Gallagher v Acc Bank Plc T/A Acc Bank

• Jurisdiction: Ireland
• Judgment Date: 07 June 2012
• Date: 07 June 2012
• Docket Number: [S.C. No. 433 of 2011]
• Court: Supreme Court

[2012] IESC 35,

Supreme Court

[S.C. No. 433 of 2011]

Gallagher v. ACC Bank plc t/a ACC Bank

Patrick Gallagher

Plaintiff

and

ACC Bank plc, trading as ACC Bank

Defendant

Cases mentioned in this report:-

Axa Insurance Ltd. v. Akther & Darby [2009] EWCA Civ 1166, [2010] 1 W.L.R. 1662; [2010] P.N.L.R. 10; [2010] Lloyd's Rep. I.R. 393; [2010] 127 Con. L.R. 50.

Bell v. Peter Browne & Co. [1990] 2 Q.B. 495; [1990] 3 W.L.R. 510; [1990] 3 All E.R. 124.

Cartledge v. E. Jopling & Sons Ltd. [1963] A.C. 758; [1963] 2 W.L.R. 210; [1963] 1 All E.R. 341; [1963] 1 Lloyd's Rep. 1.

D.W. Moore & Co. v. Ferrier [1988] 1 W.L.R. 267; [1988] 1 All E.R. 400.

Darby v. Shanley [2009] IEHC 459, (Unreported, High Court, Irvine J., 16th October, 2009).

The Eras Eil Actions [1992] 1 Lloyd's Rep. 570.

First National Commercial Bank v. Humberts [1995] 2 All E.R. 673; [1995] 1 E.G.L.R. 142.

Forster v. Outred & Co. [1982] 1 W.L.R. 86; [1982] 2 All E.R. 753.

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.[1965] A.C. 465; [1963] 3 W.L.R. 101; [1963] 2 All E.R. 575; [1963] 1 Lloyd's Rep. 485.

Hegarty v. O'Loughran [1990] 1 I.R. 148; [1990] I.L.R.M. 403.

Henderson v. Merrett Syndicates Ltd. [1995] 2 A.C. 145; [1994] 3 W.L.R. 761; [1994] 3 All E.R. 506; [1994] 2 Lloyd's Rep. 468.

Iron Trade Mutual v. J. K. Buckenham Ltd. [1990] 1 All E.R. 808; [1989] 2 Lloyd's Rep. 85.

Knapp v. Ecclesiastical Ins Group Plc [1998] Lloyd's Rep I.R. 390; [1998] P.N.L.R. 172.

Law Society v. Sephton [2006] UKHL 22, [2006] 2 A.C. 543; [2006] 2 W.L.R. 1091; [2006] 3 All E.R. 401.

Martin v. Britannia Life [2000] Lloyd's Rep. P. N. 412.

Morgan v. Park Developments Ltd. [1983] I.L.R.M. 156.

Murphy v. Brentwood D.C. [1991] 1 A.C. 398; [1990] 3 W.L.R. 414; [1990] 2 All E.R. 908; [1990] 2 Lloyd's Rep 467.

Nykredit Plc. v. Edward Erdman Ltd. (No. 2) [1997] 1 W.L.R. 1627; [1998] 1 All E.R. 305; [1998] 1 E.G.L.R. 99; [1998] P.N.L.R. 197.

Pegasus Management v. Ernst & Young [2009] P.N.L.R. 209 (H.C.); [2010] EWCA Civ 181, [2010] 3 All E.R. 297; [2010] 2 All E.R. (Comm.) 191, [2010] S.T.C. 1461 (C.A.).

Philp v. Ryan [2004] IESC 105, [2004] 4 I.R. 241.

Pirelli v. Oscar Faber & Partners [1983] 2 A.C. 1; [1983] 2 W.L.R. 6; [1983] 1 All E.R. 65; [1983] 1 E.G.L.R. 135.

Read v. Brown (1888) 22 Q.B.D. 128.

Shore v. Sedgwick Financial Services Ltd. [2008] EWCA Civ 863, [2009] Bus L.R. 42; [2008] P.N.L.R. 37.

Tuohy v. Courtney [1994] 3 I.R. 1; [1994] 2 I.L.R.M. 503.

UBAF Ltd. v. European American Banking [1984] 1 Q.B. 713; [1984] 2 W.L.R. 508; [1984] 2 All E.R. 226; [1984] 1 Lloyd's Rep. 258.

Wardley Australia Ltd. v. Western Australia (1992) 175 C.L.R. 514; 109 A.L.R. 247; 66 A.L.J.R. 839.

Limitation of actions - Negligence - Economic loss - Accrual of action - Claim that plaintiff 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 - Statute of Limitations 1957 (No. 6), s. 11(2)(a).

Appeal from the High Court

The facts have been summarised in the headnote and are more fully set out in the judgments of Fennelly and O'Donnell JJ., infra.

The proceedings were instituted by way of plenary summons dated the 10th June, 2010. A statement of claim was delivered on the 25th May, 2011.

By order dated the 18th May, 2011, the High Court (Kelly J.) gave liberty to the defendant to apply by way of notice of motion for a preliminary determination as to whether the remaining claim, in tort, was statute barred. Such notice of motion issued on the 1st June, 2011. By judgment dated the 7th October, 2011, (see [2011] IEHC 367) and order dated the 14th October, 2011, the High Court (Charleton J.) held that the plaintiff's claim in tort was not statute barred. The court also ordered, on consent, that the claims in contract and under statute were statute barred. By notice of appeal dated the 16th November, 2011, the defendant appealed to the Supreme Court.

The appeal was heard by the Supreme Court ( Denham C.J., Murray, Fennelly, O'Donnell and McKechnie JJ.) on the 6th and 7th March, 2012.

The plaintiff invested EUR500,000 in a financial product provided by the defendant, whereby the plaintiff purchased an investment bond from the defendant with a lump sum borrowed from the defendant. The defendant guaranteed the return of the amount invested and 80% of any net increase in the value of specified shares which the bond would passively track. The term of the investment and the loan was five years and eleven months. The bond could not be encashed during the term and no withdrawals were permitted prior to maturity. The marketing documentation for the product emphasised the high quality of the shares being tracked and included a table showing high returns in the past. However it cautioned that "past performance may not be a reliable guide to future performance".

More than six years after the investment, the plaintiff instituted proceedings claiming damages for negligence, breach of contract, breach of statutory and fiduciary duties and negligent misstatement. The core of the plaintiff's claim was that the product was not a "suitable product to borrow money to invest in and that it was most unlikely that the bond would deliver any return sufficient to offset the cost of the loan transaction". On the expiry of the term, the performance of the shares had been insufficient to offset any of the interest payments the plaintiff had made on the loan. The plaintiff claimed that, taking into account the borrowing costs and the tax he would have had to pay on any gains, the bond would have had to far outperform the market's view of the likely performance of the shares in order for him to make any or any significant gain.

The defendant sought a preliminary determination as to whether the claim in tort was statute barred. The High Court (Charleton J.) held that the claim in tort was not statute barred (see [2011] IEHC 367). The court also ordered, on consent, that the claims in contract and under statute were statute barred.

The defendant appealed to the Supreme Court.

Held by the Supreme Court (Denham C.J., Murray, Fennelly, O'Donnell and McKechnie JJ.), in allowing the appeal, setting aside the order of the High Court and ordering that the claim in tort was statute barred, 1, that, in a claim for financial loss based in tort, depending on the facts, the cause of action accrued (a) in the case of immediate loss to the plaintiff, when the wrong was committed, or (b) in the case of a wrong which initiated a cause of action that later resulted in a loss, at the date the plaintiff suffered actual loss.

Read v. Brown (1888) 22 Q.B.D. 128, Hegarty v. O'Loughran [1990] 1 I.R. 148, Wardley Australia Ltd. v. Western Australia (1992) 175 C.L.R. 514 andDarby v. Shanley [2009] IEHC 459, (Unreported, High Court, Irvine J., 16th October, 2009) considered.

2. That there might be immediate loss even though there were difficulties of quantification and other uncertainties and contingencies. Uncertainties did not in themselves prevent the early accrual of a cause of action, subject to the proviso that the plaintiff had suffered actual loss at the time the wrong was committed.

3. That, where a plaintiff claimed that he suffered damage by the very fact of entering into a transaction which was wholly unsuitable for him, the cause of action accrued on the date of entry into the transaction.

Quaere: Whether, where possible, the court should seek to reduce the differences in limitation periods for causes of action in tort and in contract, where they arose out of the same set of facts.

Per Fennelly J.: The court should not adopt such a general policy of interpretation of the statute. The essential difference was that a remedy in contract was due to the will of the parties, whereas that in tort was imposed by the general law. It was not objectionable that the plaintiff might be entitled to take advantage of the remedy which was most advantageous to him.

Henderson v. Merrett Syndicates Ltd. [1995] 2 A.C. 145 and Law Society v. Sephton [2006] UKHL 22, [2006] 2 A.C. 543 followed. Nykredit Plc. v. Edward Erdman Ltd. (No. 2) [1997] 1 W.L.R. 1627 not followed.

Per O'Donnell J.: Fundamentally, it was the agreement between the parties embodied in the contract which established the rights and obligations which they undertook and it offended common sense to have limitation dates years apart. The existence of different rules for what might really be the same claims forced the law into unnatural complications as it tended to push plaintiffs into framing actions in tort where contract was a more natural vehicle for recourse. Where appropriate, the policy of the law should thus be to minimise, rather than expand, the disparity between the running of time in contract and tort cases, at least where the wrongdoing alleged was identical.

The Eras Eil Actions [1992] 1 Lloyd's Rep. 570 andNykredit Plc. v. Edward Erdman Ltd. (No. 2) [1997] 1 W.L.R. 1627 followed. Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1965] A.C. 465 and Murphy v. Brentwood D.C. [1991] 1 A.C. 398 referred to.

Cur. adv. vult.

Denham C.J. 7th June, 2012

[1] I have read the judgment about to be delivered by Fennelly J. and I agree with it.

Murray J.

[2] I also agree with Fennelly J.

Fennelly J.

[3] The question on this appeal is whether the claim of the plaintiff against the defendant is statute barred. The plaintiff claims damages against the defendant for the alleged "mis-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...