Gallagher -v- ACC Bank Plc And The Implications For Claim Periods Under The Statute Of Limitations

Executive Summary

The Supreme Court's unanimous ruling in Gallagher v ACC Bank [2012] IESC 35 delivered by Fennelly J (the "Gallagher Case") has to some extent clarified the rules governing the time within which claimants must institute negligence proceedings in respect of financial loss. Broadly speaking, the claim must be brought within 6 years of the date on which the alleged loss occurred. Time may not begin to run however where there is only a "mere possibility" of loss in a case until such time as that loss materialises.

In the Gallagher Case, the Supreme Court held there was an "immediate loss" upon entering the particular investment which was alleged to be inappropriate from the outset and consequently time began to run from that point. However, it acknowledged that this would not necessarily be the case in respect of different types of investment product where mismanagement or deviation from investment strategies is alleged. In such cases, the cause of action may accrue and time may begin to run subsequent to entering into the investment.

Background to the Gallagher Case

Mr. Gallagher (the "Plaintiff") sued ACC Bank plc ("ACC")in June 2010 more than 6 years after he invested €500,000 in a 5-year 11- month capital-guaranteed investment, namely the Solid World Bond 4 (the "Bond"), which was marketed and financed by ACC in October 2003. The Bond guaranteed a 100% return of the amount invested linked to 80% of any net increase in the value of a pre- selected basket of shares. The Bond could not be encashed during the term and no withdrawals were permitted until maturity.

The Plaintiff contended that he was induced by the negligence of ACC to invest in this "borrow to invest" product which was wholly unsuitable for him or any other investor as it was unlikely from the outset that the Bond would sufficiently outperform the market as required to offset the cost of the loan transaction. The Plaintiff claimed he would not have entered the transaction but for the alleged negligence and misrepresentations of ACC and accordingly claimed loss in the amount of the interest paid by him on the loan transaction (some €41,000) as the performance of the basket of shares over the term of Bond was ultimately insufficient to pay same.

ACC denied wrongdoing but also argued the Plaintiff's claim in tort could not proceed on the basis it was statute-barred as it had been brought more than 6 years after the investment was made.1 In the Commercial Court...