In a High Court decision from January, Judge Halliwell dismissed the adviser’s claim against provider Aviva and the company he had advised, saying he could not find any breach of contract and therefore Aviva was right to claw back £204,392 in commission.
Richard Wales, an independent financial adviser whose firm goes by the name Selective Investment Services, sought to recover £204,392 in commission for his services when advising property management firm CBRE on its workplace pension.
With Mr Wales’ advice, CBRE’s employees were placed into a workplace pension scheme with Aviva in 1999, which then paid commission on the pension contributions.
However, commission was not paid directly to Mr Wales as he was an appointed representative of DBS Financial Management which was subsequently bought by Sesame.
Aviva paid the commission directly to these firms which then gave Mr Wales a share of the amounts they received.
Mr Wales’ dispute came after CBRE made the decision to move its employees to a new pensions platform and terminate his services following the introduction of auto-enrolment.
Following these rules changes were also made to the charging structure to restrict or eliminate commission based schemes and allow for better transparency.
The judgment stated: “By 2011, Mr Wales was aware of much of the planned statutory change and understood this was likely to mean the old commission based schemes would be brought to an end and it would become necessary for independent financial advisers to move to fees based models or remuneration schemes based on a percentage of the funds under their management.”
Once the employees were moved to a new scheme Aviva no longer had to pay Mr Wales commission under the original arrangements. And as it had paid Mr Wales in advance, Aviva sought to claw back £204,392 in payments.
Mr Wales argued that Aviva was under a contractual obligation to pay him commission.
But Judge Halliwell said it was understood that Mr Wales’ would be paid from the payment of the pension contributions and that if contributions ceased for whatever reason his commission would also stop.
Judge Halliwell said: “By the same logic, commission paid in advance of such contributions would be clawed back if the contributions never materialised.
"By advancing a claim to such commission, Mr Wales challenges the contractual basis on which he was remunerated.”
He concluded the claims against Aviva and CBRE should be dismissed.
Judge Halliwell said: “[Mr Wales] has failed to establish his claim against CBRE, whether for breach of contract or otherwise. Any such claim is fundamentally inconsistent with the conditions on which he was engaged to provide services.
“Mr Wales's claims against Aviva fail on the basis that Mr Wales and Aviva did not enjoy a contractual relationship with one another and, in the hypothetical event they did, I am not satisfied Aviva has committed an actionable breach.”
He said Aviva was entitled to claw back commission and did not owe a duty of good faith to Mr Wales.
amy.austin@ft.com
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