No Uniform Test
In any litigation it is important to decipher the date on which a claim begins; to determine whether the claim is statute barred. Time accrues in an action for tort when damage is manifest, but the meaning of this term is not straight forward. The law is far from settled on this matter as can be seen by the recent judgments given by the Court of Appeal in Cantrell & Ors v AIB & Ors  IECA 217 (Belfry case) and by the High Court in Noble v Bonner & Ors  IEHC 590.
In the Belfry case the investor plaintiffs brought a claim arising from a bank promoted property investment scheme known as the "Belfry Funds". It was central to the plaintiffs' claim that they were not made aware of loan to value ("LTV) covenants and the possible impact on their investments if the value of the investment fell below a particular amount. If this happened there would be a deemed automatic default and crystallisation of the bank's floating charge.
Timeline of claim:
- 2002-2006: Investments were made by hundreds of investors
- August 2008: Investors informed of a decrease in value
- September 2009: Investors made aware of the LTV covenants
- 2012: Assets were sold off at a loss
- 2013: Investors told that once sales were completed, their investments would cease to exist.
- August 2014: Proceedings issued against the defendants
The High Court held that the investors were not statute barred for claims in negligent misstatement and misrepresentation but the bank and Belfry director defendants appealed to the Court of Appeal (CoA).
Court of Appeal Clarifies?
The CoA sought to clarify "manifest" as per the recent Supreme Court decision in Brandley v Deane (see our previous article on this here). The CoA held that Brandley was not limited to property damage claims but could also apply to financial loss claims.
"Manifest" is the date on which the damage was capable of being proved, even if there was no reasonable or realistic prospect of that being done. The CoA held that damage can occur without it being apparent to any person but that the difficulty with the word "manifest" is that it seems to import some element of knowledge of damage. The plaintiffs argued that the cause of action did not accrue until August 2009 when they became aware of the LTV covenants and that was the date that the damage was manifest.
The CoA held that the damage suffered was the inclusion of the LTV covenants in the borrowing. When the borrowings were made there was a defect which was not latent but was capable of being discovered on enquiry – i.e. it happened at some stage after the investments were made and before the properties were purchased. Given the number of investments, the precise date was unclear but the CoA found it was "well outside" the six year time limit and therefore statute barred.
The CoA did emphasise the need to assess facts carefully in any financial loss claim and to consider whether the reason for the loss was due to market conditions or a negligent act.
No Uniformity Reached Post Belfry
Just twelve days after the Belfry decision, the High Court considered similar issues in Noble v Bonner. The plaintiff took a claim against his former solicitors for negligence arising from the exercise of an option agreement in 2005. A different entity in the same company structure purchased lands in 2005 than the entity provided for in the option agreement. A receiver was later appointed and royalty payments ceased in 2013. The plaintiff asserted that he suffered loss when the royalty payments ceased.
The High Court considered both of the previous Supreme Court decisions in ACC v Gallagher (discussed previously here) and Brandley and held that the decision of Gallagher remains the relevant jurisprudence to be applied. The Court held that the limitation period was to be calculated from when the loss occurred in 2005 when the wrong entity purchased the lands. The damage was capable of being discovered and capable of being proven at that point and the plaintiff could have taken an action against his solicitors for negligence from this point onwards.
Need for Clarity and Consistency
Despite the outcome for both cases being that the claims were statute barred it is still an unsatisfactory position. There needs to be a harmonised approach in this area to create greater consistency and clarity for both individuals and businesses in determining the date on which a claim or liability begins in the area of financial loss.