High court judgment/Cuttle -v- ACC Bank PLC
Neutral Citation IEHC 105
High Court Commercial
Judgment was delivered on March 30th, 2012, by Mr Justice Kelly
Judgment
Permission was granted to a plaintiff claiming mis-selling of a financial product by ACC Bank to amend his statement of claim to include a claim of fraud on condition that if he failed in this claim, he would have to bear the costs of this element of it, regardless of the outcome of the rest of the action.
Background
Patrick Cuttle was one of hundreds of people suing the bank arising out of investment in a financial product called the Solid World Bond 5, marketed and produced by the bank. He was one of a large number seeking to amend their statements of claim to include a plea of fraud against the bank.
The opening lines of the promotional material for the bond asked where an investor could get a 100 per cent secure investment linked to 85 per cent uncapped return, for a minimum investment of €2,500 for a five-year, eleven-month term.
Mr Justice Kelly pointed out that this was a relatively low-risk matter for a person with funds to invest for almost six years. However, it was a different matter for a person who borrowed to invest. If the investment did not perform as expected, the interest on the loan would have to be paid, which would be costly to the investor. That is what happened to Mr Cuttle and many other investors in the bond.
Mr Cuttle alleged that representations were made to him to induce him to borrow money to invest in the bond, and he entered into a loan agreement to borrow €100,000 to invest. He claimed that the bank breached various duties and contractual terms, causing him to enter into transactions that were unsuitable, resulting in loss and damage. The bank filed a defence, and discovery was made of documents.
This prompted the plaintiff to seek to amend his claim to include a claim of fraud. He alleged that the documents showed the bank knew the product was unsuitable, showing that the Irish Financial Services Regulation Authority informed the bank that it could not promote the “lend to invest” arrangement; the bank received legal advice that it could not encourage staff to borrow to invest in it; and its compliance adviser had also stated that it could not be promoted as a borrow-to-invest product. Yet, the plaintiff claimed, the bank actively promoted the product as a borrow-to-invest product.
The bank denied this, stating only that it was willing to lend money to customers to invest in the product provided they met eligibility criteria. It said there was no factual basis for the application to amend the claim; the amendments were no more than an artificial construct created by the plaintiff’s lawyers and Mr Cuttle had made no case himself.
Decision
Mr Justice Kelly pointed out that he had jurisdiction to permit the amendment of the statement of claim, according to rules established by previous case law, based on the idea that justice is best served if the real matters in dispute between litigants are brought before the court.
It was not the task of the court to adjudicate on the merits of the proposed amendments or speculate as to their likelihood of success at trial. The question was – would these amendments survive an application that they be struck out as having no reasonable prospect of success?
While there was no plea of fraud in the initial statement of claim, some of the allegations of wrongdoing went very far, he said, including allegations of recklessness, negligence and deliberate misleading of the plaintiff. If fraud had been pleaded in the original statement, it would not be possible to strike it out as doomed to failure, in the light of the documents disclosed in the bank’s discovery. This was not a guarantee of the likely success of the action.
The application required a low threshold of proof and this had been achieved. In permitting the amendment, he set the condition that if the claim was amended and the fraud element failed at trial, irrespective of the outcome of the rest of the trial, the plaintiff would have to bear the costs of the fraud element.
The full judgment is on courts.ie
Marcus Dowling BL, instructed by Lavelle Coleman, for the plaintiff; Maurice Collins SC and Brian Kennedy BL, instructed by Goodbody, for the respondent