In April of this year the High Court ruled on a certain questions arising out of claims related to losses sustained by investors in the Belfry property funds promoted by Allied Irish Banks in the early to mid-2000’s. 300 investors initiated legal proceedings seeking to recoup losses sustained when the Belfry funds collapsed. Mr Justice Haughton was asked to determine, as a preliminary issue, whether the claims were barred by the Statute of Limitations, 1957 by reason of the lapse of time before the legal proceedings were initiated.
The leading judgment on this issue in an investment dispute context is that delivered in the Supreme Court by Mr Justice Fennelly in Gallagher v ACC Bank plc  IESC (“Gallagher”). In that case Mr Gallagher sued ACC to recoup losses incurred as a result of investing in the “Solid World Bond” which had been marketed and financed by ACC in 2003. The Supreme Court held that Mr Gallagher’s claim was statute barred because time began to run from the time of making of the investment. This was because the Court found that Mr Gallagher’s claim concerned the inherent features of the bond – which were unsuitable from the outset of the investment i.e. from the moment Mr Gallagher invested €500,000 in the bond. Since the proceedings had been initiated more than six years after the €500,000 had been invested the claim was statute barred.
In his judgment in Gallagher, Mr Justice Fennelly was careful to point out that Gallagher fell to be determined on its own particular facts. He acknowledged that a different approach might be adopted in relation to other kinds of failed investment where, for example, the claim arose from mis-management, as opposed to misselling of the investment funds.
In the Belfry fund proceedings Mr Justice Haughton referred to the Supreme Court’s decision in Gallagher and distinguished the Belfry fund proceedings from the Gallagher decision on the facts involved. Mr Justice Haughton ruled that many of the claims were indeed statute barred, for instance the breach of contract claims and negligence claims arising on foot of alleged short-comings in prospectuses and claims arising on foot of alleged negligent advice concerning the suitability and level of risk involved in the funds. He also found that the mismanagement and breach of trust/fiduciary duty claims were statute barred. However, he did find that certain aspects of the claims were not statute barred - for instance, the claims that there was a failure to advise investors about certain aspects known as “loan to value covenants” which could have had an impact on how the funds would be managed in the event that assets fell below a certain value.
Both Gallagher and the Belfry fund proceedings are instructive on the issue of how the law will view the time when loss is deemed to have occurred and when a claimant will be deemed to have a cause of action. They are also a reminder that there is no “one size fits all” rule for determining how such cases will be decided when the Courts are faced with the question of whether an investment claim is statute barred.