Category: Insurance case law · Reviewed by Chrissie Anderson, Client Executive · Last reviewed June 2026
Court of Appeal held that a life office giving pension advice owed a duty of care extending to the dependants of the client whom it knew the client wished to benefit.
[verify date]Mr Gorham was an employee of British Telecommunications plc who, in the late 1980s, was approached by representatives of Standard Life Assurance Company in connection with pension provision. He was, or shortly became, eligible to join the BT occupational pension scheme, which (as for most contracted-out occupational schemes) provided not only a retirement pension but also valuable death-in-service and dependants’ benefits for his wife and children. Instead of joining the occupational scheme, Mr Gorham was advised to take out a personal pension with Standard Life.
The personal pension provided materially less favourable benefits than the BT occupational scheme, in particular as regards death-in-service cover for his family. Mr Gorham had two young children and was concerned to make provision for his dependants in the event of his death. The advice given by Standard Life failed adequately to draw to his attention that the BT scheme offered superior dependants’ benefits.
Mr Gorham subsequently died, leaving his widow and children with materially less provision than they would have received had he joined the occupational scheme. After his death, the widow brought proceedings against BT (on the basis that Mr Gorham’s employer owed a duty in respect of pension information) and against Standard Life (on the basis that the life office had been negligent in advising her late husband to take a personal pension in preference to the occupational scheme).
At first instance, the trial judge held Standard Life negligent in its advice to Mr Gorham but rejected the widow and children’s claim, on the basis that the dependants were not within the scope of the duty owed by the life office. The widow and children appealed.
The principal issue before the Court of Appeal was whether the duty of care owed by a financial adviser or life office to a client extending pension advice extended to the client’s dependants, where the adviser knew that the client’s purpose in seeking advice was, in part, to make provision for those dependants. The case raised broader questions about the analogy with White v Jones [1995] 2 AC 207 (the negligent will-drafting case) and about the limits of the law of negligence in protecting third-party beneficiaries of professional services where there is no contract between the third party and the professional. The court was also required to consider questions of causation and the assessment of damages where the loss was the loss of a benefit that would have accrued to dependants on the death of the primary client.
The Court of Appeal allowed the appeal in part. The court held, applying White v Jones and the wider principles of Hedley Byrne v Heller [1964] AC 465, that Standard Life had assumed a responsibility not only to Mr Gorham but also to the dependants whom Standard Life knew Mr Gorham intended to benefit through his pension arrangements. The court held that the absence of any contractual relationship between Standard Life and the dependants was not fatal to the duty: the dependants’ interests were sufficiently within the contemplation of the adviser that the law of negligence would impose a duty of care.
The court reasoned that the analogy with White v Jones was apt: just as a negligent solicitor in drafting a will could be liable to the disappointed beneficiary, so a negligent pensions adviser could be liable to the dependants for whose benefit pension provision was being arranged. The court was careful, however, to confine the duty to circumstances in which the adviser knew, or ought to have known, that the client intended to benefit specific identifiable dependants. The court remitted certain issues of quantum but, in principle, allowed the dependants’ claim to proceed.
A life office or financial adviser giving advice on pension provision owes a duty of care not only to the client but also to identified dependants whom the adviser knows the client intends to benefit, where it is foreseeable that negligent advice will cause loss to those dependants. The duty is grounded in an assumption of responsibility analogous to that recognised in White v Jones and is not defeated by the absence of contractual privity between the adviser and the dependants.
Gorham is the leading English authority on the scope of duty owed by IFAs and life offices to the dependants of pension and life-cover clients. For IFA professional indemnity insurers, the case has three principal consequences. First, the universe of potential claimants under a single retainer is widened: a single negligent piece of pensions or life-assurance advice may give rise to claims from the client, the client’s spouse and the client’s children, with corresponding consequences for the aggregation of claims and the application of the per-claim limit.
Second, the case underscores the importance of properly documenting the client’s objectives, particularly where those objectives include providing for identified dependants. An adviser who fails to record dependants’ objectives may face later difficulty in defending claims by those dependants on the ground that they were not within the contemplated scope of the retainer.
Third, the case has clear interaction with the IFA’s regulatory obligations under what is now COBS 19 (pension transfers and conversions), and with the FCA’s approach to pension transfer advice following the British Steel mis-selling and the introduction of the contingent charging ban. The case is regularly cited in FOS decisions concerning pension advice and the interests of dependants.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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