Gallagher v ACC Bank Plc

JurisdictionIreland
CourtSupreme Court
JudgeMr. Justice Fennelly,O'Donnell, J.
Judgment Date07 Jun 2012
Neutral Citation[2012] IESC 35

[2012] IESC 35

THE SUPREME COURT

Denham C.J.

Murray J.

Fennelly J.

O'Donnell J.

McKechnie J.

APPEAL 433/2011
Gallagher v ACC Bank PLC (t/a ACC Bank)
[2012] IESC 35
BETWEEN:-
PATRICK GALLAGHER
Plaintiff/Respondent
-and-
ACC BANK PLC TRADING AS ACC BANK
Defendant/Appellant

RSC O.25 r1

O'HARA & GALLAGHER v ACC BANK PLC UNREP CHARLETON 7.10.2011 2011/41/118 97 2011 IEHC 367

HEGARTY v O'LOUGHRAN & EDWARDS 1990 1 IR 148 1990 ILRM 403

READ v BROWN 1888 22 QBD 128

FORSTER v OUTRED & CO 1982 1 WLR 86 1982 2 AER 753

DW MOORE & CO LTD & ORS v FERRIER & ORS 1988 1 WLR 267 1988 1 AER 400

IRON TRADES MUTUAL INSURANCE CO LTD & ORS v JK BUCKENHAM LTD 1990 1 AER 808 1989 2 LLOYDS 85

BELL v PETER BROWNE & CO 1990 2 QB 495 1990 3 WLR 510 1990 3 AER 124

KNAPP v ECCLESIASTICAL INSURANCE GROUP PLC & ANOR 1998 PNLR 172 1998 LLOYDS IR 390

NYKREDIT MORTGAGE BANK PLC v EDWARD ERDMAN GROUP LTD (NO 2) 1997 1 WLR 1627 1998 1 AER 305

MARTIN v BRITANNIA LIFE LTD 2000 LLOYDS PN 412

LAW SOCIETY v SEPHTON & CO (A FIRM) & ORS 2006 2 AC 543 2006 2 WLR 1091 2006 3 AER 401

SHORE v SEDGWICK FINANCIAL SERVICES LTD & ANOR 2009 BUS LR 42 2008 PNLR 37

AXA INSURANCE LTD v AKTHER & DARBY SOLICITORS 2010 1 WLR 1662 2009 2 CLC 793 2010 PNLR 10

PEGASUS MANAGEMENT HOLDINGS SCA & ANOR v ERNST & YOUNG (A FIRM) & ANOR 2010 3 AER 297 2010 2 AER (COMM) 191 2010 PNLR 23 2010 STC 1461

WARDLEY AUSTRALIA LTD & ANOR v STATE OF WESTERN AUSTRALIA 175 CLR 514 1992 HCA 55

UBAF LTD v EUROPEAN AMERICAN BANKING CORP 1984 QB 713 1984 2 WLR 508 1984 2 AER 226

FIRST NATIONAL COMMERCIAL BANK PLC v HUMBERTS (A FIRM) 1995 2 AER 673 1995 69 P & CR D27 1995 1 EGLR 142

STATUTE OF LIMITATIONS 1957 S11(1)(A)

STATUTE OF LIMITATIONS 1957 S11(2)(A)

STATUTE OF LIMITATIONS (AMDT) ACT 1991 S3(2)

STATUTE OF LIMITATIONS 1957 S14

STATUTE OF LIMITATIONS 1957 S15

STATUTE OF LIMITATIONS 1957 S16

STATUTE OF LIMITATIONS 1957 S17

STATUTE OF LIMITATIONS 1957 S18

LIABILITY FOR DEFECTIVE PRODUCTS ACT 1991 S7

STATUTE OF LIMITATIONS 1957 S11(2)(B)

MORGAN v PARK DEVELOPMENTS LTD 1983 ILRM 156 1983/3/700

CARTLEDGE & ORS v E JOPLING & SONS LTD 1963 AC 758 1963 2 WLR 210 1963 1 AER 341

STATUTE OF LIMITATIONS 1957 S11

PIRELLI GENERAL CABLE WORKS LTD v OSCAR FABER & PARTNERS 1983 2 AC 1 1983 2 WLR 6 1983 1 AER 65

TUOHY v COURTNEY & ORS 1994 3 IR 1

DARBY v SHANLEY T/A OLIVER SHANLEY & CO SOLICITORS UNREP IRVINE 16.10.2009 2009/12/2684 2009 IEHC 459

LIMITATION ACT 1980 S14A (UK)

POWELL & ORS JACKSON & POWELL ON PROFESSIONAL LIABILITY 6ED FOURTH SUPPLEMENT OCT 2010

POWELL & ORS JACKSON & POWELL ON PROFESSIONAL LIABILITY 7ED 2012

PEGASUS MANAGEMENT HOLDINGS SCA v ERNST & YOUNG (A FIRM) 2009 PNLR 11 2008 EWHC 2720 (CH)

HENDERSON & ORS v MERRETT SYNDICATES LTD & ORS (NO 1) 1995 2 AC 145 1994 3 WLR 761 1994 3 AER 506

PHILP v RYAN & ORS 2004 4 IR 241 2004/42/9677 2004 IESC 105

SOCIETE COMMERCIALE DE REASSURANCE v ERAS (INTERNATIONAL) LTD & ORS 1992 2 AER 82 (NOTE) 1992 1 LLOYDS 570

DUNCAN WALLACE NEGLIGENCE & ECONOMIC LOSS: A VIEW OF THE FUTURE 1993 1 TORT L REV 152

LAW REFORM CMSN REPORT ON LIMITATION OF ACTIONS (LRC 104-2011)

PRACTICE & PROCEDURE

Limitation of actions

Negligence - Economic loss - Accrual of action - Claim that induced to enter unsuitable financial transaction - Whether claim in tort statute barred - Whether actual loss suffered at time of entry into transaction or at later date - Whether immediate loss even though difficulties with quantification and other uncertainties and contingencies - Hegarty v O'Loughran [1990] 1 IR 148, Darby v Shanley [2009] IEHC 459, (Unrep, Irvine J, 16/10/2009), Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 and Read v Brown (1888) 22 QBD 128 considered - Statute of Limitation 1957 (No 6), s 11(2)(a) - Statute of Limitations (Amendment) Act 1991 (No 18), s 3(2) - Defendant's appeal allowed (433/2011 - SC - 7/6/2012) ]2012] IESC 35

Gallagher v ACC Bank plc

1

The question on this appeal is whether the claim of the respondent (whom I will call "the plaintiff") against the appellant (whom I will call "the Bank") is statute-barred. The plaintiff claims damages against the Bank for the alleged "miss-selling" to him of an investment bond. The Court has been taken on an excursion through a large number of cases in which the English courts have grappled with the accrual of the cause of action in cases of financial loss. Our courts have not previously had to cope with these problems. The High Court of Australia has cast doubt on at least some of the English jurisprudence.

2

Kelly J gave liberty to the Bank to seek a preliminary determination, based on the pleadings, of whether the plaintiff's claim was time-barred. The result of that determination will, we are told, govern a large number of claims pending in the Commercial Court. Charleton J decided that the claim was not statute-barred. He held that the plaintiff, assuming his claim to be a valid one, did not suffer any immediate loss when he purchased the bond, but faced only a contingent loss.

The Solid World Bond
3

In October 2003, the Bank advertised and marketed an investment bond under the name of "Solid World Bond 4." The plaintiff invested €500,000 in the bond. Crucially, he borrowed that money from the Bank. His essential complaint is that he was induced to purchase a combined "borrow to invest" financial product which was completely unsuitable for him or for any investor as the investment would have had to far outperform the market if he were to get any return over and above the interest he had to pay on the sum he borrowed.

4

The Solid World Bond offered investors a 100% guarantee of the return of the amount invested linked to 80% of any net increase in the value of a "Deep Blue" basket of shares in ten specified companies each of which was claimed to be "renowned for its financial strength and for the wide marketability of its products and services." The term of the investment was five years and eleven months. The bond could not be encashed during the term and no withdrawals were permitted prior to maturity. The terms of the bond provided for a degree of protection against negative movement in the value of the "Deep Blue Basket" by averaging over the last twelve months of the term. The shares were selected and specified in advance, but the investor's money was not directly invested in them; it did not benefit from any share dividends; the shares were not actively managed; the bond passively tracked their progress; under normal conditions the basket was not to change over the term of the bond.

5

The plaintiff agreed to invest €500,000 in the bond. No additional charges were to be applied.

6

The Bank's marketing document emphasised the high quality of the shares being tracked. It included a table showing spectacularly high returns over successive prior periods of five years and eleven months, but cautioned: "Past performance may not be a reliable guide to future performance. Investments may fall as well as rise in value." The brochure said that the money was "invested in ACC Bank plc, a wholly owned subsidiary of Rabobank, an 'AAA' rated Bank."

7

Contemporaneously with his investment in the bond, the plaintiff borrowed the entire sum of €500,000 from the Bank pursuant to a facility letter dated 26 th September 2003. The amount of the loan was to be drawn down in one lump sum. The plaintiff was obliged to use it only to finance his investment in the bond. The term of the loan coincided with that of the bond.

The plaintiff's complaint
8

The plaintiff commenced his proceedings by plenary summons on 10 th June 2010, i.e., more than six years after he had made his investment. He claimed damages for negligence, breach of contract, breach of duty (including breach of statutory duty and of fiduciary duty), and negligent misstatement. He also claimed equitable rescission, no longer relevant as the claim in contract has been ruled out. It is not disputed that the proceedings were issued more than six years after the purchase by the plaintiff of the bond and of his entry into the loan transaction with the Bank.

9

By order dated 23 November 2011, it was ordered by consent that the plaintiff's claims "for breach of contract and Statute (under Fair Contract Terms) are statute barred." The High Court judgment under appeal does not deal with the issue of fiduciary duty. The appeal before this Court was confined to whether the plaintiff's claim in tort is statute barred. That will depend on when the plaintiff alleges that he suffered loss or damage.

10

The statement of claim was delivered on 25 th May 2011. Paragraph 16 is headed: "The Wrongs committed by the Defendant." It commences with the following paragraph, which was the central focus of the Bank's case on the appeal, and which alleges that:

"Wrongfully and in breach of the various duties and contractual terms particularised ante the Defendant caused the Plaintiff to enter into transactions that were unsuitable for the Plaintiff and caused the Plaintiff loss and damage and the Defendant made the representations referred to above negligently. Without prejudice to the specific particulars set out hereunder the marketing of the SolidWorld Bond product as a borrow to invest product made it wholly unsuitable for the Plaintiff or indeed any investor. Given that the Plaintiff was borrowing money from the Defendant to invest in the product taking into account the cost of the said borrowing and the tax that the Plaintiff would have to pay on any gains, the product would have had to far out perform the market's view of the likely performance of the basket of shares in order for the Plaintiff to make any or any significant gain."

11

The foregoing paragraph is followed by "Particulars," set...

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