Patrick Cuttle v ACC Bank Plc

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 30 March 2012
• Neutral Citation: [2012] IEHC 105
• Court: High Court
• Date: 30 March 2012

Cuttle v ACC Bank Plc (t/a ACC Bank)

COMMERCIAL

BETWEEN

PATRICK CUTTLE

PLAINTIFF

AND

ACC BANK PLC TRADING AS ACC BANK

DEFENDANT

[2012] IEHC 105

[No. 2473 P./2010]

THE HIGH COURT

PRACTICE AND PROCEDURE

Amendment of pleadings

Application for leave to amend statement of claim - Application following discovery - Investment made in financial product marketed and produced by bank - Bond - Plea of fraud - Representations to induce - Reasonable prospect of success - Jurisdiction to strike out in limine - Inherent jurisdiction to strike out - Liability for costs arising on foot of amendment - Whether amendments would survive application to be struck out under inherent jurisdiction for no reasonable prospect of success - Croke v Waterford Crystal Limited [2004] IESC 97, [2005] 2 IR 383; Cornhill v Minister for Agriculture and Food [1998] IEHC 47, (Unrep, O'Sullivan J, 13/3/1998); Woori Bank and Hanvit LSP Finance Ltd v KDB Ireland Ltd [2006] IEHC 156, (Unrep, Clarke J, 17/5/2006); Barry v Buckley [1981] IR 306 and Sun Fat Chan v Osseous Ltd [1992] 1 IR 425 considered - Rules of the Superior Courts 1986 (SI 15/1986), O 19, r 28 and O 28 - European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (SI 27/1995), reg 3 - Investment Intermediaries Act 1995 (No 11), s 37 - Application granted (2010/2473P - Kelly J - 30/3/2012) [2012] IEHC 105

Cuttle v ACC Bank plc t/a ACC Bank

Facts The plaintiff had invested in a product (the ‘Solid World Bond 5’) with the defendant. The bond was for a certain fixed period which saw funds being invested in the stock market. If the basket of stocks rose the investor would benefit and if there was no growth the capital was protected. The plaintiff contended that representations had been made to him in order to induce him to borrow money from the defendant in order to invest in the bond and that the bond was a wholly unsuitable product. It was contended that the defendant Bank had caused the plaintiff to enter into an entirely unsuitable combination of back to back transactions and had failed to properly advise the plaintiff as to the true import of the transactions given that the plaintiff was borrowing to invest in the bonds. In addition allegations were made that the Bank had engaged in pressurised and misleading selling techniques and failed to act with due skill, care, diligence and in the best interest of its customers. The plaintiff now brought an application for leave to amend his statement of claim to include a plea of fraud pursuant to Order 28 of the Rules of the Superior Courts.

Held by Kelly J in allowing the amendment subject to terms: The amendment would be allowed if it could be shown that it would survive an application to have it struck out under the inherent jurisdiction of the court. The purpose of Order 28 was that real matters in dispute between litigants should be determined by the court. If fraud had been pleaded in the statement of claim as originally delivered and in the light of the documents disclosed in the Bank”s discovery, it would not be possible to strike out the fraud claim as one doomed to failure. There was a factual basis laid to support an allegation of fraudulent misconduct. In the event of the plaintiff not succeeding at trial on the fraud claim then he would be responsible for the costs of that element of the case regardless of the overall outcome of the action.

RSC O.28 r2

RSC O.28 r1

CROKE v WATERFORD CRYSTAL LTD 2005 2 IR 383

CORNHILL v MIN FOR AGRICULTURE UNREP O'SULLIVAN 13.3.1998 1998/14/4976 1998 IEHC 47

WOORI BANK & HANVIT LSP FINANCE LTD v KDB IRELAND LTD UNREP CLARKE 17.5.2006 2006/59/12499 2006 IEHC 156

BARRY v BUCKLEY 1981 IR 306

SUN FAT CHAN v OSSEOUS LTD 1992 1 IR 425

INVESTMENT INTERMEDIARIES ACT 1995 S37

EUROPEAN COMMUNITIES (UNFAIR TERMS IN CONSUMER CONTRACTS) REGS SI 27/1995 S3

Introduction

1 1. This case is one of hundreds before the court where a customer of the defendant (the Bank) has brought suit against it arising out of investments made in a financial product marketed and produced by the Bank. It was called the Solid World Bond 5 (the bond).

2 2. This judgment deals with the plaintiff's application for leave to amend his statement of claim. Should such leave be granted, permission is sought to make analogous amendments to the statements of claim of other plaintiffs who are suing the Bank in similar circumstances.

3 3. The amendment contemplated involves a plea of fraud against the Bank. The application has been heavily contested.

Jurisdiction

4 4. Order 28 of the Rules of the Superior Courts permits amendment of pleadings both with and without leave of the court.

5 5. No leave of the court is required to amend a statement of claim once at any time before the expiration of the time limited for reply and before replying or, where no defence has been delivered, at any time before the expiration of four weeks from the appearance of the defendant who last appeared (Order 28, rule 2). Similar provisions apply in respect of the amendment of a defence which contains a counterclaim.

6 6. In other circumstances (of which this is one) leave of the court is required in order to effect an amendment to a Statement of claim. That is provided for at O. 28, r. 1 which states:-

"The Court may, at any stage of the proceedings, allow either party to alter or amend his indorsement or pleadings in such manner and on such terms as may be just, and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties."

7 7. In Croke v. Waterford Crystal Limited [2005] 2 I.R. 383 at 401, Geoghegan J. described this as a "liberal rule". The notion behind it is that justice is best served if the real matters in dispute between litigants are brought before the court and determined by it. This is clear from another passage from the judgment of Geoghegan J. in the same case where he said:-

"While undoubtedly there is a discretion in the court as to whether to make the order or not and other factors may come into play, the primary consideration of the court must be whether the amendments are necessary for the purpose of determining the real questions of controversy in the litigation."

8 8. On an application of this sort, it is not the task of the court to adjudicate on the merits of the proposed amendments or to speculate on the likelihood of their success at trial. In Cornhill v. Minister for Agriculture [1998] IEHC 47, O'Sullivan J. in dealing with an application for leave to amend a statement of claim was confronted by two opposing approaches to that issue. The defendants argued that there was an onus on the plaintiffs to establish by credible evidence that the proposed amendments raised a real issue between the parties and that the plaintiffs had failed to do so. The plaintiffs argued that the appropriate test was whether the proposed plea, if part of the original statement of claim, would have survived an application to strike out in limine on the basis of having no reasonable prospect of success. O'Sullivan J. clearly preferred the submission of the plaintiffs and expressed the view that:

"an amendment of the pleadings should he allowed if it would have been appropriate in the original pleadings and would have withstood an attack under Order 19, rule 28."

9 9. In the present case, the parties have agreed that the approach of O'Sullivan J. is the one which I ought to adopt. So the net question is, if these amendments are permitted will they survive an application that they be struck out under the inherent jurisdiction of the court? That jurisdiction allows the court to stop cases with no reasonable prospect of success in their tracks and not permit them to go to trial.

10 10. This approach of the parties in the present case is consistent with various judicial dicta on amendment of pleadings and in particular with the observations of Clarke J. in Woori Bank v. KDB Ireland Limited [2006] IEHC 156. That judge was of opinion that the court should lean in favour of allowing an amendment unless it is clear that the issue sought in the amended pleading must fail. This is not to say that the court ought to enter into the merits of the issues sought to be raised save to the extent of asking itself whether the party seeking the amendment will necessarily fail on the issue which will require to be tried as a result of the amended pleading.

11 11. I ought now to say a word about the jurisdiction to strike out in limine.

12 12. In Barry v. Buckley [1981] I.R. 306, Costello J. reanimated and confirmed the inherent jurisdiction of the court to strike out or stay proceedings over and above that contained in Order 19, rule 28. The inherent jurisdiction may be utilised if the proceedings are frivolous or vexatious or are bound to fail. He said that this jurisdiction "exists to ensure that an abuse of the process of the Courts does not take place." If, therefore, the court is satisfied that the plaintiff's case must fail then "it would be a proper exercise of its discretion to strike out proceedings whose continued existence cannot be justified and is manifestly causing irrevocable damage to a defendant". Whilst this is a jurisdiction that is capable of being exercised in virtually any type of case, it must be borne in mind that it is an order that will only be made in very clear cases. As Costello J. said, the jurisdiction is one to be "exercised sparingly and only in clear cases". A similar approach was adopted by McCarthy J. in Sun Fat Chan v. Osseous Limited, who said that "generally, the High Court should be slow to entertain an application of this kind". The explanation for this restrained approach was as that judge said:-

"Experience has shown that the trial of an...