Round Up Autumn 2018

Many advisers have had their contract drafted by a compliance officer. This is very sensible from a regulatory perspective, but additional input will help. In Crestsign v Natwest , the court held that Natwest advised negligently and ‘steered’ Crestsign to a product which was neither suitable nor in its best interests. A clear cut claim ? No. The claim failed. The bank’s contract clearly said that advice was not being given. That contractual term was upheld by the court, despite a finding that advice had, in fact, been given (and negligently). Despite its sympathy, the court concluded that Natwest ‘did provide negligent advice but they successfully excluded any duty not to do so. They did not show themselves worthy of the trust Mr Parker placed in them, but unfortunately… the common law provides… no remedy because the bank successfully disclaimed responsibility for the advice they gave’. Most of an adviser’s business will, of course, be giving advice. But the point to take is that a carefully drafted contract, setting out what you will and will not be responsible for, can control and limit your liabilities. Whilst obvious in contractual claims, this is also relevant in negligence (common law) claims. The scope of the common law duty which you owe is affected by your contract. If you do not define it closely, the full force of the common law will define it as widely as possible. Be protected with carefully drafted terms. 14 5 top tips to avoid a claim The Clarke Willmott Financial Services litigation team assists in the resolution of disputes involving pensions, investments, tax mitigation schemes and insurance policies. Here Philippa Hann, Partner at Clarke Willmott highlights the most common pitfalls she sees in claims made against advisers Our first step is to obtain the adviser’s files. Thin files are a red flag. Information and discussions not being recorded and missing documents are a good sign that regulatory requirements have not been met. Mistakes are more likely to have happened. ‘My usual process was’, ‘I would have advised that’ and ‘ordinarily I would have’ are regular phrases from advisers where records are missing. Inevitably, there will be three versions of the story; the client’s, the adviser’s and the documents’. It is fair to say that, due to the passage of time and fading memories, the documents often tell the best version of the truth. Certainly, the court normally think so. Where there was an important conversation, in the absence of documentation, the court will likely prefer the client’s evidence. Why ? In the court’s view, the adviser could not be expected to remember every conversation, particularly where they have advised many clients in similar ways. Keeping proper records of your advisory process is crucial. The first document we consider is the contract between the adviser and client; the terms and conditions of business. It’s a common misunderstanding that this isn’t important; just something the regulator requires you to send out. Nothing could be further from the truth. This is central to potential liability and the calculation of damages. Write it down and store it correctly. Do this every time without fail. It’s not easy, particularly during busy times, but it is crucial. Have a lawyer consider and review / redraft your terms and conditions of business. 1