interest in a company in December 1994 in reliance on the advice of the defendant accountants. They forecast that some £100,000 would have to be invested in the company during 1995 to bring it to reasonable profitability. The forecast was erroneous and substantial further sums were invested in 1995, 1996 and 1997 without bringing the company to profitability. In 1998 the claimant asked a specialist in corporate rescues to investigate the company's losses and on 6 December 2001 he brought an action against the defendants for professional negligence.
224. The claimant relied on the three year limitation period in section 14A and pleaded that the earliest date on which he had the requisite knowledge was May 1999. The House of Lords restored the decision of the trial judge that the claim was time barred. It held that the claimant had not discharged the burden of proof to show that the date when he first knew enough to investigate the possibility that the accountants' advice had been defective was after 6 December 1998. The claimant's evidence in that case was not directed at the date when he first knew enough to justify setting about investigating the possibility that the advice was defective. It was directed at the date when he first knew he might have a claim for damages. It was for this reason that Lord Nicholls and Lord Mance stated that he had not discharged the burden of proof resting on him: see paragraphs [23-24] and [135-138].
225. It is clear from Haward v Fawcetts [2006] 1 WLR 682 that the key to "knowledge" for the purposes of section 14A is knowing facts with sufficient confidence to justify embarking on the preliminaries to the issue of a writ: see also Halford v Brooks [1991] 1 WLR 428, 443. Knowledge that the damage was "attributable" in whole or in part to the acts or omissions of the defendant alleged to constitute negligence within section 14A(8)(a) means knowledge in broad terms of the facts on which the claimant's complaint is based and of the defendant's acts or omissions. It must also be known that there is a real possibility that those acts or omissions were a cause of the damage. The first of these tests concerns the degree of certainty required before knowledge can be said to exist. The second concerns the degree of detail required before a person can be said to have knowledge of a particular matter in the context of the requirements of section 14A(8)(a), the question of attributability.
226. A variety of phrases have been used to describe the degree of detail required. These include "broad knowledge" of matters pointing to the defendant's act or omissions, an appreciation "in general terms", and knowledge of the "essence" of the act or omission to which the injury was attributable: see the decisions cited by Lord Nicholls at paragraph [10] in Haward v Fawcetts. One of these was Broadley v Guy Clapham and Co [1994] 4 All ER 439 where Hoffmann LJ, at 448 stated that section 14(1)(b) requires that "one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which that complaint is based".
227. Lord Nicholls stated that a similar approach is applicable to the expression "attributable" in section 14A(8)(a). He stated that "consistently with the underlying statutory purpose, 'attributable' has been interpreted by the courts to mean a real possibility, and not a fanciful one, a possible cause of the damage as opposed to a probable one". He stated (paragraph 11) that "time does not begin to run against a claimant until he knows there is a real possibility his damage was caused by the act or omission in question". The other speeches refer to knowledge of the facts constituting "the essence" of the complaint, or the "essential thrust of the case": see paragraphs 49, 66, 90 and 120.
228. It is clear that knowledge that the act or omission involved negligence is irrelevant. Section 14A(9) draws a distinction between acts said to constitute negligence and the legal consequence of those facts "knowledge of the former (the facts)" is needed before time begins to run, knowledge of the latter (the legal consequence of the facts) is irrelevant: per Lord Nicholls in Haward v Fawcetts at paragraph 12 and see also Dobbie v Medway HA [1994] 1 WLR 1234. Appellate courts have been critical of decisions in which judgmental language is used. Lord Walker (paragraph 67), however, agreed with Lord Nicholls that the insistence on extremely non-judgmental language may sometimes ignore the realities of the situation. He stated that the level of generality or specificity will often be more important for the court to address than whether judgmental language is inconsistent with section 14A(9).
229. Lord Nicholls stated that although in many cases the distinction between knowledge of facts and knowledge of legal consequences can readily be drawn, there may be difficulties. One example is where a claimant knows of an omission by a professional but does not know the damage he has suffered can be attributed to that omission because he does not realise the professional owed him a duty. In Haward v Fawcetts that difficulty did not arise because it was held that the claimant knew enough for it to be reasonable for him to investigate whether the accountants' advice was flawed. Lord Nicholls (paragraph 21) stated that the defective nature of the advice was not transparent on its face and something more was needed to put the claimant on enquiry. He stated that "for time to start running there needs to have been something which would reasonably cause [the claimant] to start asking questions about the advise he was given".
230. Lord Scott stated (paragraph 46) that Mr Haward plainly had knowledge that the investment of the money had taken place, and that the investment was a sufficiently serious bad one to justify suing the accountants well before 6 December 1998. This was because very large sums including over £500,000 in 1997 had had to be put into the company to keep it a going concern: see paragraph 47. His Lordship stated (paragraph 51) that Mr Haward knew what advice had been given by the accountants and what advice had not been given. By 6 December 1998 he knew that the true financial state of the company had required, if it was to keep trading, the very substantial additional investment that had to be made and was made to cover the losses in the years 1995, 1996 and 1997: see paragraph 52. Lord Scott, Lord Nicholls (paragraph 17), and Lord Walker (paragraph 73) agreed with the trial judge that Mr Haward clearly knew all the material facts as they occurred. Lord Walker stated (paragraph 66) that the losses were clear and substantive and there was never any doubt about the identity of the putative defendant.
231. Lord Brown and Lord Mance found the issue more difficult because all that was in issue in that case was actual knowledge. The Court of Appeal had held that it was not open to the accountants to assert constructive knowledge within section 14A(10). Lord Brown referred to and distinguished the cases in which what is unknown is the very fact of damage and cases where what is unknown is the attributability of known damage to the defendant's act: paragraph 88 and see also Lord Nicholls and Lord Walker at paragraphs 14, 61 and 64-65. His Lordship stated that in the circumstances of Haward's case nothing more was required than that the claimant knew that his loss might well have resulted from an investment made on the accountants' advice. His Lordship stated: that

"… having regard to the huge scale of his losses from the outset, [the claimant] ought surely to have sought expert advice and set in train the consideration of a possible claim against [the accountants] long before he did". (paragraph 87)

232. Finally, knowledge of one type of damage, even if minor, causes time to run from the date that damage is discovered. This is so even though other more serious damage is sustained and discovered at a later date: see Hamlin v Edwin Evans [1996] PNLR 398 and Oakes v Hopcroft [2000] Lloyds Rep BN 946 at 948.
233. (d) The present case: By 15 December 1999 Mr. Shore knew that there had been a substantial fall in annuity rates since 1997. He knew that this and the level of his drawings would mean that his income would be substantially reduced at the triennial review when the maximum pension he would be entitled to withdraw would fall. I have found that Mr. Shore was aware of Sedgwick's recommendation that no more than 75% of the maximum permitted income should be withdrawn under a PFW scheme by the end of May 1999. Additionally, Mr. Fry specifically drew it to his attention in December when explaining to him why, as he also knew, the value of his fund had fallen.
234. By the time of the triennial review in May 2000 Mr. Shore knew of his actual loss of income from £45,869 pa to £32,578 pa, a reduction of over 30%. He also knew, as a result of what Mr. Fry had told him in December that the taking of maximum income had exposed him to this risk. He also knew, or should have known, that at the age of 60, which he would attain on 7 October 2000, he would be in receipt of an income substantially lower than that which he could have expected to receive had he remained a member of the Avesta scheme or had purchased an annuity in July 1997.
235. Mr. Shore was in a similar position to the claimant in Haward v Fawcetts. He knew what advice had been given by Mr. Ormond and what advice had not been given by him. By 15 December 1999 he knew that he had not been told of the recommendation that no more than 75% of the maximum permitted income should be drawn and had not been warned of the risks of drawing maximum income. Mr. Ormond failed to advise him as to the risks of PFW policies and the particular risks of drawing the maximum permitted income. He also failed to advise him about the benefits obtainable by purchasing an annuity in the light of those risks when his income needs changed in late May and early June 1997. Mr. Shore knew he relied on Mr. Ormond's advice. The causal connection between the advice, in particular the failure to advise about the risks of drawing the maximum income, and the damage was obvious.
236. Mr. Shore thus had knowledge of his actual loss of entitlement to income and of income, its causes and the relevant conduct of SFS and Mr. Ormond. I remind myself of the terms used in Haward v Fawcetts: "broad knowledge", the "essence", and "the essential thrust". In the light of these, in this case what Mr Shore was told in December 1999 about the risks of taking maximum income and the 75% recommendation meant that he appreciated in general terms that the loss he would sustain once the GAD rates were adjusted was capable of being attributed to Mr. Ormond's advice: see paragraph 10 of Hayward v Fawcetts.
237. I do not consider that any reassurance given to Mr. Shore about the underlying state of the fund or what might be done about the GAD rates means that he did not have sufficient knowledge. The absence of advice as to the risk of a reduced pension if maximum income is drawn lies at the heart of his complaint. Certainly by May 2000, and probably by 15 December 1999, Mr. Shore knew there was a real possibility his damage was caused by the failure to give him this advice.
238. I therefore conclude that SFS's limitation defence succeeds. As in Martin v Britannia Life, the causes of action accrued only a short time outside the six year limitation period. Like Jonathan Parker J in that case, it gives me no satisfaction to reach this conclusion.

Part 12: Conclusion

239. In the light of my conclusion on the limitation issue it follows that SFS is not liable to Mr. Shore for damages as claimed and that the action must be dismissed.

NOTE

A draft of this judgment was sent to counsel on 19 October 2007 with the intention of handing down the judgment on 1 November. The parties provided me with a list of typing corrections and obvious errors on 29 October. On 31 October the claimant provided a skeleton argument in relation to costs and draft grounds of appeal. It was apparent from page 1 of the draft grounds of appeal that there was a mistake in paragraphs 99 and 100 of the judgment. The figures given for the fall in the value of the claimant's fund did not take account of the fact that he had received a tax free lump sum. The mistake had led me to refer in paragraphs 214 and 215 to the value of the fund on 22 September 1999. I informed the parties before and at the hearing on 1 November that, in the light of this mistake, I would not hand down judgment but would consider whether the mistake affected the conclusions I reached. I have done so and conclude that it did not. My decision was and is that by the beginning of 1999 the risk the claimant took in 1997 had materialised because of the fall in annuity rates. I have amended the relevant paragraphs to remove the mistake.