Governey v Financial Services Ombudsman

• Jurisdiction: Ireland
• Judge: Ms. Justice Laffoy
• Judgment Date: 21 December 2016
• Neutral Citation: [2016] IESC 78
• Court: Supreme Court
• Docket Number: [S.C. No. 43 of 2014],[Appeal No. 43/2014]
• Date: 21 December 2016

IN THE MATTER OF SECTION 57CL OF THE CENTRAL BANK ACT 1942, AS INSERTED BY SECTION 16 OF THE CENTRAL BANK AND FINANCIAL SERVICES AUTHORITY OF IRELAND ACT 2004

BETWEEN

HUGH GOVERNEY

APPELLANT

AND

FINANCIAL SERVICES OMBUDSMAN

RESPONDENT

AND

IBRC ASSURANCE COMPANY LIMITED

NOTICE PARTY

[2016] IESC 78

[Appeal No. 43/2014]

THE SUPREME COURT

Contract – Question of law – Duty of disclosure – Appellant seeking reimbursement of premium paid – Whether there was a duty of disclosure on the part of the notice party

Facts: The appellant, Mr Governey, in November 2010, complained to the respondent, the Financial Services Ombudsman that a contract entered into by Mr Governey with Anglo Irish Assurance Company Ltd was a contract to which the principle of utmost good faith applied, including a fundamental duty to disclose all material facts, and that such duty had been breached. Mr Governey indicated that the manner in which he wished his complaint to be resolved was by reimbursement of the entire premium paid plus interest, damages and payment of his solicitors’ costs. On 23rd July, 2012, the Ombudsman found that the complaint had not been substantiated pursuant to s. 57CI(2) of the Central Bank Act 1942. In August 2012, Mr Governey appealed to the High Court against that finding invoking s. 57CL of the 1942 Act. Hedigan J, on 1st November, 2013, ordered that the appeal should be dismissed. Mr Governey applied to the Supreme Court to review the determination on a question of law in accordance with s. 57CM(4) of the 1942 Act Mr Governey contended that the trial judge erred in law or in fact: (a) in adopting an incorrect approach or test to the statutory appeal, or applying such approach or test in an incorrect manner; (b) in conflating the disclosure of the nature of the risk (whether high, medium or low) with disclosure of material facts pertaining to that risk or failing to distinguish them; (c) in failing to hold that the Ombudsman had been in serious and significant error; (d) in holding that there was no obligation on the Ombudsman to deal with the break clause issue; (e) in misdirecting himself as to parts of the finding; and (f) in failing to give any sufficient weight to the fact that Anglo had specifically designed the product as an insurance policy and marketed it to consumers and so the notice party, IBRC Assurance Company Ltd, should not have been allowed to challenge the applicability of insurance law principles to the same. The questions of law which arose for determination were formulated as follows: (a) When the High Court is determining an appeal from the Ombudsman is a test of rationality applicable to a question of law, namely, whether there was a breach of obligation of disclosure imposed by the principle of uberrima fides? (b) As a matter of law is there a distinction to be drawn between disclosure of the degree of risk and disclosure of material facts pertaining to the risk in determining whether the duty of disclosure pursuant to the principle of uberrima fides has been complied with? (c) As a matter of law what is the extent of the obligation on the part of the Ombudsman to identify and address issues raised by the parties and to give a reasoned finding in respect thereof? (d) What parameters apply to the dicta in Carr v Financial Services Ombudsman [2013] IEHC 182 and Faulkner v Minister for Industry and Commerce [1997] ELR 107 that an adjudicating body need not address an issue raised by a party? (e) What degree of deference must be shown by the High Court to the decision of the Ombudsman on a question of law?

Held by Laffoy J that she wholly rejected Mr Governey’s argument on the core question, the answer to which, when contextualised, was that there was no duty of disclosure on the part of Anglo to Mr Governey in relation to the potential future value of the underlying asset of the Kennet Centre Geared Property Fund. Laffoy J held that there was no basis for Mr Governey’s claim that he is entitled, on the grounds of the alleged material non-disclosures, to repudiate the contract and to recover the sum of €500,000 invested by him on the appeal; nor, as a matter of law, would there be any such entitlement if the matter was remitted to the Ombudsman for review. Laffoy J held that, in the circumstances, even if it were the case that Mr Governey could satisfy the Court that he is in a position to sustain the other questions of law identified by Clarke J, in reality, he would not be in a position to obtain the relief which he sought, which was the return of the investment of €500,000.

Laffoy J held that there should be an order affirming the order of the High Court that Mr Governey’s application to the High Court was refused. It was proposed that the Court should hear further submissions from the parties in relation to the costs of the proceedings in the High Court and in the Supreme Court, other than the costs of the application to the Supreme Court pursuant to s. 57CM(4) of the 1942 Act as determined by the order of the Court dated 6th May, 2015.

Judgment approved.

Judgment of Ms. Justice Laffoy delivered on the 21st day of December, 2016

The process leading to this appeal in outline

1 The genesis of this appeal is an investment made by the appellant, Hugh Governey (Mr. Governey), in 2006. The investment opportunity was created by Anglo Irish Bank Private Bankers and Anglo Irish Assurance Company Limited and it related to what was described as ‘the Kennet Centre Geared Property Fund’ (the Fund). In broad terms, the Fund was sold as a unit-linked fund managed by Anglo Irish Bank and the investment in the Fund was to be made through insurance policies issued by Anglo Irish Assurance Company Limited. The scheme was that the Fund was to acquire units in a Jersey Trust, which, in turn, was to acquire a shopping centre known as ‘the Kennet Centre’ in Newbury in England at the price of Stg. £50m. Investors were to make their contributions to the Fund through an Investment Bond or a Pension Policy issued by Anglo Irish Assurance Company Limited. In January 2006 Mr. Governey made an investment of €500,000 in the Fund through a single premium Investment Bond issued by Anglo Irish Assurance Limited with a start date of 19th January, 2006 (the Investment Bond), the life assured being Mr. Governey. The acquisition of the Kennet Centre and the establishment of the Fund was implemented in due course.

2 In November 2010 Mr. Governey made a formal complaint to the respondent, the Financial Services Ombudsman (the Ombudsman), naming Anglo Irish Assurance Company Limited as the financial service provider to which the complaint related. In essence the complaint was that the contract entered into by Mr. Governey with Anglo Irish Assurance Company Limited was a contract to which the principle of utmost good faith applied, including a fundamental duty to disclose all material facts, and that such duty had been breached. On the basis that the Fund had performed extremely poorly and that it appeared likely that he would lose the entirety of the premium he had paid, Mr. Governey indicated that the manner in which he wished his complaint to be resolved was by reimbursement of the entire premium paid plus interest, damages and payment of his solicitors' costs.

3 The complaint was thoroughly investigated by the Ombudsman over a period of in excess of eighteen months. During that period, with effect from 14th October, 2011, the name of Anglo Irish Bank Corporation Limited had changed to Irish Bank Resolution Corporation Limited and the registered name of Anglo Irish Assurance Company Limited had changed to IBRC Assurance Company Limited, being the notice party as currently named on this appeal. In the interests of clarity, as the events to which these proceedings relate occurred when ‘Anglo’ was in the name of the predecessor of the notice party, I propose, in this judgment, to refer to the notice party as ‘Anglo’ save that, in relation to involvement in the proceedings in the High Court and in this Court, Anglo or its successors, as the case may be, will be referred to as the Notice Party. In the course of the investigation, the Ombudsman obtained from Anglo, and made available to Mr. Governey, the policy documentation and other documentation in connection with the Fund, including a report dated 11th October, 2005 furnished by Savills, English Chartered Surveyors, to Anglo on the value of the Kennet Centre as at 11th October, 2005, which Anglo previously had refused to furnish to Mr. Governey and which refusal was raised as an issue on the complaint to the Ombudsman.

4 The Ombudsman issued what was described as his ‘Finding’ (the Finding) on 23rd July, 2012. His conclusion was that the complaint had not been substantiated pursuant to the relevant statutory provision, that is to say, s. 57CI(2) of the Central Bank Act 1942 (the Act of 1942) as amended and inserted by the Central Bank and Financial Services Authority of Ireland Act 2004 (the Act of 2004).

5 Mr. Governey being dissatisfied with the Finding, in August 2012 he appealed to the High Court against the Finding invoking s. 57CL of the Act of 1942. The Ombudsman was the respondent on the appeal. There was joined and named as a notice party ‘Irish Bank Resolution Corporation Limited (Formerly Anglo Irish Bank/Anglo Irish Assurance Company)’. Specifically, on the appeal, Mr. Governey sought orders in the following terms:

(a) an order pursuant to ‘s. 57CL(2)(b)’ setting aside the Finding and in lieu thereof an order directing the named notice party to return to Mr. Governey the premium of €500,000 which was paid by Mr. Governey to Anglo in respect of the Investment Bond; or

(b) in the alternative, an order pursuant to ‘s. 57CL(2)(c)’ remitting the Finding to the Ombudsman for review.

As the High Court had jurisdiction to make such orders by virtue of s. 57CM (1) and (2)(b) and (c) of...