Previous professional advice – heed or history?

As the professional services market has become more fluid, clients are changing advisers with greater frequency than ever before. In this context, we examine the recent case of Paul Denning v Greenhalgh Financial Services Ltd and the duty on professional advisers to review the advice of their predecessors.

Background

In August 2000 Mr Denning authorised the transfer of the deferred benefits from his final salary pension scheme to a personal pension plan with Scottish Equitable (the First Transfer). This was on the recommendation of Alexander Forbes Financial Services Ltd (AF), who advised that such a transfer was likely to produce a higher pension for him at retirement age.

Regrettably, however, the personal pension plan did not perform as anticipated. Therefore, in February 2007, on the further recommendation of AF and in preparation for his imminent retirement, Mr Denning transferred to a phased retirement plan with Standard Life (the Second Transfer).

In August 2008 and dissatisfied with the service being provided by AF, Mr Denning retained Greenhalgh Financial Services Ltd (GFS) in its place. At this time, it was agreed that GFS would undertake a review of Mr Denning’s existent arrangements and GFS was not instructed to review the First Transfer.

In November 2010, and of his volition, Mr Denning complained to the Financial Ombudsman Service (FOS) about the advice he had received from GFS in relation to the First Transfer. However, this complaint was rejected in 2012 by the FOS on the grounds that it was out of time.

In January 2013 Mr Denning issued legal proceedings against AF, although these were later abandoned on the basis that his claim for compensation was likely to fail as it too was time-barred.

Finally, in December 2014, Mr Denning issued legal proceedings for professional negligence against GFS.

Allegations

Mr Denning alleged that GFS had been negligent in failing to review the advice that AF had given in 2000 in relation to the First Transfer and in failing to advise him of the potential to make a claim against AF. Had GFS done so, Mr Denning alleged that he would have issued proceedings against AF in late 2008 and that he would have recovered substantial compensation.

Decision

On an application to strike out and/or summarily dismiss the claim, the court determined that the facts and circumstances surrounding the First Transfer were far too distant in time and remote in subject matter from the instructions given to GFS in 2008 to give rise to a duty on GFS to review it. In doing so it observed, amongst other matters, that the information required to provide the omitted advice had not been available to GFS and that the errors allegedly made by AF were not obvious ones.

Comments

While the court had little difficulty concluding on the facts of Mr Denning’s case that a successor adviser was under no duty to review and advise upon the recommendations of its predecessor, there will inevitably be other cases where a positive obligation does arise. This seems more likely where, for example, the successor adviser was expressly instructed to review previous advice and/or where it was reasonable or necessary to review advice previously given in order to provide any further advice. It also seems more likely where the preceding advice remained in effect and/or falls within the sphere of competence of the successor adviser.

Although it is not uncommon for professional advisers to review the actions of their predecessors, particularly where a new client has expressed dissatisfaction, the decision in Denning indicates that it cannot safely be assumed that they will always do so.

Therefore, as a client, if you do have concerns about the actions or advice of your previous adviser, or if you would simply like piece of mind, the safest course will be to specifically request a review and agree the ambit of it. At the same time, you might also consider taking legal advice, not least because of the potential for any claim that you may have to become time-barred. If you do not, you run the risk that any actionable mistakes committed by your previous adviser will not be heeded but will, instead, be consigned to history.

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