Mr Les O’Hare & Mrs Janet O’Hare v Coutts & Co. [2016] EWHC 2224 (QB)

A significant case from the end of 2016, O’Hare was an unsuccessful professional negligence action brought by a couple against their former private bankers, Coutts & Co, over its alleged failure to exercise reasonable skill and care when advising them on making investments.

Of particular note is that the judgment included Kerr J’s obiter- but nonetheless significant- observations about the tests to be applied when assessing whether a financial advisor had discharged its duty (be it contractual or tortious) to use reasonable skill and care when recommending investments.

The Judge noted the orthodoxy was this was to be assessed by reference to the ‘Bolam Test’ (drawn from Bolam v. Friern Barnet Hospital Management Committee [1957] 1 WLR 582) of “whether the defendants, in acting in the way they did, were acting in accordance with a practice of competent respected professional opinion”; that is to say: “in accordance with a practice accepted as proper by a responsible body of … men skilled in that particular art.” (and, as further developed, in the context of advisory work, in cases like Matrix Securities v. Theodore Goddard (a firm) [1998] PNLR 290 and Barker v. Baxendale Walker Solicitors (a firm) [2016] EWHC 664 (Ch).

However, he rejected submissions that the required extent of communication between a financial adviser and their client, to ensure the client understands the advice and the risks attendant on a recommended investment, was governed by the Bolam Test.

Instead, his view was that a different duty applied, akin to that identified by the Supreme Court in Montgomery v. Lanarkshire Health Board [2015] AC 1430 as applying to a doctor explaining risks to a person to whom advice is given, being one:

“to take reasonable care to ensure that the patient is aware of any material risks involved in any recommended treatment, and of any reasonable alternative or variant treatments”

with a test of ‘materiality’ being,

“whether, in the circumstances of the particular case, a reasonable person in the patient’s position would be likely to attach significance to the risk, or the doctor is or should be aware that the particular patient would be likely to attach significance to it”.

In practice, in Kerr J’s view, the question of whether the advisor had said enough to a client was not to be decided according to whether the adviser acted in accordance with a practice accepted as proper by a responsible body of persons skilled in the giving of financial advice, but by reference to a standalone analysis, of whether material information had been imparted.

The decision is also well worth close study for its useful review of law relating to the weight to be given to hearsay evidence, with a review of key sections of the Civil Evidence Act 1995; as well as the potential legal consequences of ‘goodwill payments’

The judgment can be found here.