The ombudsman ruled in favour of Zurich in 2014 but a judge has overturned that decision in favour of the client, a British ex-pat living in Costa Rica.

Angela Lenderink-Woods, now 96, made the complaint.

She had an investment portfolio (inherited from her mother in 1966) that had a value of £567,700 in 2001. Due to its location in the United Kingdom and irrespective of Mrs Lenderink-Woods' domicile, it carried a potential inheritance tax burden, said to be £130,300, according to the court papers.

She took advice from Huw Davies, described as a Financial Planning consultant representing Allied Dunbar, which was bought by Zurich in 1998.

The judge heard he was a "tied adviser", able only to recommend Allied Dunbar products. If there was no suitable Allied Dunbar product to offer then Mr Davies was bound by the requirements of the Personal Investment Authority, his regulator, to make no recommendation, but only to introduce his client to an IFA.

He was a friend of her daughter, who originally introduced him to her.

On the advice of Mr Davies Mrs Lenderink-Woods converted her investment portfolio into three types of product marketed by Allied Dunbar - a Gift and Loan Trust scheme, an offshore Investment Bond and a Portfolio Bond (managed by a discretionary fund manager). Mrs Lenderink-Woods said that these products were unsuitable for someone who was not domiciled in the UK.

The court doucments stated: “She claimed that the charging structure was unnecessarily burdensome, and that she was told by Mr Davies that it would be 2%; whereas, taking account of Mr Davies' commission, Allied Dunbar's charges, and the discretionary fund manager's charges, it has over the years been far more.”

In July 2012 Zürich made an open offer of redress of £459,567. This represented a refund of the payments which Mrs Lenderink-Woods had made into the plan, less the total withdrawals made and the total regular income received. To the remaining balance was added interest net of tax at base rate +1%.

But a month later it withdrew that offer, saying that it had reviewed the mix of assets that Mrs Lenderink-Woods owned and was satisfied that these were potentially liable to UK IHT.

At that time Zurich stated: "Given Mrs Lenderink-Woods' tax position, there was clearly a need for her share portfolio to be invested offshore, in order to avoid any future IHT liability. We have found no evidence to suggest that these bonds were not suitable products to meet her objectives at that time."

The Financial Ombudsman had stated when dealing with the complaint in 2014: “In order to uphold the complaint I would need to be satisfied that the advice was flawed, not simply that alternatives existed which may have constituted a more suitable recommendation or one that subsequently turned out to provide a better return. In short, if the advice given was reasonable and suitable, a complaint of this kind is less likely to succeed."

The FOS said: “Whilst I accept that the adviser was mistakenly recommending the use of this trust arrangement, I have not seen evidence that this has in itself caused [Mrs Lenderink-Woods] any financial loss or other detriment …. By placing the investments in the offshore bonds, this had the effect of removing the potential future tax liability. Overall, given [Mrs Lenderink-Woods'] requirements to mitigate her tax liability whilst retaining access to her capital and also receiving an income, the advice seems to have largely met her needs."

But the Judge concluded: “I assess the damages in the sum of £223,000 representing the impact upon fund value (down to July 2016) of the unnecessary charges occasioned by the adoption of Mr Davies' scheme which with competent advice Mrs Lenderink-Woods would have avoided. Because actual fund growth and actual charges levied more or less cancelled each other out the award of this sum also compensates Mrs Lenderink-Woods for the loss of investment growth of which it was the object of Mr Davies' scheme to deprive her.”