High Court refuses application for leave to issue proceedings against Irish Bank Resolution Corporation (in Special Liquidation), partly on the grounds of delay
On 19 October 2020, the High Court refused an application seeking leave to issue proceedings against IBRC, brought pursuant to section 6 of the Irish Bank Resolution Corporation Act 2013. Under section 6, no new actions nor proceedings can be issued against IBRC without the consent of the High Court. This provision has been in effect since February 2013, when IBRC was placed into Special Liquidation by the Minister for Finance.
The ex tempore decision of the High Court was partly grounded on the delay of the Plaintiffs in advancing their claim once they became aware of the alleged basis for bringing proceedings.
IBRC was represented by A&L Goodbody in relation to the section 6 application.
The proposed proceedings and the Statute of Limitations 1957
The proposed proceedings involved allegations of fraudulent misrepresentation against IBRC (formerly Anglo Irish Bank), by two joint investors in a product that was sold by the Bank in 2005.
In general, claims of fraudulent misrepresentation are often difficult to prove because the plaintiff must show that a false representation has been made by the defendant (i) knowingly, (ii) without belief in its truth, or (iii) recklessly as to its truth. On the other hand, claims alleging negligent misrepresentation do not require the plaintiff to prove that the defendant was aware that the representation was false, or was reckless as to whether it was false.
However, under the Statute of Limitations an action in negligent misrepresentation may not be brought "after the expiration of six years from the date on which the cause of action accrued". Since the alleged misrepresentations in this case took place approximately 15 years ago, any claim of negligent misrepresentation against IBRC by the investors would have been time-barred under statute.
Where a claim is based on the alleged fraud of the defendant however, the Statue of Limitations provides that the six year limitation period does not begin to run until the plaintiff "has discovered the fraud or could with reasonable diligence have discovered it". For the purpose of their section 6 application, the investors in this case argued that they were unaware of the alleged fraudulent misrepresentation until December 2015, when it was brought to their attention by a third party.
Factors taken into account by the court in refusing the application
In an ex tempore judgment delivered by Mr Justice Brian O'Moore on 19 October 2020, the High Court denied the investors' application based on the legal test laid down in the case of Wright-Morris v. Irish Bank Resolution Corporation Ltd [2013] IEHC 385. Namely, the court was required to consider whether it would be "right and fair in the circumstances for the Court to give consent to the proposed proceedings".
In applying this test, the Judge found that:
- The investors had "just" provided sufficient details of their claim of fraudulent misrepresentation against IBRC, in the affidavits filed in support of their section 6 application.
- Notwithstanding the length of time that had elapsed since IBRC allegedly made the relevant representations about the investment product in 2005, it did not appear that granting consent to the investors' application would unfairly prejudice IBRC in the preparation for, and presentation of, its defence against the investors' claim.
However, the court ultimately did not deem these two factors to be sufficient to provide a legal basis for the investors to issue proceedings against IBRC because:
- The investors had failed to discharge the onus of showing that their claim of fraudulent misrepresentation was not time-barred under statute.
- There was considerable delay on the part of the investors in bringing the section 6 application, which was not explained to the satisfaction of the court in the affidavits filed in support of the application.
Accordingly, Judge O'Moore refused to grant the investors' section 6 application.
Note on appeals
In general, an order of the High Court refusing to grant a section 6 application may be appealed to the Court of Appeal within 28 days from the date on which the registrar signs the order.
Key takeaways
Delay in attempting to bring a claim against IBRC may result in an unsuccessful section 6 application
Mr Justice O'Moore found in favour of IBRC on the issue of whether the investors' delay in bringing the section 6 application was such that it would not be "right and fair in the circumstances for the Court to give consent to the proposed proceedings", in accordance with the relevant test.
The court accepted IBRC's argument that there was evidence suggesting that the investors had discovered the alleged fraudulent misrepresentations in or around 2012, or could with reasonable diligence have discovered them. The investors had also engaged solicitors to represent them in relation to their claim against IBRC in 2018, and yet did not bring the section 6 application until October 2020.
Judge O'Moore found that the investors' delay in instituting the proceedings was considerable and had not been adequately explained. Notably, the Judge found that COVID-19 was not a sufficient excuse for the investors' failure to bring the section 6 application until October 2020. It was pointed out that the court had been hearing similar applications throughout July and August 2020.
Furthermore, the Judge made note of the fact that IBRC is now at a late stage of its winding up process. Therefore granting consent to the proceedings could potentially result in the conclusion of the liquidation being extended beyond the anticipated end date of 31 December 2022.
Historic claims against IBRC may be time-barred
Over seven years have now passed since the Bank was placed into liquidation. Any former customers of the Bank who consider that they may have a historic claim against IBRC, and who are yet to seek the court's consent to issue proceedings, may find that their claims are time-barred in the absence of an allegation of fraud.
Even if a potential plaintiff were to allege fraud against IBRC for the purpose of a section 6 application, they would still be required to discharge the onus of showing that they are bringing the claim within 6 years of the date when they discovered the alleged fraud, or with reasonable diligence could have discovered it, in accordance with the statutory timeframe.
Potential plaintiffs must prove that they have a stateable case against IBRC
It is clear that any potential plaintiff seeking the court's consent to bring a claim against IBRC is required to set out sufficient details of the relevant cause(s) of action in the affidavit(s) filed in support of their section 6 application. It will not be sufficient for an applicant to merely allege that they have a claim against IBRC, without setting out the specific information alleged to support the claim. That is not to say that potential plaintiffs need to provide evidence that proves their claim on the balance of probabilities for the purpose of a section 6 application. However they would of course be required to do so at trial, should any section 6 application ultimately be granted by the court.
For more information on this topic please contact Joe Kelly, Partner, Ana Margetts, Lawyer or Rebecca O'Brien, Trainee Solicitor.
Date published: 21 December 2020