Cantrell v Allied Irish Banks Plc

• Jurisdiction: Ireland
• Judge: Ms. Justice Baker
• Judgment Date: 18 July 2019
• Neutral Citation: [2019] IECA 217
• Date: 18 July 2019
• Court: Court of Appeal (Ireland)
• Docket Number: Neutral Citation Number: [2019] IECA 217 2017/268 2017/271 2017/273

BETWEEN/

GERALDINE CANTRELL

PLAINTIFF/RESPONDENT

AND

ALLIED IRISH BANKS PLC, THE SECOND BELFRY PROPERTIES (U.K.) PLC, TULLAMONA LIMITED, THE FOURTH BELFRY PROPERTIES (U.K.) PLC, LEYALLY LIMITED, THE FIFTH BELFRY PROPERTIES (U.K.) PLC, MONSAL LIMITED, SEAN HENNEBERRY, TONY KILDUFF, WILLIAM LEDWIDGE, JOHN ROCKETT, JOHN ROGER WILKINSON

AND

ESSEX TRUST LIMITED

DEFENDANTS/APPELLANTS

BETWEEN/

LAURENCE McMULLIN

PLAINTIFF/RESPONDENT

AND

ALLIED IRISH BANKS PLC AND OTHERS

DEFENDANTS/APPELLANTS

BETWEEN

BERNADETTE GOODWIN

PLAINTIFF/RESPONDENT

AND

ALLIED IRISH BANKS PLC AND OTHERS

DEFENDANTS/APPELLANTS

BETWEEN

MARY HONOHAN

PLAINTIFF/ RESPONDENT

AND

ALLIED IRISH BANKS PLC AND OTHERS

DEFENDANTS/ APPELLANTS

BETWEEN

PETER TIERNEY

PLAINTIFF/ RESPONDENT

AND

ALLIED IRISH BANKS PLC AND OTHERS

DEFENDANTS/ APPELLANTS

BETWEEN

BRIAN SPIERIN

PLAINTIFF/ RESPONDENT

AND

ALLIED IRISH BANKS PLC AND OTHERS

DEFENDANTS/ APPELLANTS

BETWEEN

BRIAN O'REILLY

PLAINTIFF/ RESPONDENT

AND

ALLIED IRISH BANKS PLC AND OTHERS

DEFENDANTS/ APPELLANTS

BETWEEN

EDWARD SHEEHAN

AND

EVELYN SHEEHAN

PLAINTIFFS/ RESPONDENTS

AND

ALLIED IRISH BANKS PLC AND OTHERS

DEFENDANTS/ APPELLANTS

[2019] IECA 217

Baker J.

Peart J.

McGovern J.

Baker J.

Neutral Citation Number: [2019] IECA 217

Appeal No. 2017/266

2017/268

2017/271

2017/273

THE COURT OF APPEAL

Misrepresentation – Negligent statements – Statute barred – Appellants seeking to appeal from High Court decision – Whether the High Court erred in finding that the respondents were not statute barred in their claims of misrepresentation and negligent statements arising from the existence, and pleaded non-disclosure, of loan to value covenants in the borrowings negotiated on behalf of investment vehicles by the appellants

Facts: Appeals to the Court of Appeal arose from a decision of the High Court delivered on 28 April 2017 and order made on 25 May 2017 by which Haughton J determined the preliminary issue regarding the Statute of Limitations 1957 to the claims of the plaintiffs/respondents, investors in a number of property investment schemes of which Allied Irish Banks plc (AIB plc) acted as promoter and placing agency. The investment schemes were undertaken through a number of investment vehicles each bearing the name “Belfry”, of which the second, fourth, and sixth defendants were the relevant companies for the appeals. The defendants/appellants were: (a) AIB plc, which filed a notice of appeal on 9 June 2017; (b) Mr Rockett and Mr Wilkinson, who filed a notice of appeal on 8 June 2017; (c) Mr Ledwidge, who filed a notice of appeal on 8 June 2017; and (d) Mr Kilduff, who filed a notice of appeal on 9 June 2017. The appellants (b), (c), and (d) were referred to collectively as “the Directors”. The appeals raised a question of law regarding the running of time in claims for financial loss in tort. The question was determined by way of trial of a preliminary issue on motion of the defendants of 1 February 2016, the hearing whereof took place over seven days in April and May 2016. The defendants appealed part of the finding, and there was no cross-appeal. The sole question for determination in these appeals, therefore, was whether Haughton J erred in making a distinction between three categories of claim, and in his overall finding that the Investors were not statute barred in their claims of misrepresentation and negligent statements arising from the existence, and pleaded non-disclosure, of loan to value covenants (the LTV covenants) in the borrowings negotiated on behalf of the Belfry investment vehicles by the director defendants.

Baker J held that the cause of action was that sometime after the investments were made, the Directors, in the exercise of the powers vested in them and mentioned in the prospectus, negligently and without informing the Investors, negotiated terms of lending which made the risk greater than that which existed at the date of the investments as the Investors had fewer buffers against market forces than they had contracted for, and the risk was greater than that which they understood had been assumed. As a consequence, it seemed to Baker J that the damage became manifest once the LTV covenants were entered into by the directors and, at that stage, the Investors had less chance of surviving a catastrophic loss of property values. Baker J held that she would allow the appeal on that basis. She noted that it was at the time when the LTV covenants were negotiated that AIB plc had that particular “card”, to use the language of counsel for the Investors, and that was a card which, in the events, was argued to have led to the loss.

Held by Baker J that she would allow the appeal.

Appeal allowed.

JUDGMENT of Ms. Justice Baker delivered on the 18th day of July, 2019

1 These appeals arise from a decision of Haughton J. delivered on 28 April 2017, Cantrell v. AIB [2017] IEHC 254, and order made on 25 May 2017 by which he determined the preliminary issue regarding the Statute of Limitations 1957, as amended, (‘the Statute of Limitations’) to the claims of the plaintiffs, investors in a number of property investment schemes of which Allied Irish Banks plc (‘AIB plc’) acted as promoter and placing agency. The investment schemes were undertaken through a number of investment vehicles each bearing the name ‘Belfry’, of which the second, fourth, and sixth defendants are the relevant companies for the present appeals. For convenience, I will refer to the investment vehicles collectively as ‘Belfry’, and to the plaintiffs, the respondents to these appeals, who were jointly represented by counsel at the hearing of the appeals, as ‘the Investors’, save where the context otherwise requires.

2 The defendants, the appellants in these appeals, who are separately represented, can conveniently be grouped as follows:

(a) AIB plc, which filed a notice of appeal on 9 June 2017;

(b) John Rockett and John Roger Wilkinson, who filed a notice of appeal on 8 June 2017;

(c) William Ledwidge, who filed a notice of appeal on 8 June 2017;

(d) Tony Kilduff, who filed a notice of appeal on 9 June 2017.

I will refer to the appellants (b), (c), and (d) collectively as ‘the Directors’.

3 The appeals raise a question of law regarding the running of time in claims for financial loss in tort. The question of the accrual of a cause of action in tort has given rise to two recent decisions of the Supreme Court, the second of which, Brandley v. Deane [2017] IESC 83 delivered by McKechnie J. on 15 November 2017, postdates the decision of Haughton J. the subject of these appeals. The question is difficult as is apparent from the depth of analysis and length of the judgment of the High Court, the lengthy analysis in Gallagher v. ACC Bank [2012] IESC 35, [2012] 2 IR 620 and Brandley v. Deane and recent decisions of the superior courts of England and Wales, the analysis in some of which has not readily found favour with the Irish Supreme Court.

4 The question was determined by way of trial of a preliminary issue on motion of the defendants of 1 February 2016, the hearing whereof took place over seven days in April and May 2016. The defendants appealed part of the finding, and there is no cross-appeal. The sole question for determination in these appeals, therefore, is whether Haughton J. erred in making a distinction between three categories of claim, and in his overall finding that the Investors were not statute barred in their claims of misrepresentation and negligent statements arising from the existence, and pleaded non-disclosure, of loan to value covenants (the ‘LTV covenants’) in the borrowings negotiated on behalf of the Belfry investment vehicles by the director defendants.

5 Haughton J. found it unnecessary to determine whether the investors were entitled to rely on s. 71(1)(b) of the Statute of Limitations in relation to the pleaded non-disclosure of the LTV covenants.

Factual Background

6 The Investors invested in a number of Belfry funds, the material ones for present purposes being Belfry 2, Belfry 3, Belfry 4, and Belfry 5, the corporate vehicle supporting each fund being named as defendants in the proceedings. The investments were promoted by AIB plc and each Belfry company was established as a special purpose vehicle to invest in UK commercial properties. The Directors were directors of the different Belfry companies.

7 The Investors invested various sums of money ranging from €100,000 to €400,000 between 2002 and 2006. In addition to the proceedings heard before Haughton J. it appears that more than three hundred other High Court proceedings have been commenced by other investors in the Belfry funds and served on some or all of the defendants in these proceedings.

8 The Investors claim that, based upon negligent representations contained in marketing and other material, primarily in the form of prospectuses, they entered into the investments and, as a result of the entire failure of the funds, they lost all of the monies invested. The Investors commenced proceedings seeking damages for breach of contract, negligence, breach of duty, negligent misstatement, and misrepresentation. The eight proceedings in which the preliminary issue was heard by Haughton J. were chosen from a large number of related cases as ‘pathway cases’, although they are not test cases in the formal sense.

9 The trial of the preliminary issue was based primarily on the pleadings and submissions made by the Investors and by the defendants who were separately represented as identified above. There was also before Haughton J. some affidavit evidence, the particular affidavit of importance being the affidavit sworn on 14 March 2016 by Mr Conal Regan, manager at AIB plc, where he exhibited financial statements and updates of the Belfry companies from inception up to 2015.

10 Many of the facts are disputed and Haughton J. approached the trial of the preliminary issue in the light of...