Harold Wildgust and Carrickowen Ltd v Bank of Ireland and Norwich Union Life Assurance Society

• Jurisdiction: Ireland
• Judge: Mr. Justice Geoghegan,Mr. Justice Kearns
• Judgment Date: 22 March 2006
• Neutral Citation: [2006] IESC 16
• Court: Supreme Court
• Docket Number: [S.C. No. 177 of 2002]
• Date: 22 March 2006

[2006] IESC 16

THE SUPREME COURT

Denham J.

Geoghegan J.

Kearns J.

Record No. 2002/177

WILDGUST & CARRICKOWEN LTD v BANK OF IRELAND & NORWICH UNION LIFE INSURANCE SOCIETY

BETWEEN:

HAROLD WILDGUST AND CARRICKOWEN LIMITED

Appellants/Plaintiffs

and

THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND

First-named Defendant

and

NORWICH UNION LIFE INSURANCE SOCIETY

Respondent/Second-named Defendant

SUTHERLAND SHIRE COUNCIL v HEYMAN 1865 60 ALR 1

CAPARO PLC v DICKMAN 1990 2 AC 605 1990 2 WLR 358 1990 1 AER 568 1990 BCLC 273

DONOGHUE v STEVENSON 1932 AC 562 1932 48 TLR 494 1932 AER REP 1

GLENCAR EXPLORATION PLC & ANDAMAN RESOURCES PLC v MAYO CO COUNCIL 2002 1 IR 84

HEDLEY BYRNE v HELLER & PARTNERS LTD 1964 AC 465 1963 2 AER 575 1963 3 WLR 101 1963 1 LLOYD'S REP 485

CANDLER v CRANE CHRISTMAS & COMPANY 1951 2 KB 164 1951 1 AER 426 1951 1 TLR 371

SECURITIES TRUST LTD v HUGH MOORE & ALEXANDER LTD 1964 IR 417

BANK OF IRELAND v SMITH 1966 IR 646

NOCTON v LORD ASHBURTON 1914 AC 932 1914 83 LJ CH 784

SMITH v BUSH 1990 1 AC 831 1989 2 AER 514 1989 2 WLR 790

MINISTRY OF HOUSING & LOCAL GOVERNMENT v SHARP 1970 2 QB 223 1970 1 AER 1009 1970 2 WLR 802

WHITE v JONES 1995 2 AC 207 1995 1 AER 691 1995 2 WLR 187

WALL v HEGARTY 1980 ILRM 124

WILDGUST v BANK OF IRELAND UNREP HIGH COURT MORRIS 28.7.1998 1998/34/13279

WILDGUST v BANK OF IRELAND 2001 1 ILRM 24

HAY v O'GRADY 1992 1 IR 210 1992 ILRM 689

BEST v WELLCOME FOUNDATION LTD 1993 3 IR 441 1992 ILRM 609

SINEY v DUBLIN CORPORATION 1980 IR 400

WARD v MCMASTER 1988 IR 337 1989 ILRM 400

HALSBURY'S LAWS OF ENGLAND 4TH ED V3(1) PARA 149

KENNEDY v AIB 1998 2 IR 48

NATIONAL BANK OF GREECE SA v PINIOS SHIPPING CO, THE MAIRA SUB NOM NATIONAL BANK OF GREECE SA v PINIOS SHIPPING CO & GEORGE DIONYSIOS TSITSILIANIS, THE MAIRA (NO 3) 1990 1 AC 637 1989 1 AER 213 1989 3 WLR 185 1988 2 LLOYD'S REP 126

PAT O'DONNELL & CO LTD v TRUCK & MACHINERY SALES LTD 1998 4 IR 191

DORSET YACHT CO LTD v HOME OFFICE 1970 AC 1004 1970 2 AER 294 1970 2 WLR 1140 1970 1 LLOYD'S REP 453

ANNS v MERTON LONDON BOROUGH COUNCIL 1978 AC 728 1977 2 AER 492 1977 2 WLR 1024

COMPANIES ACT 1985 (UK)

HARRIS v WYRE FOREST DISTRICT COUNCIL 1990 1 AC 831 1989 2 AER 514 1989 2 WLR 790

GLENCAR EXPLORATION v MAYO COUNTY COUNCIL (NO 2) 2002 1 IR 112 2002 1 ILRM 481

SPRING v GUARDIAN ASSURANCE PLC 1995 2 AC 296 1994 3 AER 129 1994 3 WLR 354

Abstract:

Negligence - Duty of care - Negligent misstatement - Scope of liability for negligent misstatement - Insurance company - Proximity - Whether special relationship creating duty of care - Whether plaintiffs sufficiently proximate so as to be persons reasonably within contemplation of defendant as being likely to be affected by its acts or omissions - Whether personal reliance on statement necessary for recovery of damages - Whether plaintiffs entitled to damages

Facts: The first plaintiff had obtained life cover from the second defendant to protect loan repayments to Hill Samuel bankers. The premiums were paid by direct debit from an account with the first defendant. Due to an error, one of the premium payments was not made, as a result of which the second defendant contended that the plaintiffs' policy lapsed. Hill Samuel had been aware of the error with the direct debit and made enquiries at the time to the second defendant to ensure that the monies due on that premium instalment had been paid by some alternative method. Hill Samuel had been assured by the second defendant that the premium payment for that particular month had been paid by an alternative method.

Held by the Supreme Court in allowing the appeal that the proximity test in respect of a negligent misstatement included persons in a limited and identifiable class when the maker of the statement could reasonably expect, in the context of a particular inquiry, that reliance would be placed thereon by persons to act or not to act in a particular manner in relation to that transaction. There was a special relationship between the plaintiffs and the second defendant sufficient to create a duty of care on the defendant for the accuracy of its statement, even though the statement was not made directly to the plaintiffs but to a person identified with them. Moreover, the plaintiffs were, vis-à-vis the person giving the information, proximate neighbours who could foreseeably be damaged by the inaccuracy of the information.

Reporter: P.C.

1 JUDGMENT of Mr. Justice Geoghegan delivered the 22nd day of March 2006

2 This is an appeal by the above-named appellants/plaintiffs from an order of the High Court (Morris P.) dated 15th October, 2001 dismissing an action for damages for negligence against the above-named respondent/second-named defendant. There is also a cross-appeal by the said respondents against the particular costs order made in the High Court and I will return to that in due course.

3 I gratefully adopt the full account of the relevant facts in the case as well as its complex procedural history set out in the judgment about to be delivered herein by Kearns J. I will content myself by giving a shorthand account of the salient facts as found by the trial judge. The first-named appellant (hereinafter referred to as "Mr. Wildgust") and his late wife had effected a life policy of insurance on each of their lives with the respondent insurance company. Mr. Wildgust carried on business through a company controlled by him namely, the second above-named appellant, Carrickowen Limited. In the late nineteen eighties Carrickowen Limited purchased certain properties and for that purpose obtained loan facilities from Hill Samuel Bank Limited ( "Hill Samuel"). In accordance with normal practice, Hill Samuel required collateral security for the loan. As a consequence, personal guarantees were entered into by Mr. Wildgust and his late wife, Margaret Wildgust. The properties acquired were to be mortgaged to Hill Samuel and two life policies including the policy already referred to were to be assigned by way of mortgage to Hill Samuel. Carrickowen Limited held an account with the first-named defendant, Bank of Ireland, and the arrangement was that the premiums on the relevant life policy were to be paid for by way of direct debit from that account. The mortgage assignment of the life policy to Hill Samuel contained a covenant by Mr. Wildgust and his wife to pay and keep up the premiums on the policy. A monthly premium became due on the 23rd March, 1992 but the direct debit for that month was not paid.

4 I should explain that Mr. Wildgust took the view that the Bank of Ireland had wrongly neglected to pay the direct debit and in that connection the Bank of Ireland was originally a defendant in these proceedings. In the course of the hearing, the claim against the Bank of Ireland became settled and that bank is no longer involved.

5 Returning to the action against the respondent on the appeal, i.e. the Norwich Union, that company notified Hill Samuel but not the Wildgusts or their insurance broker that there had been default in the direct debit. Mr. Declan O'Hanlon was the relevant manager of Hill Samuel at the time and when he received the notification of the default, he contacted Mr. Wildgust. It was of considerable concern to Mr. O'Hanlon that the policy should not be allowed to lapse and he was aware at the time that Mrs. Wildgust was seriously ill. Indeed around that time, she was diagnosed as terminally ill. Mr. Wildgust assured Mr. O'Hanlon that he, Mr. Wildgust, had sent a cheque or more accurately a bank draft that would cover the premium. In giving this assurance, Mr. Wildgust appears to have acted bona fide but as is explained in the judgment of Kearns J. that particular payment had been treated as an excess payment and was refunded not to Mr. Wildgust but to his company, Carrickowen Limited, a fact of which Mr. Wildgust only became aware after the policy lapsed in May, 1992.

6 On the 22nd April, 1992, Mr. O'Hanlon, working off his diary, telephoned the respondent to make absolutely sure that the March payment had been made notwithstanding the assurance given to him by Mr. Wildgust. He did not personally remember making the call but he had a clear file note which showed that it had been made and detailing the contents of the call. The learned trial judge accepted that the file note was accurate.

7 The file note read as follows:

"File note

Carrickowen Limited

With regard to the above account I have been advised by Mr. Harry Wildgust that Mrs Margaret Wildgust has been diagnosed with cancer. We hold as security a policy assigned to ourselves with Norwich Union Life Insurance Society.

On the 6th April 1992 we received an advice from Norwich Union Life Insurance Society that the direct debit on the policy had been returned unpaid. I contacted the clients and was informed that they had forwarded a cheque to Norwich Union to keep the policy in order.

I rang Norwich Union today, 22nd April, to confirm that the policy was correct and in order. Norwich Union confirmed that the cheque had been received and everything was correct and in order."

8 Although the respondent, at the trial, disputed the facts contained in that file note, the learned President, as I have already mentioned, accepted them as true. In fact the policy was not "correct and in order" and it became a lapsed policy.

9 Mr. O'Hanlon had not informed Mr. Wildgust that he had sought confirmation from the respondent that the premiums were paid up. Mr. Wildgust, therefore, cannot be said to have personally relied on the information given to Mr. O'Hanlon by the respondent. By reason of that fact, the learned President held that Mr. Wildgust was not entitled to recover damages in negligence against the respondent...