Adviser not negligent for failing to review previous pension transfer advice

Paul Denning had argued that Greenhalgh Financial Services Ltd (GFS) should have spotted that the previous advice was defective, and advised him to pursue a complaint or claim against his former advisers within the applicable limitation period. Alexander Forbes Financial Services Ltd (AF) had advised Denning on the transfer of his benefits from a final salary scheme to a personal pension plan in August 2000 and then again in early 2007.

The judge found that GFS had been engaged only to advise on Denning's present and future financial requirements. Although a professional adviser may owe a duty to a client that goes beyond "the four corners of a retainer", in "unusual cases", this was not true in the circumstances of this case, he said.

In particular, the judge found that GFS had never been asked to advise on the merits of the 2000 transfer, which had "no substantive connection to the matters upon which GFS was instructed to advise". At the same time, Denning had not provided GFS with any information that would have enabled it to advise on the matter and the alleged errors were not obvious, the judge said.

It was also relevant that GFS was not competent to give "legal" advice of the type sought by Denning, and that there was no need to imply a term that would have obligated it to provide such advice into the contract between it and Denning to make that contract effective, the judge said.

"The facts and circumstances surrounding the [2000 transfer] are far too distant in time and remote in subject matter from the instructions given to GFS in 2008 to, even arguably, give rise to a duty whether arising under contract or tort," the judge said.

"I would observe finally that [Denning's] pleaded case on this issue is wholly unparticularised as to the facts and matters said to give rise to the duty," he said.

Denning instructed GFS for investment management advice in August 2008, after becoming dissatisfied with the performance of the personal pension set up by AF. Denning had by this point begun a formal complaint against AF in relation to the 2007 pension transfer, which was subsequently referred to the Financial Ombudsman Service (FOS). He did not address the 2000 transfer in this complaint.

Hayley Goldstone, a pensions disputes expert at Pinsent Masons, the law firm behind Out-Law.com, said that the case showed the importance of a carefully drafted retainer letter.

"In the wake of pension freedoms and flexibilities, if things go wrong then we're likely to see people looking to claw back their losses," she said. "Professional advisers are an obvious target."

"For both the individual and the professional adviser, the scope of the retainer letter and the instructions to the professional adviser are key," she said.