Firm News

Mishcon de Reya wins landmark mis-selling case against Scottish Equitable

Release Date:

31 July 2007

In a High Court judgment believed to be the first ever such judgment against a financial product provider, Mishcon de Reya client Michael Walker today [31 July] obtained a very substantial judgment in damages against Scottish Equitable for giving him unauthorised investment advice.

In an age where the FSA's Treating Customers Fairly initiative is central to its delivery of the retail agenda, the judgment is likely to send shock waves through the financial services industry.

Mr Walker had occupied a senior position at construction company, Taylor Woodrow. Approaching retirement, he sought advice about how much tax free cash to take from his pension. Between 1999 and 2001, he attended several meetings with his IFA and a representative of Scottish Equitable and was instead persuaded to transfer out of his occupational pension and into a different product, causing him to suffer considerable losses.

Mr Walker was clear that he had been advised by both his financial adviser (Inter Alliance) and a product provider (Scottish Equitable) to do this. What he had not realised was that Scottish Equitable was prohibited by the rules of the regulator from giving him any investment advice whatsoever.

Mr Walker sued Scottish Equitable for having advised him. They denied throughout the proceedings that they had given him any advice at all and stood firmly behind their representative who had attended the meetings with Mr Walker. But today, Mr Justice Henderson ruled that Scottish Equitable had advised Mr Walker, that that advice was an actionable cause of his decision to transfer and that they should be held liable for advising in breach of the rules. He ordered Scottish Equitable to compensate Mr Walker for all his losses, both past and future, caused by their advice.

In his Judgment, Mr Justice Henderson stated:

"…the critical question is whether Scottish Equitable…provided investment advice…to Mr Walker at the meetings…On the basis of my findings of fact, it will …be apparent that in my judgment this question must be answered in the affirmative… " [para 96]

"..I find on the balance of probabilities that, if [the Scottish Equitable representative] had not advised Mr Walker as he did at the two key advisory meetings, Mr Walker would not have come to the decision which he finally reached on 2 February 2001 and would instead have remained a member of the Taylor Woodrow scheme." [para 104]

Commenting on the case, Adam Epstein, who heads the Financial Services team at Mishcon de Reya said:

"The conventional route in mis-selling cases is to sue the IFA. Suing Scottish Equitable was a bold move on the part of Mr Walker, especially as it is such uncharted territory and as Scottish Equitable were adamant that they had not advised." 

"The fact that the circumstances giving rise to the case took place some years ago makes the case no less relevant today. The judgment will provide a timely lesson to both financial advisors and product providers about taking proper responsibility for their contribution to any investment outcome. They must ensure that they treat customers fairly.”   

"I am delighted that Mr Walker had the fortitude to see this litigation through to a happy conclusion.  I hope that he is now able to enjoy his retirement in the way that he should have been able to do from the outset.”

Notes to Editors:

Treating Customers Fairly is an FSA initiative that it states is central to the delivery of its retail regulatory agenda as well as being a key part of its move to principles-based regulation.

The Mishcon de Reya team consisted of Adam Epstein, Partner, David Lytton, Assistant Solicitor, and barrister Javan Herberg of Blackstone Chambers.