Extent of common law duty of care owed in pensions misselling: Gorham & Others v British Telecommunications plc, Trustees of the BT Pension Scheme, & Standard Life Assurance Company Available to Purchase

The claimants who were the Appellants in this case were a Mrs Gorham, widow of Mr Gorham, and her two young children. Mr Gorham had been employed by British Telecommunications plc (BT) between 2nd April, 1991 until his death on 5th September, 1994. Upon joining BT, Mr Gorham was informed by BT that he was eligible to join the defined benefit occupational pension scheme. He was sent a booklet about the scheme, which contained an opting‐out form at the back and stated that if this form were not completed he would automatically be joined into the scheme. He did not complete the form but pension contributions were, at his oral instructions, never deducted from his salary and that fact was apparent from his monthly pay slip. The judge at first instance found as a matter of fact that Mr Gorham believed he was not a member of the BT scheme until October 1992 from which date onwards he believed that he was a member of it. In autumn 1991 Mr Gorham contacted Standard Life Assurance Company (Standard Life)and was contacted by a Mr Cornwell, a customer representative of Standard Life. The Gorhams completed and signed a Standard Life Personal Information Questionnaire which prioritised Family Protection followed by Retirement Planning and House Purchase. Mr Cornwell's recommendations based on the information supplied to him from the Gorhams (who were described in the Standard Life correspondence as client and spouse) included transfer of accrued pensions rights with Mr Gorham's previous employer to a personal pension contract and payment into that contract by Mr Gorham of monthly premiums of £80, along with a small amount of life cover at a cost of £5 per month. In November 1992 Mr Gorham, having read the BT pension booklet and discovering that he could not be a member of both the BT scheme and have a personal pension, telephoned the Standard Life helpline to be told that the BT pension scheme was preferable to a personal pension scheme. At that stage he stopped paying contributions into the Standard Life pension scheme. Despite his earlier belief that he had not been a member of the BT scheme the judge at first instance found as a matter of fact that from autumn 1992 onwards he believed he was now a member of the scheme because of his failure to return the opting‐out form at the back of the BT pension scheme booklet. In fact he was not and pension contributions were still not being deducted from his salary. As a result of his failure to join the scheme either in 1991 or in 1992 when he died in 1994 his widow and children received considerably less than if he had been a member. Mrs Gorham sued Standard Life for breach of tortuous duty of care owed to her and the children and was awarded £114,282.61 for her and the children on the basis that she would have been paid that sum, part of it as trustee for the children, if her husband had become a member of the BT occupational scheme. This sum represented the capital value of Mr Gorham's loss of pension rights but the judge at first instance declined to award a further £120,000 which would have represented lump sum death benefits payable to dependants of BT scheme members which would have been payable had Mr Gorham joined the scheme and had two years qualifying service.