In this case, the claimants sued Lloyds Bank over a GBP 700,000 investment. The claimants met with Lloyds in 2006 and January 2007 and based on Lloyds' assessment of their attitude to risk, various "balanced/medium risk" investments were recommended.
Thereafter, the claimants signed Lloyds' standard terms and conditions, stating that Lloyds would periodically check for changes in the claimants' circumstances that could affect their investment objectives.
In March 2008, Lloyds conducted a review meeting. Despite the value of the initial investment dropping due to the financial crisis, Lloyds advised the claimants to retain their investment. The claimants eventually instructed Lloyds to liquidate their portfolio in July 2008 and sustained a loss of GBP 43,000 on the original amount invested.
In March 2013, the claimants issued proceedings claiming Lloyds acted negligently, in breach of contract and its statutory duties (under s.150 FSMA 2000 and breaches of FSA conduct rules) regarding the initial investment advice. They argued the investment was not suited to their appetite for risk - which they submitted was "cautious/low".
While conceding their causes of action concerning the alleged negligent advice given in January 2007 had expired, they argued Lloyds were under a continuing duty of care to re-consider the advice (and correct it) at the subsequent review meeting.
The court held the initial advice was not negligent, meaning Lloyds could not be deemed negligent for subsequently failing to correct it. The Judge held that the duty arose at the point of the original advice; once that advice was given, the duty of care was discharged. Further, the duty would only be continuing if the claimants were able to identify a contractual obligation that remained unperformed (distinguishing it from Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979]).
This case provides welcome news for the finance industry and insurers. It also provides useful guidance to other professionals who may face similar arguments from claimants.
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