Seymour Vs. Ockwell & Co.

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- The Threefold test (Lord Griffiths), which comprises of

- Foreseeability – Was it reasonably foreseeable that the plaintiff would suffer the kind of damage which occurred?

- Proximity – Was there sufficient proximity between the parties?

- Duty of care – Was it just and reasonable that the defendant should owe a duty of care of the scope asserted by the plaintiff?

- The assumption of responsibility test and the five factors which need to be taken into account:

- The precise relationship between the adviser and the advisee.

- The precise circumstances in which advice or information or other material came into existence. Any contract or other relationship with a third party will be relevant.

- The precise circumstances in which advice or information or other material was communicated to the advisee.

- The presence or absence of other advisers on whom the advisee would or could rely.

- The opportunity, if any, given to the adviser to issue disclaimer.

Question 5: The judge decided that ZIFA did not owe the Seymours a duty of care. Explain his reasoning. Do you agree with his conclusion?

We agree with the judge’s conclusion as reasons below.

- Threefold test to test for the existence of duty of care

The judge did not find that ZIFA did not have an assumption of responsibility towards the Seymours:

- Duty of care

- The Seymours were the clients of Ms. Ockwell, not ZIFA.

- The Seymours relied on Ms. Ockwell for advice and as such, the responsibility for recommendations and information fell squarely on the shoulders of Ms. Ockwell (Adopted FIMBRA Rules).

- To impose a direct duty of care on ZIFA would avoid the client-adviser relationship between the Seymours and Ms. Ockwell.

- Foreseeability

- ZIFA could not be sure how much of the information provided to Ms. Ockwell through Mrs. Clarke would be adopted and passed on to the Seymours.

- Mrs. Clarke had also gone beyond the role of simply providing information when she chose to provide ‘client-specific’.

- Proximity

- There was no direct contact and precise relationship between the Seymours and ZIFA

- Test for the assumption of responsibility

The judge find that ZIFA did not have an assumption of responsibility towards the Seymours:

- Much of ZIFA’s case that it did not assume responsibility, to which the judge agreed with, rested primarily on:

- The fact that there was not sufficient proximity between the Seymours.

- The assumption of responsibility rested on the role that Miss Ockwell was expected to assume – Ms. Ockwell was expected to assume the role of sifting through any information provided and exercise her own independent judgment (Adopted FIMBRA Rules).

- This was further supported by the following facts:

- ZIFA also admitted that it owed a duty of care to Ms. Ockwell in respect of the information provided and accepted any liability arising out of the negligent statements made by Mrs. Clarke insofar as Ms. Ockwell could have been reasonably expected to rely on that statement.

- The expert witnesses were of the opinion that by channeling the information through Ms. Ockwell, there was no liability to the Seymours.

- The claimant’s lawyer was also prepared to concede that a liability might arise if the broker-consultant relationship was broken and ZIFA made representations about the product directly to the Seymours.

Note: Some of the facts stated here overlap with the threefold test for duty of care.

Question 6: Ms Ockwell sought contribution from ZIFA in the event that she was found liable to the Seymours. Explain his analysis on this matter.

ZIFA initially tried to disclaim liability by placing responsibility solely on Ms. Ockwell but the judge determined that ZIFA’s actions had to an extent, caused the eventual losses:

- Mrs. Clarke made statements to Ms. Ockwell about the Alpha Fund’s risk and the content of protection available to investors, and these statements were incorrect or misleading. To the extent that Ms. Ockwell relied on the information, it lead her to make wrong assumptions (not withstanding her own duty of care towards the Seymours).

- The contents of the Memorandum by Mr Tyler highlighting certain deficiencies and conflicting information was never communicated to Mrs. Clarke. This failure of communication eventually translated into the Seymours continuing their investment rather than choosing to cancel it.

In determining the extent to which each of these actions contributed to the losses:

- The statement and correction made on the Isle of Man protection was of little significance as Ms. Ockwell understood and was able to make her own judgement and communicate to the Seymours.

- With regard to the fund being marketed as a low risk investment, the context in which the remark was made implied that ZIFA endorsed the view. The statement that ADIA would have gone through the books was also reassurance that everything was in order. It was determined that there was a reasonable degree of influence in this case.

- Greatest significance was placed on the lack of communication from the 15th to 20th January 2001 regarding the memorandum, in conjunction with the cancellation deadline of 20th January. If these concerns had been communicated to Ms. Ockwell, it is likely that she would have sought an extension of the cancellation period or the Seymours would have cancelled their investment, preventing the loss altogether.

The judge did not find that there was a direct duty of care based on the two tests highlighted. More interesting was the statement that to impose a direct duty of care on ZIFA would avoid the client-adviser

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