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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Needler Financial Services v. Taber [2001] EWHC Ch 5 (31st July, 2001) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2001/5.html Cite as: [2002] 3 All ER 501, [2002] Lloyd's Rep PN 32, [2001] Pens LR 253, [2001] EWHC Ch 5

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Needler Financial Services v. Taber [2001] EWHC Ch 5 (31st July, 2001)

Case No: HC010/650

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 31st July 2001 B e f o r e :

THE VICE-CHANCELLOR

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Mr. George Bompas QC and Mr. Charles Marquand (instructed by Messrs Reynolds Porter Chamberlain for the Claimant)

Mr. Richard Gordon QC and Ms Sarah Asplin (instructed by Messrs Norton Rose for the Defendant)

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Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

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The Vice-Chancellor :

Introduction

1. On 10th May 1990 the defendant Mr Taber, on the advice of a representative of the claimant Needler Financial Services Ltd ("Needler"), transferred the deferred benefits to which he was entitled in the Ilford Pension Scheme to a personal pension plan ("PPP") with Norwich Union Life Assurance Society ("the Society"). On 14th April 1998 Mr Taber attained the age of 65. He then discovered that the pension to which he was entitled under the PPP was less than the pension to which he would have been entitled under the Ilford Pension Scheme. On 24th April 1998 Mr Taber complained to the PIA Ombudsman. The Ombudsman upheld his complaint. Needler does not dispute, for the purposes of these proceedings only, that it's representative's advice was negligent and in breach of duty. On 15th November 1999 Needler offered to compensate Mr Taber for the consequences of its negligent advice, an offer which, but for one matter, Mr Taber would have accepted.
2. The matter to which I refer is the demutualisation of the Society in June 1997 whereby its long term business was transferred to Norwich Union Life & Pensions Ltd ("LP"), a subsidiary of Norwich Union plc ("NU"). As part of that scheme fully paid shares in NU were allotted to the holders of with profits policies issued by the Society. On 16th June 1997 Mr Taber received 2441 shares in respect of the PPP. He sold them on 21st August 1997 for a net sum of £7,815.77. In their offer to Mr Taber of 15th November 1999 Needler insisted that the shares so allocated to Mr Taber should be taken into account in determining how much he should receive by way of compensation.
3. Needler's offer had been copied to the PIA Ombudsman. He drew to Mr Taber's attention a Regulatory Update No.33 issued by PIA to its members in May 1997 to the effect that the financial impact of demutualisation should be ignored in calculations of loss or redress in cases such as his. After further correspondence, and with the consent of both the PIA Ombudsman and Mr Taber, Needler invoked the test case procedure for which the Ombudsman's terms of reference provide. The claim form was issued by Needler on 12th April 2001 and seeks the determination of the court of the following questions of law:

1. Whether the Claimant may, in assessing the compensation payable by it to the Defendant pursuant to the PIA Pension Review, for negligence and/or breach of contract and/or pursuant to Section 62 of the Financial Services Act 1986 in respect of wrongful advice given to the Defendant to transfer his deferred benefits under the Ilford Occupational Pension Scheme to the Norwich Union Life Insurance Society ("The Society") to buy a Personal Pension Plan take into account as a credit to the Defendant the value of shares in the Society received by the Defendant following the demutualisation of the Society?

2. If the answer to the first question be in the affirmative: a) At what date is the value of the shares in the Society received by the Defendant to be assessed?

b) May the Claimant also take into account as a credit to the Defendant dividends received or receivable by the Defendant in respect of his shares in the Society?"

4. It is apparent from those questions and the written and oral arguments of counsel that the relevant issues fall into three distinct categories, namely (1) the demutualisation of the Society, (2) the consequences at common law of such demutualisation on Mr Taber's claim for compensation and (3) the effect (if any) of the Pensions Review procedure which was activated by Mr Taber's complaint to the PIA Ombudsman. The evidence is documentary with helpful explanations provided by the witness statements of a number of individuals including Mr Taber and experts' reports from two actuaries, Mr Grenville-Jones instructed by Mr Taber and Mr Wilson instructed by Needler. There was no oral evidence. In so far as there may be material differences between the experts it is agreed that I should resolve them as best I may without cross-examination.

Demutualisation

5. The Society was established by a deed of settlement dated 1st July 1808. On 10th May 1893 it registered under Companies Act 1862 as an unlimited company. It was an insurance company authorised to transact ordinary long-term insurance business under Insurance Companies Act 1982.
6. The Articles of Association of the Society provided that its members were the legal holders, whether by original grant or assignment, of policies of insurance or annuity entered into by the Society as part of its ordinary long-term insurance business falling within classes I or III of those specified in Schedule I to the Insurance Companies Act 1982. (Art.1) The members were entitled to attend and vote at general meetings of the Society. (Art.17) In the case of a member whose policy entitled him to do so he was eligible to share in the profits of the Society as provided for in Articles 69 to 72. Those articles required the directors at least once a year to determine in the light of an actuarial investigation the amount of profit available for allocation and to distribute that profit amongst with profit policy holders in all respects as the directors thought fit. The directors were specifically authorised to allocate additional bonuses and to set up special or reserve funds.
7. Thus, in summary, when Mr Taber took out his PPP with the Society in May 1990 he not only became entitled by contract to the sums provided for in the PPP but, in accordance with the Articles of Association, he became a member of the Society and an object of the fiduciary powers conferred on the directors by Articles 69-71.
8. I should, at this stage, refer to certain concepts associated with the conduct of long-term insurance business. I do so in simple, perhaps over simple, terms because no greater precision appears to be required in this case. The first is "the asset share" of a long-term policy-holder. This is calculated by reference to the value of the investments in the insurance company's long term business fund acquired with the accumulated premiums paid by that policy-holder together with the accumulated profits arising from those investments and an appropriate share in the net profits made in other operations financed by the long-term business fund. Equitable Life Assurance Society v Hyman [1999] PLR 297, 303 para 41 and Re: AXA Equity and Law Life Assurance Society plc (Evans-Lombe J 11th January 2001) para 12. The second is the policy-holders reasonable expectation ("PRE"). This is dealt with in more detail in the judgments of Sir Richard Scott V-C in Equitable Life Assurance Society v Hyman and Evans-Lombe J in Re: AXA Equity and Law Life Assurance Society plc. For present purposes it is the collective reasonable expectation of the relevant class of policy-holder derived from a number of sources including the Articles of Association, the past bonus policy of the company and the current practice of the insurance industry generally. The third is "the inherited estate". This may be described as that part of the long-term business fund in excess of the sum of the asset shares of the current policy-holders. It is the accumulated surplus carried forward from past operations. It is a significant resource of the company. It provides for flexibility of investment, it enables bonus declarations to be averaged over good and bad years and it is available to finance new business. It provides additional security for the benefits of policy-holders in case of need.
9. The demutualisation of the Society arose from the wish of the board to compete successfully in the new financial services market which emerged in the 1990s. It was thought by the board and others that the structure of a mutual society was inappropriate. The demutualisation of the Society was a complicated process, but it is unnecessary to go into all the complications. In essence it involved the following steps:

1) The long-term business of the Society was transferred to LP, a wholly-owned subsidiary of NU. Thus the liability under Mr Taber's PPP was taken over by LP in place of the Society.

2) The long-term business fund of the Society included shares in various subsidiary companies which carried on substantial general insurance business. Those shares were transferred to NU, not LP. The rest of the assets of the long-term business fund of the Society were transferred to LP. Within LP two funds were created, a shareholders' fund and a long-term business fund. The latter was divided into two sub-funds, a with profits sub-fund and a non-profits sub-fund.

3) As consideration for the transfer of the shares in the subsidiaries from the Society to NU NU paid £1.5bn to LP having raised the same by a issue of shares to the public.

4) As consideration for the transfer of the long-term business fund from the Society to LP, the wholly-owned subsidiary of NU, the latter issued fully paid shares to those policy-holders who had been members of the Society.

5) The issue of shares by NU to the former policy-holders and members of the Society was regulated by a Flotation Benefit Deed dated 27th April 1997 made between the Society (1) and NU (2). The deed provided for two benefits, with a cash alternative, namely a fixed allocation and an additional variable allocation. The fixed allocation was 150 shares for each member irrespective of the number or type of policies held. The additional variable allocation was intended to be "fair and broadly proportional to asset share" (recital H) in respect of all with-profits policies held by a member with a minimum of 300 shares.

6) The Society re-registered as a company limited by shares all of which were issued to LP.

10. In order to obtain the approval of the court under s.49 and Schedule 2C Insurance Companies Act 1982, without which the transfer of the long term business of the Society could not be effected, it was necessary for the scheme to be approved by both an appointed and an independent actuary. The appointed actuary recorded (para 6.2 of his report) that the principles behind the flotation benefit share scheme were the acceptability of the scheme to the membership as a whole, the reflection of the rights of members to vote at meetings and the rights of members holding with-profits policies to share in the future profits of the Society. In his opinion (para 6.11) the immediate tangible benefits of the free share scheme provided fair compensation for the membership rights in the Society. The independent actuary considered the share scheme for members in chapter 9 of his report. He pointed out (para. 9.3) that the value of the free shares would broadly reflect the value of the assets and entitlements transferred from policy-holders to shareholders as a result of the scheme, less the capital contribution of £1.5bn into the [LP] with profit fund. In paragraph 9.12 he stated

"The fixed allocation to all members may be regarded as providing compensation for the loss of voting rights. The additional variable allocation reflects the additional interest in the distribution of surplus of members holding with profit policies."

He considered (para 9.17) that the balance of the free share allocation between members holding with profits policies was appropriate because

"These members have effected policies which have a low guaranteed entitlement but which participate in the fortunes of [the Society]. They would also be the main or sole beneficiaries of any distribution of free assets in circumstances such as the closure of [the Society] to new business."

He agreed (para 9.31) with the Appointed Actuary that the proposed allocation of free shares fairly reflected the interests of members of the Society.

11. In fact Mr Taber opposed the scheme, but he was in a minority. In due course he received 3069 shares in NU. It is agreed that 150 were his fixed allocation, 478 represented his additional allocation attributable to two other with profit policies he held and 2441 were his additional allocation attributable to the PPP. The shares allotted to Mr Taber were first traded on 16th June 1997 at £2.90 each. By the time Mr Taber sold his holding on 21st August 1997 the share price had risen to £3.24. Net of the expenses of sale Mr Taber received £7,815.77 for the 2441 shares attributable to the PPP. NU did not declare any dividend before 21st August 1997.
12. The loss sustained by Mr Taber transferring his deferred benefits from Ilford Pension Scheme to the PPP was calculated by the PIA Ombudsman as at the date of Mr Taber's 65th birthday in capital terms as £21,322. If the contentions of Needler are correct then the loss so computed would be reduced by the net sum of £7,815.77 together with interest or the dividend declared between 21st August 1997 and 14th April 1998 (7.75p per share). Not only would Mr Taber's compensation be reduced by 36.6% but the principle could affect both the 43,000 outstanding claims and the 83,000 claims already dealt with in which demutualisation benefits are involved.

Common Law treatment of demutualisation benefits

13. For the purpose of dealing with this issue it is necessary to assume that, instead of complaining to the PIA Ombudsman, Mr Taber had commenced proceedings seeking damages for breach of statutory duty under s.62 Financial Services Act 1986, breach of contract and negligence. In that event would the benefit derived from the demutualisation shares have been brought into account in assessing the damages to which Mr Taber would, on the basis of the admission of liability for the purpose of these proceedings, have been entitled? It is common ground that such assessment should be made as at the date Mr Taber became 65, 14th April 1998, rather than the date of the breach in April/May 1990. That it is permissible to take such a date is apparent from the speech of Lord Browne-Wilkinson in Smith New Court Ltd v Scrimgeour Vickers [1997] AC 254, 265-6.

14. It is also common ground that the basic rule is that enunciated by Lord Blackburn in Livingstone v Rawyards Coal Co.(1880) 5 App.Cas. 25, 39 namely that

"you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation..."

One element in the calculation is emphasised in the speech of Lord Bridge of Harwich in Hodgson v Trapp [1989] 1 AC 807, 819 where he said

"It cannot be emphasised too often when considering the assessment of damages for negligence that they are intended to be purely compensatory. Where the damages claimed are essentially financial in character, being the measure on the one hand of the injured plaintiff's consequential loss of earnings, profits or other gains which he would have made if not injured, or on the other hand, of consequential expenses to which he has been and will be put which, if not injured, he would not have needed to incur, the basic rule is that it is the net consequential loss and expense which the court must measure. If, in consequence of the injuries sustained, the plaintiff has enjoyed receipts to which he would not otherwise have been entitled, prima facie, those receipts are to be set against the aggregate of the plaintiff's losses and expenses in arriving at the measure of his damages."

15. Lord Bridge went on to point out that the classic exceptions to the general rule are (1) moneys accruing to the claimant from insurance for which he has paid, and (2) moneys received due to the benevolence of third parties. The reasons for these exceptions are explained by Lord Reid in Parry v Cleaver [1970] AC 1,13 and depend, ultimately, on considerations of justice, reasonableness and public policy.

16. Counsel for Needler submitted that the operation of the general rule required that the demutualisation benefits should be brought into account and that the rationale behind the exceptions to the general rule did not apply to any such benefits. He suggested that when Mr Taber took out his PPP with the Society he thereby exchanged his rights in the Ilford Pension Scheme for all the rights accruing to him in consequence of the PPP scheme. The rights so accruing were not only the contractual rights under the policy but also the further rights conferred by the Articles of Association, namely, the right to vote at general meetings and the right to share in the distribution of surpluses. He contended that the right to share in the distribution of surpluses was translated by the demutualisation into the 2441 shares in NU. In summary, he argued, the policy with the Ilford Pension Scheme was replaced by the PPP and the demutualisation benefits were the product of the PPP.

17. This was disputed by counsel for Mr Taber. He argued that the demutualisation shares came to Mr Taber under an independent transaction. There were two elements to this argument. The first was that there was insufficient causal connection with the original breach of duty to bring the demutualisation shares within the general rule expressed by Lord Bridge of Harwich in Hodgson v Trapp. The second was to the effect that the requirement for a benefit to be brought into account is confined to those benefits which are similar to the loss sustained. Both elements were challenged by counsel for Needler. The challenge to the first element was to the effect that the cases on which Mr Taber relied were inapplicable to cases in which the benefit accrued to the claimant before, not after, the date at which damages are to be assessed. His challenge to the second was to the effect that the judicial statements concerning the need to compare like for like are limited to cases which are said to constitute exceptions to the general rule. For reasons which will become apparent it is unnecessary to give further consideration to the second element.

18. Counsel for Mr Taber relied on paragraphs 336-356 in McGregor on Damages 16th ed. under the general heading of "No recovery for loss which the plaintiff has avoided, unless the matter is collateral." The principal authority to which the editors refer is the well known case of British Westinghouse Co. v Underground Ry [1912] AC 673. In that case, which was concerned with a breach of contract only, Viscount Haldane LC emphasised that the subsequent transaction, if it was to be taken into account, must be one arising out of the consequences of the breach and in the ordinary course of business. As the editors of McGregor point out a wider formulation to include cases of tort is to exclude benefits arising from a matter completely collateral and merely res inter alios acta. It is true, as pointed out by counsel for Needler, that these passages are within the general topic of a claimant's duty to mitigate his loss. I do not accept his submission that they have no wider application. There can be no recovery of damages for loss avoided by matter not collateral whether by the claimant or by the course of events triggered by the breach of duty. Cf Hussey v Eels [1990] 2 QB 227, 232E.

19. Counsel for Mr Taber relied on three recent decisions of the Court of Appeal. The first in chronological order is Dominion Mosaics and Tile Co Ltd v Trafalgar Co. Ltd [1990] 2 AER 246. In that case the plaintiffs' factory premises were severely damaged by fire in October 1983 due to the negligence of the defendants. The diminution in the value of the premises caused by the fire was about £60,000. The cost of the rebuilding (£570,000) and loss of profits in the meantime (£300,000) led the plaintiffs to buy a lease of larger premises for a total sum £390,000. In 1987, having acquired other factory premises, the plaintiffs sold the new premises for £690,000. At the subsequent trial the judge held that the plaintiffs were entitled to recover the sum of £390,000 spent on acquiring the new premises. On appeal it was contended that the claim of the plaintiffs should be limited to the normal measure of damages, namely diminution in value. This contention failed. As Taylor LJ explained at page 252

"...counsel for the appellants sought to bring later dealings into account. The respondents, by the comparatively modest expenditure of £60,000 in 1986, acquired the freehold of Waterend Road and were then able to sell it for £690,000 in April 1987. It is argued that, since all of this happened before trial, it should all be brought into account in the appellants' favour. There should, up to the trial, be in effect a running account between the parties so that any gain to the respondents from whatever cause in regard to their property or its proceeds can be used by the appellants to diminish their liability.

The judge rejected this argument on the practical ground that the gains made by the respondents were attributable simply to the inflationary rise in the value of real property during the relevant period. I agree with him; but further, as a matter of principle, I do not accept that a defendant is entitled to the benefit of any successful dealings which the plaintiff may have had up to trial."  

20. The second case is Hussey v Eels [1990] 2 QB 227. In that case in February 1984 the plaintiffs had bought a bungalow in reliance on a misrepresentation that it had not been subject to subsidence. It had and the remedial works required would have cost £17,000. The plaintiffs could not afford them. After several unsuccessful attempts, in August 1986 the plaintiffs obtained planning permission to demolish the bungalow and to put up two other houses. In October 1986 the plaintiffs sold the land with the benefit of that planning permission for £78,500 and moved elsewhere. Their claim for damages for the initial representation went through various mutations. The first formulation was the value of the land with a sound bungalow on it (£80,000) less the net receipts after reselling and moving (£76,095). By an amendment made before trial the sum of £80,000 was increased to £90,000, thereby increasing the claim for damages from £3,905 to £13,905. At the trial a further amendment was made quantifying the damages as £17,000 being the difference between the price paid by them in buying the bungalow in 1984 (£53,250) and its actual value at the time (£36,250). The judge held that the misrepresentation had been made but that the claim failed because the gain on the resale exceeded the initial loss.

21. On appeal the plaintiffs raised two contentions. The first was that they owed no duty to mitigate their loss by obtaining planning permission and reselling the land with the benefit of it. The second was that the profit on the resale was not to be taken into account. The Court of Appeal accepted both arguments. With regard to the second Mustill LJ, with whom Farquharson LJ and Sir Michael Kerr agreed considered all the relevant authorities and concluded

"I have dealt with the authorities at some length, because it was said that in one direction or another they provided a direct solution to the present problem. For the reasons already stated, I do not see them in this light. Ultimately, as with so many disputes about damages, the issue is primarily one of fact. Did the negligence which caused the damage also cause the profit - if profit there was? I do not think so. It is true that in one sense there was a causal link between the inducement of the purchase by misrepresentation and the sale 2½ years later, for the sale represented a choice of one of the options with which the plaintiffs had been presented by the defendants' wrongful act. But only in that sense. To my mind the reality of the situation is that the plaintiffs brought the house to live in, and did live in it for a substantial period. It was only after two years that the possibility of selling the land and moving elsewhere was explored, and six months later still that this possibility came to fruition. It seems to me that when the plaintiffs unlocked the development value of their land they did so for their own benefit, and not as part of a continuous transaction of which the purchase of land and bungalow was the inception."

22. The third case is Gardner v Marsh & Parsons [1997] 1 WLR 489. In that case the plaintiffs, in reliance on a survey which had been negligently carried out, bought from the landlord a leasehold property for £114,000. Three years later they discovered the defect. Two years later still the defect was remedied by the landlord pursuant to a term in the lease. The plaintiffs sought damages from the surveyors for their negligence. The judge assessed the damages as the difference between the value of the property without the defect (£114,000) and its market value with the defect at the time of the purchase (£85,000). The Court of Appeal, Peter Gibson LJ dissenting, held that the action of the landlord in repairing the defect was collateral to the negligence and therefore not to be taken into account in reduction of the defendant's liability. At page 503 Hirst LJ said

"Mr. Johnson, founding his argument on Hussey v Eeels [1990] 2 QB 227, submitted that, where as a result of the defendant's negligence a plaintiff suffers loss in the form of diminution of value of the property, that loss is not avoided by the subsequent conduct of the plaintiff unless such conduct flows inexorably from the original transaction, and can properly be seen as part of a continuous course of dealing with the situation in which the plaintiff originally found himself.

Here, he submitted, the action of the landlords in repairing the property was collateral, and res inter alios acta; moreover, it did not flow inexorably from the original transaction (i.e. Mr. Dyson's negligent valuation) and was in no sense part of a continuous course of dealing, in view of the long lapse of time and of the nature and magnitude of the intervening events.

In evaluating these arguments I bear very much in mind Mustill L.J.'s salutary warning against laying down potentially unreliable statements of principle in the field of damages, and I respectfully adopt his approach, namely that the issue is primarily one of fact, and that the relevant considerations are mutatis mutandis those cited by him in his conclusion, which seem to me in line with the Westinghouse case [1912] AC 673 (see especially the second passage quoted above from Viscount Haldane L.C.'s speech, a pp. 691-692). It follows that I accept Mr. Johnson's analysis and reject Mr. Brunner's broad brush formulation, not least because of its inconsistency with the cases dealing with sale of goods or shares cited above, which cannot in my view be segregated from the main stream of authority.

In my judgment, having regard to the intervening events and to the long interval of time, the repairs executed in 1990 were not part of a continuous transaction of which the purchase of the lease as a result of Mr. Dyson's negligence was the inception. Furthermore, these repairs undertaken by Guidedale at the plaintiff's insistence were res inter alios acta and therefore collateral to Mr. Dyson's negligence." Pill LJ reached the same conclusion. At page 514 he said

"In holding that the negligence which caused the damage did not also cause the profit, Mustill L.J. in Hussey v Eels referred to the lapse of time between purchase and sale and to the fact that the plaintiffs unlocked the development value of the land. That was done for their own benefit and not as part of a continuous transaction of which the purchase following misrepresentation was the inception. In distinguishing the British Westinghouse case, Mustill L.J. said, at p 236D, that "there was no question of [that] case being concerned with a chain of disconnected transactions."

In my judgment, the present case, on its facts, is on the Hussey v Eels side of the line. Hirst L.J. has described the intervening events. Years after the defendants' negligence, the freeholders performed their obligation to the plaintiff's under a contract which the plaintiffs had negotiated with them. That has the effect of rectifying the damage resulting from the defendants' negligence. The benefit came by reason of the performance of a contractual obligation by a third party. The plaintiffs had to undertake protracted negotiations with that third party and other third parties, the other tenants in the building. Before that obligation was performed by the freeholder, there was a considerable lapse of time in the course of which the plaintiffs, because of the structural defect, were unable to sell the property when they wished to do so in 1988. In my judgment, the facts relied on as affecting the measure of the damages are too remote to be taken into consideration and, on the fact, the judge was entitled to find for the plaintiffs as he did. On the sequence of events as it occurred, and not as it might have occurred, I do not regard the decision reached by the judge as contrary either to principle or to common sense."

23. There is no hint in any of these cases or in any others of which I am aware that the general principle is inapplicable if the benefit precedes the date at which compensation is to be assessed. Obviously the benefit must accrue from acts or events occurring at the same time as or after the negligence for which compensation is sought; otherwise the benefit could not have been caused by the negligence. If the benefit accrued at the same time as or after the negligence of which complaint is made I cannot see any reason why the general principle should apply only if it accrued after the date at which the compensation is to be assessed. Accordingly I reject the submission to which I referred in paragraph 17.

24. In my view the authorities to which I have referred establish two relevant propositions. First, the relevant question is whether the negligence which caused the loss also caused the profit in the sense that the latter was part of a continuous transaction of which the former was the inception. Second, that question is primarily one of fact.

25. The profit in this case is the holding of demutualisation shares issued to Mr Taber, but it might just as easily have taken the form of a cash payment or an additional bonus. I can see no reason for drawing any distinction based on the form in which the benefit was received. The benefit was derived from the demutualisation. The demutualisation was not caused by the negligence of Needler. It arose from the desire of the board of directors of the Society to have the corporate structure best suited to competing in the new markets for financial products they perceived to have arisen in the mid 1990s. The underlying reasons are explained in detail on chapter 3 of the Report of the Independent Actuary. They have no connection with the breaches of duty of all or any of the financial advisers which led policy holders to transfer to a mutual society.

26. It is true that but for the negligence of Needler Mr Taber would not have taken out the PPP. It is also true that but for the PPP Mr Taber would not have received any demutualisation benefit. Even allowing for these factors the demutualisation benefit was not caused by and did not flow, as part of a continuous transaction, from the negligence. In causation terms the breach of duty gave rise to the opportunity to receive the profit, but did not cause it. Quinn v Burch Bros (Builders) Ltd [1966] 2 QB 370; Galoo v Bright Grahame Murray [1994] 1 WLR 1360, 1375A-B. The link between the negligence and the benefit was broken by all those events in the mid 1990s and later which led to the directors of the Society formulating and the court approving under s.49 Insurance Companies Act 1982 the transfer of the long term insurance business of the Society to LP.

27. The matter may be tested in this way. Would Mr Taber have received comparable benefits from his PPP if there had been no demutualisation? The answer is plainly in the negative. Mr Taber was contractually entitled to share in the profits of the Society by way of bonus. Such bonus was likely to provide him with a reasonable return on his asset share in accordance with the PRE. But in the absence of the transfer of the long term business under the Insurance Companies Act 1982 or the winding up or closure of the Society to new business it was most unlikely that he would ever share in a distribution of the inherited estate. But by virtue of the demutualisation he did. Thus in Chapter 12 of his report the Independent Actuary summarised his opinions as to the consequences of the demutualisation that no group of policy-holders would suffer any reduction in reasonable benefit expectations, some with profits policy-holders might receive slightly higher benefits, the proposed allocation of free shares fairly reflected the interests which the members would be giving up and that the allocation of free shares meant that qualifying members would be better off.

28. For these reasons I conclude that the demutualisation benefit received by Mr Taber was not caused by the mis-selling by Needler of which he complained. Thus, the common law principles for the assessment of damages do not require the value of the benefit of the demutualisation shares issued to Mr Taber to be brought into account in diminution of the compensation to be awarded to him for Needler's breach of duty. It follows that the questions whether if the general rule had applied the demutualisation benefits should be excepted by analogy with the exceptions, as explained by Lord Reid in Parry v Cleaver [1970] AC 1,13. and whether the Pension Review procedure conferred on Mr Taber an entitlement to compensation in excess of what would have been recoverable at law do not arise. I answer question 1 in the claim form in the negative.