Supreme Court dismisses plaintiff's tort claim barred by limitation period as cause of action accrued at investment date.

THE SUPREME COURT

433/11

Denham C.J.

Murray J.

Fennelly J.

O’Donnell J.

McKechnie J.

Between:

Patrick Gallagher

Plaintiff

AND

ACC Bank Plc.

Trading as ACC Bank

Defendant

JUDGMENT delivered the 7th day of June, by O’Donnell, J.

1 I fully agree with the decision and judgment of Fennelly J. in this matter. In particular I agree that the Irish Courts should approach

the foreign jurisprudence, and particularly that of the English courts, on accrual of a cause of action with considerable caution in the

light of the different statutory context. While in general I agree that many areas of law have been illuminated by close and refined

analysis, I respectfully doubt that some of the distinctions made in this area and in particular that between “transaction cases” and

“no transactions cases” are of particular utility. That seems to me to be a matter of characterisation of a claim rather than something

intrinsic to it. I do not think that there is anything to be gained from making the process of pleading in this area even more hazardous

(and less clear) than it already is. In truth, since nearly all of these types of cases arise out of contractual relations, they can be said

to be transaction cases in one form or another. I also fully agree with Fennelly J. that in the absence of any clear principle, these

cases are best dealt with on an incremental basis closely related to the facts of the individual case. Since it is likely therefore that

the issue will recur, and since the subject is a matter which should be the subject of broader debate and consideration, it may be

useful to add some general observations the issue raised by this case, and in particular to explain why I would respectfully differ from

Fennelly J. on the question of whether, where possible, Courts should seek to reduce the differences in limitation periods for causes of

action in tort and in contract ,when they arise out of the same set of facts.

2 The reason I venture to suggest, why much of the learning industry and fine judgment applied to this question has not produced a

coherent and acceptable principle, is that the only and rather esoteric tool available to the Courts – the decision as to the date on

which damages occurs and therefore on which a cause of action in tort (at least one which is not actionable per se) accrues – is

very imperfectly adapted to deal with the problem of when a cause of action against a business or individual providing investment or

other advice should become barred, particularly when the client may have little reason to know that a wrong has been done. In truth

it is only fortuitous if a decision on the technical question of the date of accrual of the cause of action could provide a just solution

to that problem.

3 It is for me a striking feature of this case that the accepted starting point for the analysis is that the plaintiff’s claim in contract is

statute barred because the alleged breach (which is also the foundation of the claim in tort) occurred more than six years prior to the

commencement of this claim. Not only is there a similarity between the claim in contract and tort made here, they are in fact

identical. The same facts are repackaged as a claim in contract, negligence, and negligent misstatement. The pleadings do not

distinguish between those claims. Instead, the same acts are pleaded as “particulars of wrongdoing” and no distinction is made

between the legal nature of the wrong alleged.

4 It is also fair to say I think that the cause of action in contract is in truth the central and primary claim here. Indeed, there was a

time not so long ago and certainly at the time the relevant provisions of the Statute of Limitations 1957 were enacted, when the

contractual claim would have been regarded as the only possible cause of action arising on the facts here. Even today, it is the

contract which creates the relationship giving rise to the Hedley Byrne obligation to take care in the provision of advice, and the

terms of contract could control limit, or even negative any such duty. Once again, if there is a separate duty of care in negligence

alone, then it is the contract which creates the proximity between the parties which gives rise to the duty of care. Again it follows

that the bank could in this case by an appropriately drafted provision reduce, limit or altogether negative such a duty of care.

Fundamentally it is the agreement between the parties embodied in the contract which establishes the rights and obligations they

each undertook and in particular the extent of liability which the bank in this case accepted. Accordingly, on one point of view, if

there is a case that the limitation period here operates too harshly then that argument should also apply in relation to the contractual

claim, and a public policy decision should be taken by the Oireachtas on that issue taking into account all the competing interests. If

on the other hand it is considered acceptable that the plaintiff’s claim in contract should be barred, then there should be little

objection if the tort claim arising out the same facts is also now too late to be commenced. In any event it would be a matter of pure

chance if the rules on accrual of a cause of action in tort could produce a just result for claims arising from modern day conditions,

including causes of action in tort unknown when the rules of accrual were themselves developed, and derived in turn from even more

ancient distinctions normally of interest only to the legal historian.

5 Accordingly, at a level of principle I would see some merit in the approach advocated by Lord Nicholls in Nykredit Mortgage Bank Plc

v Edward Erdman (No. 2) [1997] 1 WLR 167, and adopted by the bank in its submissions in this case, that where appropriate the

policy of the law should be to minimise rather than expand the disparity between the running of time in contract and tort cases, at

least when the wrongdoing alleged is identical. In my view this is not a question of approaching the interpretation of an Act of the

Oireachtas by reference to policy considerations. If the Oireachtas had reached an advertent conclusion on the question as to when

causes of actions in respect of latent financial loss could be brought, then this case would be much simpler. The only choice the

Oireachtas made however was to maintain the principle that time starts to run, both in contract and tort, from the date upon which a

cause of action accrues. That choice if it was made by the Oireachtas was made when the type of tort liability now contemplated

was unknown. The question for this Court is when did the cause of action in tort accrue. That necessarily involves consideration of

precedent, and analogy with other tort claims, and unavoidably to some consideration of policy. This Court is asked to choose

between different possible dates for the date of occurrence of damage, and thus the accrual of a cause of action. That choice

necessarily involves some consideration of policy. The suggestion that contract and tort should where possible offer the same

answers to the same question is not simply a case of seeking an unobtainable elegance of pattern: rather it is a question of seeking

to achieve a fair and predictable result. In this regard I regard it as significant that if the plaintiff is correct that the cause of action

in tort accrues only when the investment period terminates and the investment has failed to out perform the interest paid, then,

where an investment term is of 6 years or more, the cause of action in tort could only accrue when the cause of action in contract

was barred. In theory a wronged plaintiff should be able to maintain all claims arising out of the same transaction but that would only

be possible on this hypothesis by initiating the contractual claim, then delaying it, and then seeking to amend it to include the tort

action alleged to have accrued. Even more oddly, if as was suggested in argument in this case, the cause of action in tort might

accrue at a point during the investment period when, to use a phrase fraught with its own difficulties, it was clear that the

investment was doomed to fail, then it would follow that that point could only be determined with certainty after the case had been

fully heard and decided. Since a claim cannot be initiated until a cause of action has accrued, then at least in theory a plaintiff runs

the risk of being non suited if it were determined that the cause of action had not accrued at the time the claim commenced. The

plaintiff in addition to the risks of starting a claim too late, would now also face a real risk of having started the claim too early, and

would not know for sure until the case was determined. That would turn the process of initiation of claims into a form of litigation

Russian roulette, and is a conclusion which I would only accept if driven to it by a clearly expressed legislative choice, or by settled

precedent.

6 It might be said that even if policy considerations come into play, then the policy of permitting a plaintiff to pursue a claim should

prevail. Quite apart however from the other policy considerations (such as certainty, predictability, fairness to defendants and the

desirability of early determination of controversies) which justify limitation periods, there is also the consideration that the adaptation

of tort claims to a contractual setting necessarily risks having a distorting effect on the law, and more importantly spreading liability,

and therefore cost, more widely than is desirable. If for example a duty of care in tort is held to arise in a situation of a bank offering

a product to its customer, then it must follow that the same duty is owed whether or not a contract exists, and indeed when advice

in relation to such product is offered even gratuitously. That may well be the case, but the whole question of when a duty of care

arises to avoid pure economic loss is a difficult one on its own terms, and should not be influenced by the perceived defects of the

limitation regime.

7 The earliest reference to the undesirability of having radically different limitation periods for claims in contract and tort arising out of

the same set of facts and alleging the same facts as wrongdoing, of which I am aware, is the judgment of Mustill LJ (as he then was)

in Société Commerciale de Réassurance v ERAS (International) Ltd., [1992] 2 All ER 82, where he said that the different treatment for

limitation purposes between claims brought in contract or tort is already unsatisfactory because, “(1)Whatever the legal logic the fact

that claims in tort and in contract between the same parties arising out the same fact become time barred and dates which may

well be years apart offends common sense; (2)The existence of different rules for what may really be the same claims forces the

law into unnatural complications. Whatever the historical justification for holding that there are concurrent rights of action in

contract and tort, nobody we believe would trouble nowadays to insist on the difference, but for the fact that one form of a claim

(usually the one on tort) offers procedural advantages. This is not a sound basis for the development for practical and self

consistent law of negligence (3) so far as limitation is concerned, the rules regarding the accrual of the cause of action tend to push

the evolution of substantive law in the wrong direction. In most if not all cases the plaintiff would be better off by framing his

actions in tort, whereas, in our judgment, if a contract is in existence this is a natural vehicle for recourse.”

8 Similar issues have arisen in the field of damage to property and the liabilities owed in tort by builders to subsequent purchasers and

indeed the liabilities of subcontractors in tort to clients. In (1993) 1 Tort L Rev 152, I Duncan Wallace Q.C. made the following

interesting observations:

“The English historical background is that, like the rest of the Commonwealth, the traditional 19th century limitation

legislation adopted accrual of the cause of action, whether in contract or in tort, as the trigger starting the limitation

period. Almost certainly unintentionally, but still ruled from the grave by the old forms of action while the new tort of

damage to property was developing out of contract at the turn of the century, the statutory language produced a much

earlier starting date for contractual negligence than for negligence if now framed in tort. …

… As a result plaintiffs claiming under the Hedley Byrne principle rather than in contract will enjoy additional substantial

limitations advantages over cases brought in contract in England, producing the paradox the result that the relationships

for the contract that justifying a claim under Hedley Byrne will enjoy much greater limitation periods than a claim under

full contract would do …

…Whether or not other jurisdictions decide to follow Murphy, the existence of the potentially wide range of new

economic loss claims under the Hedley Byrne doctrine calls , it is suggested, for a radical reappraisal of the limitation

legislation in common law countries first to eliminate differences between contract and tort, and secondly to provide a

more equitable regime where in the absence of fault on a plaintiffs part, apart from the very old claims, on strong policy

reasons, he should not be deprived of a claim of which he has no reason to be aware.”

9 In my view, the focus should be on legislation in the shape of a revised statute of limitations, rather than on judicial decisions on

the question of accrual of a cause of action. If there is a perceived inadequacy in the current rules, particularly those to be applied

to claims of defective professional advice giving rise to claims which may only become apparent some time after the acts alleged to

have caused the wrong, then that is best, and perhaps only addressed, by a general review of the law such as that recently

recognised by the Law Reform Commission (LRC 104-2011) which suggested a short general limitation period, the possibility of

extension on grounds of discoverability, and a long stop provision after which no action could be brought. . Whether that or any other

change is desirable is best debated at the level of public policy, when all the interests concerned are involved, and when the costs of

any change in the law can be considered ,evaluated and debated. It is inherently unlikely that a satisfactory solution to such difficult

problems can be arrived at on the limited information that is available in any single set of court proceedings, and using only the rules

on accrual of a cause of action.

10 The present case must be decided by reference to its own facts. It may well be that it would have been preferable to postpone

the consideration of the limitation issue until the trial of the action. Once the issue proceeded in the High Court however it was

necessary for this Court to set out its conclusions, particularly since they differ from those arrived at by the learned High Court judge.

I agree fully with Fennelly J. that this case is a relatively simple one. The entire thrust of the plaintiff’s claim is that the investment

ought never to have been made. The plaintiff claims to have suffered a loss in the shape of a liability to interest payments which

accrued immediately and was immediately quantifiable. I have little doubt that proceedings could have been commenced earlier, and if

so, that damage could have been assessed both in contract and tort. If such a claim had been initiated and succeeded, it would I

think have been relatively easy to assess damages which in my view would have posed less difficulty than the assessment of

damages for future pain and suffering, and future loss of earnings in a personal injuries action. Looked at in one way the loss itself

was certain and quantifiable (it was the liability to interest payment during the term) and the only uncertainty was as to the credit

which might be allowed to the defendant in respect of the possible gain in value of the investment at the end of the term. That is the

type of uncertainty which would not pose significant difficulty for either the parties or the Court to devise an appropriate solution. On

the facts of this case therefore, I conclude that the plaintiff’s pleaded cause of action in tort accrued when the investment was

made, and accordingly is barred by the provisions of the Statute of Limitations.