The Supreme Court in Gallagher v. ACC Bank PLC [2012] IESC 35 clarified the rules governing the period of time within which a person who proposes to sue a bank for financial loss arising from allegedly negligent financial advice or for providing incorrect information on a product must initiate their claim. The claim must be brought within six years of the date on which the alleged loss occurred (i.e. the date of the accrual of the cause of action) but, the clock may not start running while there is only a mere possibility of a loss.
Gallagher borrowed €500,000 from the bank in 2003 to invest in a capital guaranteed bond which was being promoted by the bank. The investment lasted five years and 11 months and the bond guaranteed a 100% return on the initial investment and 85% of the net growth of the value of a preselected basket of shares.
In 2010 Gallagher initiated a claim against the bank. His essential complaint was that he was induced to purchase a combined “borrow to invest” financial product which was completely unsuitable for him or for any investor as the investment would have had to far outperform the market if he were to get any return over and above the interest he had to pay on the sum he borrowed. He argued that he would not have taken out the loan to make the investment but for the alleged negligence and misrepresentation of the bank.
The bank defended Gallagher’s claim denying any wrongdoing and arguing that the claim could not proceed in any case as it had been brought more than six years after the investment was made and was therefore, statute barred. Gallagher had brought his claim in contract and in tort in attempt to get over the issue of the limitation period.
The High Court ruled in favour of Gallagher holding that his claim was not statute barred because when purchasing the bond he did not suffer an immediate loss, but faced only a contingent one. The bank appealed to the Supreme Court.
On appeal the Supreme Court held in favour of bank ruling that Gallagher’s loss had occurred in 2003 when invested in the bond. In coming to its decision the Court noted that the investment was not to be actively managed or monitored by the bank during the life of the bond and because the plaintiff alleged that he had suffered the damage by the very fact of entering into the transaction and purchasing the bond in 2003 the Court found that the issue of when the loss occurred was straightforward. The loss had occurred when Gallagher purchased the bond in 2003 and on that basis the limitation period within which he was entitled to initiate a claim against the bank had expired by the time he brought a claim in 2010. On that basis Gallagher’s claim could not proceed.
The Supreme Court made some further observations in relation to the limitation periods in such cases. In some cases, the Supreme Court stated, that the loss might merely be a possibility at the outset. In a case involving a contingent loss, the limitation period is likely to start from the date on which the loss actually arises and not on the date of the relevant contract. In other cases loss suffered immediately although it might be difficult to assess the value or extent of the loss. However, it stated that the Courts were experienced in assessing damages in face of uncertainty and the limitation period in such a case would run from the date of the contract. This seemed to indicate a willingness to allow claims to be brought at a later time where the possibility of a loss is not certain at an early-stage.