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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Wildgust & Anor v. Governor and Company of Bank of Ireland & Anor [2001] IEHC 225 (17 August 2001) URL: http://www.bailii.org/ie/cases/IEHC/2001/225.html Cite as: [2001] IEHC 225 |
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THE HIGH COURT
1993 No. 5275P
BETWEEN
HAROLD WILDGUST
AND
CARRICKOWEN LIMITED
PLAINTIFFS
AND
THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND
AND
NORWICH UNION LIFE INSURANCE SOCIETY
DEFENDANTS
Judgment of Mr. Justice Frederick Morris delivered on the 17th day of August 2001
The Proceedings to date
This matter came before the Court and was at hearing for seven days in July 1998.
On the 23rd July 1998 a compromise was reached between the Plaintiffs and the First Named Defendant as a result of which the proceedings against that Defendant were struck out with no Order as to costs.
At the conclusion of the Plaintiffs evidence against the Second Named Defendant Counsel on behalf of the Second Named Defendant sought a non suit and on the 28th July 19981 delivered Judgment on that Application. In the course of that Judgment I said "I am satisfied that the Plaintiffs have adduced evidence before the Court which if accepted could lead the Court to the conclusion that the enquiry made of the Norwich Union on the 22nd April by Mr. O'Hanlon was made by Hill Samuel in their capacity as Agents for Mr. Wildgust and his Company and that the making of a negligent misstatement to Hill Samuel equated in all respects to the making of the statement to the Plaintiffs." I therefore refuse the Application for a non suit.
In the course of the Application for a non suit Counsel on behalf of the Second Named Defendant objected to the manner in which the Plaintiff had pleaded the case and submitted that insofar as the Plaintiff had any case to make (and he denied that he had such a case) it lay in negligent misstatement broadly based on the Hedlev Byrne v Heller principle. He submitted that no such case was pleaded. He submitted that it would be unjust in the circumstances to allow the Plaintiff to maintain such a case at that stage because had he appreciated that this case was to be made then his approach to the case and that of his clients might well have been different.
I took the view that the case as pleaded did not adequately identify the cause of action as negligent misstatement. However in the interests of justice I directed that the Plaintiff be permitted to amend the Statement of Claim so as to adequately plead this cause of action.
From that Ruling the Plaintiff appealed to the Supreme Court and by Order of the Supreme Court of the 3rd April 2000 it was ordered that the Plaintiffs appeal be allowed insofar as it awarded the Second Named Defendant the cost of the action to date but it ordered nevertheless that the Plaintiff deliver an amended Statement of Claim in accordance with my Judgment that is to say so as to adequately plead the claim under negligent misstatement. The Court further directed that the matter be referred back to me to continue the hearing.
Accordingly the hearing of this matter before me recommenced on the 10th July.
The Facts of the Case
There is only one matter of fact in issue between the Parties which I shall identify in due course. In my Judgment of the 28th July 19981 summarised the facts as follows:
The First Named plaintiff is a business man and is the principal if not the sole shareholder in the second-named plaintiff company. That company, Carrickowen Limited was incorporated for the purpose of holding two commercial units in Industrial Estates in Coolock. The First Named plaintiff ("Mr. Wildgust") and his late wife wished to create an arrangement whereby they would sublet smaller units within these commercial units at a rent sufficient to pay the mortgage on the property and thereby create a pension fund for themselves. With this intention they applied for and obtained from Hill Samuel Merchant Bankers a loan of £215,000 (which sum was subsequently increased by an additional £50,000) which loan was secured by the primary security of a mortgage over the property in favour of Hill Samuel and was backed by a personal guarantee from Mr. Wildgust and the late Mrs Wildgust. As an additional secondary security Mr and Mrs Wildgust were required to obtain and assign to Hill Samuel a policy of insurance on their joint and several lives. All of these transactions were satisfactorily carried through.
Mr. Wildgust put in place an arrangement whereby the rents of the tenants occupying the sub-units were paid direct, in the first instance, into a company account with Allied Irish Banks but this arrangement was subsequently changed to one whereby the rents were paid into a company account in the Bank of Ireland at their Ballsbridge branch and arrangements were made with the bank that the premiums on the life policy were to be discharged to Norwich Union by direct debit The premiums were due monthly on the 23rd of each month.
A breakdown in the system occurred as a result of which the direct debit payment due on the 23rd March, 1992 was not paid. Mr. Wildgust held the Bank of Ireland responsible for this fact. They were accordingly joined as defendants in the present claim however after the hearing had progressed for some days a settlement was reached between Mr. Wildgust and the Bank of Ireland as a result of which they were struck out of the case.
Because of the failure to discharge the premium due on the 23rd of March, 1992 the Life Policy lapsed. The late Mrs Wildgust died on the 1st of January, 1993. The amount payable under the terms of he policy on her death was not paid as the Norwich Union claimed that the policy had lapsed. Mr. Wildgust brings this action to enforce payment of that amount and claims that as a result of withholding payment consequential loss has been suffered by him and by his company.
The issue of fact which gives rise to this action is as follows:
It is alleged that a Mr. Kevin O'Hanlon who was the Manager of Hill Samuel became aware of the fact that there had been a breakdown in the payment of the direct debit to the Norwich Union Insurance Company by the Bank of Ireland because Hill Samuel were among the persons to whom default notice was sent. He says that he telephoned Mr. Wildgust to enquire about payment of the premium and was told by him that the premium had been paid. Subsequently he says that he telephoned the Norwich Union on the 22nd April 1992 to enquire about the payment of this direct debit and he was told that the cheque for the premium had been received and that everything was "correct and in order." He says that in reliance upon this he took no action. In fact the premium had not been paid. He said that if he had known that the premium remained unpaid then it would have been paid by Hill Samuel in order to keep the policy alive. He said that he is sure that this would have occurred particularly in view of Mrs Wildgust's ill health. It is alleged on behalf of the Plaintiff that the information given to Mr. O'Hanlon constituted a negligent misstatement of fact as a result of which the policy was allowed to lapse and the Plaintiff has suffered loss and damage.
It is denied on behalf of the Norwich Union Insurance Company that the telephone call described by Mr. O'Hanlon or any such call was ever made.
Accordingly I am satisfied that as a preliminary issue of fact I must determine whether the Plaintiff has satisfied me that on the balance of probabilities such a telephone call did take place and that such an assurance was given to him by the Norwich Union. In the event of me being satisfied that such a conversation did take place then the second issue is to determine the Plaintiffs rights in these circumstances.
With regard to the issue of fact I now propose to summarise the relevant evidence.
Mr. Kevin O'Hanlon was in the employment of Hill Samuel between 1982 and 1993. At the relevant time he was Manager of the Merchant Bank and became familiar with the commercial mortgage granted to the Second Named Defendant while he was in the bank. He was aware that an advance of £215,000 was originally made and this was secured by Mr. & Mrs Wildgust's personal guarantees and an assignment of a life insurance policy on the lives of Mr. & Mrs Wildgust with the Norwich Union Insurance Company. Subsequently the mortgage facility was increased to £275,000. He was aware of an arrangement put in place by Mr. Wildgust for the payment of premiums on the life policy through the Bank of Ireland by way of direct debit. He informed the Court that it is common practice for a Banker in the position of Hill Samuel if they became aware of a default on the payment of a premium which might result in a policy lapsing that the bank would themselves pay the premium.
On the 3rd April 1992 Hill Samuel received a direct debit breakdown advice indicating that a premium of £227.25 due on the 23rd March 1992 was unpaid. Upon becoming aware of this fact Mr. O'Hanlon says that as Account Manager he referred the matter to Senior Management and after discussing it with his superiors he contacted Mr. Wildgust informing him of the breakdown in payment. He says that when he contacted Mr. Wildgust and was informed by him that he, Mr. Wildgust had forwarded a cheque to the Norwich Union to keep the policy in order and he said that on the 22nd April 1992 he telephoned the Norwich Union to confirm that the cheque had been received and that everything was in order. He says that the Norwich Union confirmed that this was so. He says that he has no doubt that if he had known that the premium was not paid arrangements would have been made for Hill Samuel to pay the premium to prevent the policy lapsing. This was of particular importance as Mrs Wildgust had been diagnosed with cancer.
Mr. O'Hanlon has no personal recollection whatever of this transaction nor the telephone call and gives evidence entirely from the contemporaneous note that he made on the 22nd April 1992 which appears on his file and which he has signed. Mr. O'Hanlon ceased in the employment of Hill Samuel in October 1993.
The Defendants deny that any such conversation ever took place between Mr. O'Hanlon and any member of their staff. They have offered the evidence of Mr. Owen Byrne who was in 1992 Operations Director of the Norwich Union Life Insurance Company and Ms Betty Tuite who is and was at the relevant time the Manager of the Premium Collection and Agency Department. Her evidence may be summarised as follows:
She says that there are different sections within the Premium Collection Unit but in the Direct Debit Section there were approximately four people who were answerable to her. She says that these operatives are skilled and experienced people who were fully trained.
She says that there is and was at the relevant time a system whereby if an enquiry came through into the section, such as would have happened in Mr. O'Hanlon's case, the operatives who received the enquiry would write it down on an action slip which would be sent to the Image Department. This action slip would be scanned and the enquiry would be recorded in the image departments.
In addition the enquiry would be electronically entered on the screen and would be recorded and available on, in this case, Mr. Wildgust's screen. She informed the Court with considerable emphasis that this system is absolutely reliable and is universally adopted. She says that she has checked and is in a position to inform the Court that no record of any such enquiry exists on the computer records or in the Imaging Department. She does not admit of the possibility that any such enquiry was ever made.
In determining this issue of fact I believe that there are two significant factors to which I should have regard.
In the course of cross examination it emerged that the Norwich Union Premium Collection and Agency Department was contacted by the Norwich Union Dun Laoghaire Branch with a request that the default direct debit be relodged for payment. Nowhere on the Norwich Union computer records or in the image department is this request or telephone conversation noted otherwise than by manual note entered on the unpaid direct debit. It should have been if the system described was as foolproof as suggested by the Defendants. They explain this fact by referring to the manuscript note on the unpaid direct debit. However, I do not accept that as a satisfactory explanation for what has been described as a completely foolproof system of noting.
I am satisfied that even though there existed a thorough and business like procedure for noting enquiries it was not incapable of error and it would have been possible for Mr. O'Hanlon's enquiry not to have been entered in the system.
The second point is this. There exists and has existed on the Hill Samuel file since the 22nd April 1992 a memorandum or "file note" signed by Mr. O'Hanlon confirming the fact that on the 22nd April such a conversation took place. Mr. O'Hanlon has no financial or other interest in this transaction to provide him with any motive to do otherwise than to tell the full truth. No suggestion has been made that this "file note" is other than bona fide. I can envisage no circumstances in which such a "file note" would have come into existence if the facts which they record were not correct.
Accordingly I accept as a fact that even though Mr. O'Hanlon has no direct recollection of this transaction such an enquiry was made of the Norwich Union and I accept that Mr. O'Hanlon was given the assurances in the terms which he has told the Court.
That being so it is necessary to consider what rights, if any, the Plaintiffs acquire as a result of the Norwich Union's misstatement of fact made to a representative of Hill Samuel.
I believe that it is necessary and relevant to summarise the evidence given by Mr. Wildgust. Having described the various transactions involved in the acquisition of the property he then described the raising of finance for the transaction with Hill Samuel Limited. This was secured then inter alia with the life policy on Mr. & Mrs Wildgust the premiums from which were payable monthly.
Mr. Wildgust gave detailed evidence of difficulties which he had with the loan facilities which were made available to him and his company by the Bank of Ireland which are not of any relevance to the present issues save that it emerges from the lack of attention to his dealings with the Bank of Ireland that in late 1991 and early 1992 Mr. Wildgust was apparently preoccupied by his wife's ill health and allowed his business affairs to lapse.
A premium was due to the Norwich Union on the 23rd March 1992 and default notices were sent by the Norwich Union to Hill Samuel and Mr. Wildgust in respect of that default. Mr. Wildgust says that he never received this default notice. He claims there should not have been a failure on the part of the Bank of Ireland to pay the direct debit because he had at that time renegotiated overdraft arrangements with the Bank of Ireland which he believed provided him with the facility for meeting such payments. The first notice that he had that the premium due on the direct debit of the 23rd March 1992 was not paid was in the latter half of the month of June. This delay was due to the bank strike and the postal strike which finished at that time. He said "If I had found out before, I would have paid the money straight up." He said that between the 23rd March and the end of June he received no communication from the Bank of Ireland in relation to the direct debit nor did he receive any communication whatever from the Norwich Union in relation to the return of the direct debit. It was after June and probably around August that he had communication with the Norwich Union about the direct debit. He says that around the 8th, 9th or 10th April he had a telephone conversation with Mr. O'Hanlon of Hill Samuel. He said that Mr. O'Hanlon told him that the direct debit had not been paid and that he told Mr. O'Hanlon that he had sent a cheque to cover it. This was a reference to a cheque for £681.75 which he believed was to be held by the Bank of Ireland in reserve to meet a contingency such as this. In fact he did not know then but now knows that this reserve was not available because that cheque was returned.
I am of the view from the totality of Mr. Wildgust's evidence that he became aware that the policy had lapsed at the end of June 1992 when he got his statements.
What emerges from Mr. Wildgust's evidence is:
(a) At no stage up to the time when the policy lapsed was Mr. Wildgust aware of the telephone conversation between Mr. O'Hanlon and the Norwich Union or of any information given to Mr. O'Hanlon by the Norwich Union
(b) Mr. Wildgust believed at all times that the Bank of Ireland were in sufficient funds or otherwise obligated to him to discharge the direct debits due to the Norwich Union as premiums on the policy.
(c) At no stage did or could Mr. Wildgust have placed any reliance upon any statements made by the Norwich Union to Mr. O'Hanlon.
The Law since Ward v McMaster & Glencar Exploration plc and Andaman Resources pic, Applicants and the County Council of the County of Mayo, Respondents
Since I delivered Judgment on the application for a non suit on the 28th July 1998 the Supreme Court has considered the law in this Jurisdiction having regard to the decision of the Supreme Court in Ward v McMaster & Glencar Exploration plc and Andaman Resources plc Applicants and the County Council of the County of Mayo Respondents.
In his Judgment delivered the 19th July 2001 (unreported) Chief Justice Keane considered the approach of McCarthy J. in Ward v McMaster and contrasted it to what he described as the more cautious approach favoured in Caparo Industries plc v Dickman and Sutherland Shire Council v Heyman and having done so, summarising the law had this to say:
"There is in my view, no reason why courts determining whether a duty of care arises, should consider themselves obliged to hold that it does in every case where injury or damage to property was reasonably foreseeable and the notorious difficulty and elusive test of "proximity" or "neighbourhood" can be said to have been met, unless very powerful public policy considerations dictate otherwise. It seems to me that no injustice will be done if they are required to take the further step of considering whether, in all the circumstances, it would be reasonable that the law should impose a duty of a given scope on the Defendant for the benefit of the Plaintiff, as held by Costello J. at first instance in Ward v McMaster, by Brennan J. in Sutherland Shire Council v Heyman and by the House of Lords in Caparo Industries plc v Dickman. As Brennan J. pointed out there is a significant risk that any other approach will result in what he called a "massive extension to aprimafacie duty of care restrained only by undefinable considerations"
With this Judgment the remainder of the Supreme Court were in agreement.
Accordingly when McCarthy J. said in Ward v McMaster
"Whilst Costello J. essentially rested his conclusion on the "fair and reasonable " test, I prefer to express the duty as arising from the proximity of the Parties, the foreseeability of the damage and the absence of any compelling exemption based upon public policy. "
This is no longer the full test. I must add the further factor of asking myself "is it just and reasonable that the law should impose a duty of a given scope on the Defendant for the benefit of the Plaintiff?" I am satisfied that this is the appropriate test in cases where negligent misstatement is alleged.
It is submitted on behalf of the Plaintiff by Mr. Bradley S.C., that it is unrealistic to attempt to separate the coinciding interest of Hill Samuel and the Plaintiff since each had an identical and corresponding interest in ensuring that the policy remained in place and accordingly a misrepresentation made to Hill Samuel must, he submits, prejudice Mr. Wildgust since without this misrepresentation the policy would have been renewed by Hill Samuel.
In my view the one major insurmountable difficulty for the Plaintiff is that at no stage did he, Mr. Wildgust become aware of the fact that the misstatement had been made by the Norwich Union nor did he place any reliance upon it. He was not misled by the misstatement because he was not aware of it. He was not prejudiced by it. It was not until two months later that he became aware of the fact that the premium had not been paid. In my view the misstatement in no way influenced or contributed towards the conduct of the Plaintiff. It did not influence him or cause him to act to his detriment. I do not believe that it would be reasonable that the law should impose a duty on the Defendant for the benefit of the Plaintiff in these circumstances. In my view to do so would, as Brennan J., said in Capara Industries Limited plc v Dickman be a "massive extension of a prima facie duty of care" which is not my understanding of the law in this Jurisdiction.