The Supreme Court has ruled that Patrick Gallagher’s negligence claim against ACC Bank over a €500,000 investment product was brought outside the six-year limitation period.
Gallagher invested €500,000 in ACC Bank’s Solid World Bond 4 in 2003. Crucially, he borrowed the full investment sum from the bank under a loan running for the same five-year-and-eleven-month term as the bond.
His case was that the combined “borrow to invest” arrangement had been mis-sold and was wholly unsuitable because the investment would have needed to substantially outperform the market to cover the loan interest and leave him with a meaningful return.
The bond guaranteed repayment of the €500,000 invested and provided exposure to gains in a basket of ten shares. Gallagher could not withdraw from the investment before maturity. He ultimately paid about €41,000 in loan interest and claimed that interest as his loss.
The key legal issue was when his negligence claim arose. A tort claim has a six-year limitation period beginning when the cause of action accrues. In negligence, that requires both a wrongful act and actual damage.
The High Court had held that Gallagher suffered only a contingent loss when he bought the bond, so time did not begin to run until a financial loss later crystallised.
Mr Justice Fennelly disagreed. He held that Gallagher’s own pleaded case was that he should never have entered the transaction at all. The alleged damage therefore arose immediately when he took on the loan and bought what he claimed was a wholly unsuitable product.
The court rejected the idea that a mere possibility of future loss will always be enough in financial negligence cases. However, it distinguished that general principle from Gallagher’s particular claim, where the alleged disadvantage was inherent in the transaction from the outset.
Because proceedings were not issued until June 2010, more than six years after the 2003 investment, the Supreme Court allowed ACC Bank’s appeal and held the negligence claim statute barred.