A Timely Decision on Limitation Periods
A recent Supreme Court decision has gone some way towards clarifying just when the clock starts to tick for the purposes of the Statute of Limitations in claims involving financial loss.

In cases involving a claim for breach of contract, the Statute of Limitations provides that a claim must be brought within six years from the date upon which a cause of action accrues (unless the contract is under seal, in which case the limitation period is 12 years).  Unlike a claim in contract, a claim in tort (a claim for a non-contractual wrong, such as negligence) is not actionable without proof of actual damage. The critical question in such actions is therefore, at what point in time was the damage/loss suffered? 

In 2003, the complainant, Mr Gallagher invested in the “Solid World Bond”, an investment product marketed by ACC Bank. The term of the investment was five years and 11 months, and no withdrawals or redemptions were permitted during this period. 

In 2010, Mr Gallagher commenced proceedings* against the ACC Bank alleging breach of contract and negligence.  The bank countered that the claim could not proceed as it had been brought more than six years after the investment was made and therefore fell foul of the Statute of Limitations.

From the outset, both parties accepted that the claim in contract was out of time. The bank sought to argue that the negligence claim should also be struck out on these grounds.  The High Court found that Mr Gallagher did not suffer any immediate loss and therefore the period permitted pursuant to Statute had not expired. The bank appealed.

In a unanimous decision**, the Supreme Court reversed the decision of the High Court and ruled that Mr Gallagher suffered immediate loss and damage (and accordingly the cause of action accrued) on the date on which he purchased the product in 2003.  On this basis, Mr Gallagher was prevented by the Statute of Limitations from proceeding with his claim against the bank.

It should be noted that the approach adopted by the Supreme Court was particularly fact specific and involved a detailed inspection of the features of the investment product.  Mr Gallagher’s claim at no point questioned the quality or management of the product and was in fact limited to the inherent features of the product.  In proceedings involving a different type of investment product, particularly one that might have involved continuous active management and on-going obligations on the part of an investment manager, it is arguable that the Supreme Court might adopt a different position.    

* Gallagher v ACC Bank plc [2011] IEHC 367
** Gallagher v ACC Bank [2012] IESC 35

Contributed by Gerard James and Richard Breen.

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